April 14 (Bloomberg) — China’s central bank chief, who raised interest rates six times last year, said there’s still room for the country’s lending and deposit rates to increase to help cap the fastest inflation in more than a decade.

“The anti-inflation policy is a combination of both quantitative measures and price measures,” Zhou Xiaochuan said in an interview with Bloomberg News in Washington yesterday. “There’s room for using interest rates further.”

The comments by Zhou, 60, underscore Chinese Premier Wen Jiabao’s pledge to use what he called “forceful” steps to mop up the excess cash adding pressure on inflation. Consumer prices soared 8.7 percent in February on food and fuel costs, making it harder for the government to meet its target of capping 2008 inflation at 4.8 percent.

The People’s Bank of China may need to raise the one-year lending rate from 7.47 percent and the deposit rate from 4.14 percent at least once in 2008, according to a March 12 survey of 12 economists by Bloomberg News.

The Beijing-based central bank is yet to raise rates this year. Higher rates in China after cuts by the U.S. Federal Reserve may attract more speculative money into an economy with $1.68 trillion of foreign-exchange reserves and where excess cash had spurred speculation in equities and real estate.

Capital Flows
“We also need to look at the situation of capital flows,” as well as “the interest-rate policy in the U.S. and Europe” to decide “which instrument fits into the current economic situation the best,” Zhou said.

The central bank has raised the proportion of deposits that banks must set aside as reserves to a record 15.5 percent. It’s also added price controls and allowed faster appreciation of China’s currency.

The yuan’s gains are “to some extent” related to anti- inflation policies, the central banker said.
The currency has climbed 4.3 percent this year versus the dollar after a 7 percent increase last year. A stronger yuan makes imports cheaper and may help to tame the trade surplus that’s pumping cash into China’s economy.

To contact the reporter for this story: Luo Jun in Washington at at luo6@bloomberg.net; Zhao Yidi in Washington at at yzhao7@bloomberg.net; Klaus Wille in New York at kwille@bloomberg.net.

Last Updated: April 13, 2008 21:38 EDT

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Housing prices dropped by over 11 percent at the beginning of this year, the largest drop in the 20 years that such data have been collected. Thank goodness.

Restoring Financial Sanity

Why are plummeting real estate prices good news? Because it’s the first sign that sanity is returning to the market. And a sane real estate market — one in which sellers recognize that they won’t get as much for their house as Al down the street got two years ago — is a precondition for a broader economic recovery.

Recessions, or any economic downturn, are always caused by the same thing: Something goes wrong. That may sound overly vague, but it’s rarely the same thing that causes a shock to the system. In an agrarian society, it might be a bad harvest or a failed monsoon season. In a developing country, it might be a slump in the global price of a major export, such as coffee or copper.

In the United States in 1929, it was the stock market collapse. In the early ’80s, it was the recession deliberately engineered by Fed Chairman Paul Volcker to break the back of inflation. (The Fed held interest rates high enough for long enough that the economic pain persuaded workers to stop asking for higher wages, and firms to stop raising their prices.)

Bad to Be Good

In all these cases, the recovery begins when either: 1) Conditions get better — the rains come, the price of coffee rebounds, or consumers stop worrying about another terrorist attack. Or, 2) Things don’t get better, but we adapt to the new reality. Coffee prices don’t rebound, so farmers start growing something else.

The only route out of our current real-estate-bubble-inspired economic malaise is the latter — a new real estate reality. Property owners must recognize that some of the prices we saw over the past couple of years were an anomaly, just like Internet stocks in the ’90s.

The problem with the housing bubble wasn’t just that prices got out of whack for a while. The bigger problem was that those crazy prices sent erroneous signals to the rest of the economy. Artificially high housing prices caused developers to build things that shouldn’t have been built; consumers to spend money that they didn’t really have; banks to loan money to those developers and consumers; and Wall Street to bundle those shoddy loans into products that most of us still don’t understand.

Feeling the Heat

Normally, the beauty of a market economy is that prices convey important information. When starting salaries for engineers go up, more college students major in engineering. When the price of gas gets to $4 a gallon, people drive less (or buy fuel-efficient cars).

But the housing bubble sent bad signals all over the economy. It’s as if we had a broken thermometer telling us it was 30 degrees, and now we’re all standing outside in 90-degree weather wearing sweaters and ski parkas. The important thing is what we do next: We can either stand there hoping the weather gets much colder, or we can recognize that it’s 90 degrees and start taking off the layers.

Falling real estate prices tell me that sellers are finally starting to do the latter. I recognize the pain. A lot of people are going to lose a lot of money; some will lose their homes. But realistically that’s already happened. If buyers are only willing to pay you $300,000 for a house you bought for $400,000 two years ago, the $100,000 difference is already gone.

For What It’s Worth

Listing the house for $400,000 and leaving it on the market unsold isn’t going to get the money back, either. That’s essentially just living in the house and hoping it’ll appreciate in the future. The “For Sale” sign out front is decoration, something to keep the mailbox company.

Look, I bought 50 shares of Bear Stearns stock at $90 a share. There’s nothing stopping me from putting a sell order in with my broker at $90. I can keep that sell order open as long as I want, just like the permanent “For Sale” sign.

But the market reality is that JP Morgan Chase has an offer on the table for $10 a share. If I really want to sell my shares, it’ll have to be at a price someone is willing to pay — which, sadly, has nothing to do with the $90 I paid in the first place.

True Value

If this were just about the price of real estate, I wouldn’t care at what price people tried to sell their homes, or how long those properties stayed on the market. But it’s bigger than that. Falling prices will help put the “market” back in the real estate market; it’ll get us back to a point where sellers are asking prices that buyers are willing to pay.

We’ll know the real value of real estate in different markets around the country. That’ll give banks a sense of what their loans are worth. It’ll also be a signal to buyers that they don’t have to wait any longer for the deals that they know are coming.

Both will help stabilize the credit markets so that they can get back to the business of making sane loans based on realistic property valuations. And healthier credit markets will allow Wall Street to price the mortgage-backed securities that will remain illiquid as long as we have no idea which mortgages are likely to go into default and which mortgages aren’t.

The Bottom Is Near

What good news am I looking for in the future? Another significant drop in housing prices, albeit smaller, say 4 or 5 percent. That would signal to buyers, sellers, banks, and Wall Street that the bottom is near.

Things have to get worse before they can get better. We’re making progress.

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NEW YORK (AP) – Wall Street turned lower Wednesday as investors worried that a sharp jump in oil prices could be another sign that consumers are under stress in an economy that is already showing signs of a recession.
The major indexes, which spent most of the session in a tight trading range, tumbled after oil prices shot higher in response to the Energy Department’s report of an unexpected jump in gasoline demand. That could lead to higher prices at the pump, a troublesome trend given that retail gas prices are expected to rise further as the summer approaches and put more financial pressure on consumers.

Consumer spending, which makes up about two-thirds of the U.S. economy, is watched closely by the Federal Reserve. Earlier Wednesday, Fed Chairman Ben Bernanke said he expects the economy to contract in the first half — a trend that would mean the U.S. is in a recession.

Crude oil rose $3.85 to settle at $104.83 a barrel on the New York Mercantile Exchange.

“The oil uptick took away some of the optimism that we’ve seen recently,” said Richard Cripps, chief market strategist for Stifel Nicolaus. “Higher gasoline price would mean less in the pocket for Americans, and there’s also continued worries about a recession.”

The credit crisis and weak economy have sent stocks tumbling over the past six months. But the market had shown some renewed confidence that the worst of the credit problems might be behind Wall Street; that upbeat sentiment sent stocks up nearly 400 points on Tuesday, the first day of the second quarter.

Some of the pullback late Wednesday also was pinned on profit taking after that big advance.

The Dow Jones industrials fell 48.53, or 0.38 percent, to 12,605.83 after changing direction several times.

Broader market indexes also fell. The Standard & Poor’s 500 index fell 2.65, or 0.19 percent, to 1,367.53 while the Nasdaq composite index fell 1.35, or 0.06 percent, to 2,361.40.

Treasury bonds moved slightly lower as investors weighed Bernanke’s testimony before Congress; fixed income investors were focused on hints from Bernanke that the central bank might be less aggressive about lowering interest rates. The 10-year Treasury note’s yield, which moves opposite its price, rose to 3.59 percent from late Tuesday’s 3.55 percent — then edged up to 3.60 percent in after-hours trading.

The dollar was mixed against other major currencies, while gold fell slightly.
Investors paid close attention to what Bernanke had to say about a number of problems facing the economy — including tightening credit markets, a slumping housing market, and the near collapse of investment bank Bear Stearns Cos. Stocks initially rose after the Fed chairman said he doesn’t believe the nation’s big investment banks face the possibility of a collapse.

And, his warning about a potential recession was really not a shock to investors who trudged through one of the more difficult first quarters in years. Kim Caughey, equity research analyst at Fort Pitt Capital Group, said she didn’t believe Bernanke had “anything new to say” and was simply reiterating previous thoughts.

“This is evidence that he is being more transparent — there are no big bombs dropping during congressional testimony,” she said.

Though numerous economists have said they believe a recession is under way, Fed officials generally are cautious when describing the economy. A recession consists of at least two consecutive quarters of economic contraction and can only be declared in hindsight.

Bernanke also outlined some of the steps taken in the past few weeks to help boost the financial positions of the nation’s biggest investment banks. He offered that a failure of Bear Stearns would have been difficult to contain, and that was one reason why the central bank helped arrange the investment bank’s sale to JPMorgan Chase.

JPMorgan Chase fell 38 cents to $46.24, while Bear Stearns rose 1 cent to $10.86.

Richard Sparks, a senior equities analyst at Schaeffer’s Investment Research, called Wednesday’s market performance “a breather.” He said stocks might begin to percolate higher if first-quarter earnings come in better than expected, and should the credit markets remain stable.

“The market did a lot of work (Tuesday) — it makes sense that it needs a bit of a rest here before resuming on, if it can,” he said.

Investors also weighed fresh economic data that indicated factory orders in the U.S. have fallen for a second straight month. The Commerce Department said orders dropped by 1.3 percent in February, about double the downturn that economists had been expecting.

In corporate news, Best Buy Co. said its fourth-quarter profit slipped 3 percent as customer traffic slowed after the holidays. But, the electronics retailer still beat Wall Street estimates, and shares rose 47 cents to $43.94.

The Russell 2000 index of smaller companies rose 1.62, or 0.23 percent, to 712.27.

Advancing issues barely outpaced decliners on the New York Stock Exchange, where consolidated volume came to 4.19 billion shares, compared to 4.65 billion on Tuesday.

Overseas, Tokyo’s Nikkei index closed up 4.21 percent. There were gains in European stocks too — London’s FTSE 100 rose 1.08 percent, Frankfurt’s DAX advanced 2.84 percent and Paris’ CAC 40 gained 0.94 percent.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

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Reverse mortgages are exactly that. Instead of paying the bank, the bank pays you. It’s a type of loan where your equity is converted into cash.

These mortgages are designed for people 62 and older. And you can get this cash in a few ways: Either you can get it all in a lump sum, a monthly payment or a line of credit that you can tap into when you need it.

The loan doesn’t need to be repaid if you continue to live in the home. But if you move, the debt must be repaid - with interest. If you die, your heirs can elect to sell the house to repay the loan.

While the payment doesn’t usually affect social security or Medicare, it may affect Medicaid according to Peter Bell of the National Reverse Mortgage Association.

You will also be responsible for property taxes and any repairs on the home.

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

Consider your Candidacy

The older you are, the more likely you are to benefit from a reverse mortgage according to AARP.

First, you’ll probably have built up more equity in your home. And lenders calculate the payout based on your age and your expected lifespan. Reverse mortgages are most beneficial if you own your home or have a small amount left to pay on the original mortgage that can be paid off at closing with the proceeds from the reverse loan, according to HUD.

Reverse mortgages are also best for people who want to remain in their home for the long-term. If you’re looking to move in two or three years, a reverse mortgage may not be right for you.

Weigh the Downsides

Fees on home equity conversion mortgages can be high. For a $300,000 loan, a person who is 74 years old can expect to pay $15,000 in upfront fees according to AARP. There is an origination fee, appraisal fee, title fee, escrow fee, recording fee, a monthly servicing fee and an ongoing mortgage insurance premium.

Bell says the total of these fees are about 5% of the home’s value. They can be included in your loan balance, if there is enough equity available.

Remember - a reverse mortgage is a loan with rising debt and falling equity. So, if you get a lot of cash over the years, there will be little, if any, left over for your heirs according to AARP.

Do your homework

Reverse mortgages, while only one percent of the mortgage market, are on the rise. There were less than 7,000 reverse mortgages in 2000. Last year, over 107,000 reverse mortgages were sold according to AARP.

There are a lot of nuances you should consider before buying a reverse mortgage. In fact, you are required to get counseling before buying this product.

You can contact the Housing Counseling Clearinghouse at 800-569-4287 to find a lender in your area. Your bank should give you a list of counselors in your area that can help you. Be wary of lenders that try to get you to buy more products, like long term care insurance or annuities.

To get an online guide to reverse mortgages, check out aarp.org.

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AIG shares slump after it says losses from mortgage-related securities are bigger than thought. Microsoft signals it won’t take ‘NO’ for an answer after Yahoo rejects its $44.6 billion offer. The Dow will get a makeover next week. Apple leads techs higher. Crude oil jumps.

The stock market gave investors a decent rally today, despite an 11% drop for Dow component American International Group

But the gains came with low volume, leading some to suggest that investor confidence in the market overall remains weak.

At the close, the Dow Jones industrials were up 58 points, 0.5%, to 12,240. The Standard & Poor’s 500 Index rose nearly 8 points, or 0.6%, to 1,339. The Nasdaq Composite Index finished with a 15-point gain, 0.7%, at 2,320.

Had AIG just broken even today, the Dow might have jumped more than 100 points. Instead, AIG’s big drop to $44.87 knocked nearly 48 points off the Dow. The effect was eight times greater than that of Altria (MO, news, msgs), which will be replaced in the Dow next week. Altria’s 0.9% loss to $72.42 cost the Dow a bit more than 5 points.

Microsoft’s (MSFT, news, msgs) 1.2% loss to $28.21 cost the Dow fewer than three points. Yahoo formally rejected Microsoft’s $44.6 billion for the company, saying the bid undervalued the company. But Yahoo didn’t preclude another bid, and there was tremendous speculation on Wall Street today that the rejection was simply one step in what may be a prolonged negotiation. That’s why Yahoo shares moved 2.3% higher to $29.87.

After the market close, Microsoft called Yahoo’s rejection of its “full and fair” offer was “unfortunate.” The company added that the response didn’t change its position on a deal, and it aded, “We are confident that moving forward promptly to consummate a transaction is in the best interests of all parties.”

Microsoft said it may pursue “all necessary steps” so shareholders can “realize the value inherent in our proposal.”

The company did not offer details on what the steps might be, but they could include a proxy fight or a tender offer for Yahoo’s shares.

Yahoo shares moved up 13 cents to $30 in after-hours trading; Microsoft was up a penny to $28.22. Energy and technology shares led the market today. Energy moved higher on a 2% increase in the price of crude oil to $93.59 a barrel in New York. Crude oil moved higher on supply disruptions in Nigeria, a refinery outage in the United States and concern about Venezuelan President Hugo Chávez’s threat to cut off oil supplies to the U.S. Crude had been as high as $94.72 today.

AIG was the laggard among both the 30 Dow stocks and the S&P 500. General Motors (GM, news, msgs) was the Dow leader, up 5% to $27.12 on hopes that fourth-quarter profits, to come out Tuesday, will be better than expected.

New York Stock Exchange volume was a bit more than 1.3 billion shares, about 20% below its average of about 1.6 billion shares. The Nasdaq’s volume was better: about 1.9 billion shares. But the pattern of light volumes on up days and big volumes on down days continues to worry market watchers.

AIG auditors force larger write-downs

AIG shares tumbled after the company said auditors found a “material weakness” in the internal controls on how it accounts for and manages its credit-default-swap portfolios. Credit default swaps are financial instrument sold to protect investor in fixed-income securities, including mortgage securities, against losses.

Result: AIG may have to write off $4.88 billion from the portfolios just for October and November

Earlier, the company had estimated the October and November losses at between $1.05 billion and $1.15 billion. AIG’s auditors found “material weakness” in its accounting for the contracts, and the firm doesn’t know what they were worth at the end of 2007, a Securities and Exchange Commission filing said.

AIG said it will expand and clarify its disclosures on how it determines the value of those portfolios.

Energy prices — New York close
Mon. Fri. Chg. Month chg. YTD chg.
Crude oil (NYMEX) (per barrel) $93.59 $91.77 $1.82 2.01% -2.49%
Heating oil (per gallon) $2.6044 $2.5541 $0.0503 2.76% -1.70%
Natural gas (per million BTU) $8.5310 $8.3010 $0.2300 5.66% 14.01%
Unleaded gasoline (per gallon) $2.3962 $2.3572 $0.0390 3.77% -3.80%

Yahoo rejects Microsoft — for now

Yahoo wasn’t biting today, rejecting Microsoft’s $31-a-share offer

And, as noted, Microsoft isn’t going away.

Yahoo’s board met over the weekend and concluded that the $44.6 billion offer from Microsoft “substantially undervalues” the company and “is not in the best interests” of the company and its shareholders.

“The Board of Directors is continually evaluating all of its strategic options in the context of the rapidly evolving industry environment and we remain committed to pursuing initiatives that maximize value for all stockholders,” Yahoo’s statement said this morning.

A key question now is whether Microsoft will go hostile and proceed with its effort despite the official rejection from Yahoo’s board. The software giant could also work on Yahoo’s largest shareholders in hopes of getting them to persuade Yahoo to agree to a deal.

About 70% of Yahoo’s shares are owned by institutions such as big mutual fund companies. The biggest shareholder is Capital Research and Management, one of the nation’s largest mutual fund companies, which owns 11% of the company.

“A lot of this is gamesmanship on the part of Yahoo,” Standard & Poor’s analyst Scott Kessler told Bloomberg News. “Microsoft is well aware that Yahoo doesn’t have any other options. What this is about is how much Microsoft wants Yahoo and how much time they’re willing to wait to get this deal done.”

Yahoo didn’t state an acceptable price in its press release. But the Associated Press reported that Microsoft proposed a deal at $40 a share last year. Reports over the weekend suggested that $40 is the minimum price the Yahoo board will now consider.

Microsoft launched its unsolicited bid for Yahoo on Feb. 1 with an offer that represented a 62% premium over Yahoo’s previous day’s closing price of $19.18.

Most analysts speculate that Microsoft could sweeten its bid to $35 per share but question whether Microsoft will pay $40 per share.

Yahoo has been struggling with executive departures, low employee morale and continued market-share loss to rival Google

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NEW YORK (AP)-- It started with another stomach-turning drop at the open, and a loss of more than 300 points by midday. Then stocks changed course, raced higher and closed with a dramatic gain of nearly 300.

This wasn’t just volatility. This was Wall Street whiplash.

Amid tumbling housing prices, an ongoing credit crisis and growing fears of a recession, turbulence has become a hallmark of Wall Street in recent weeks. And after five straight days of pullbacks, analysts saw some positive signs in Wednesday’s trading.

Investors certainly found a reason to buy, perhaps encouraged by the Federal Reserve’s unprecedented 0.75-point interest rate cut a day earlier and a widely held bet on another half-point cut next week.

By day’s end, the Dow had swung 631.86 points from its low point to its high — the largest single-day turnaround in more than five years.

“You might say this is a belated reaction to what the Fed did this week, compounded by hopes for the Fed to do more next week,” said Peter Cardillo, chief market economist at Avalon Partners.

The Dow had plunged more than 465 points just after the opening bell Tuesday as the market digested news of the rate cut. But stocks rallied to finish down just 128, then tacked on a 2.5-percent gain on Wednesday.

The Dow Jones industrial average finished the day up 298.98 at 12,270.17. It had been down 323.29 at its low point.
The swing from negative to positive territory of 631.86 points was the largest point move since July 24, 2002, according to Dow Jones Indexes. The largest intraday point swing, a metric that Dow started calculating in 1995, was a 721-point swing on April 14, 2000.

“Volatility is certainly the norm now and not the exception,” said Art Hogan, chief market strategist at Jefferies & Co.

He noted that all but two trading days this year had seen triple-digit swings in the Dow, three of them 300 points.

On Wednesday, traders who bet on the Fed’s target fed funds rate were pricing in a 100 percent chance of a 0.50-percentage-point cut by the central bank when it meets next Tuesday and Wednesday.

Rate cuts are designed to stimulate borrowing and, in turn, business activity and the overall economy. They also will eventually boost profit margins for banks and other lenders, which have been working to lower costs and raise cash levels through layoffs and stock sales after having lost billions of dollars to bad mortgages and mortgage-related investments. Those companies — including Citigroup Inc., Washington Mutual Inc. and Merrill Lynch — were the big winners Wednesday.

“What has happened is the Fed is flooding the system with liquidity and eventually we should see some traction in the economy. And stocks tend to respond first,” said Steve Goldman, chief market strategist at Weeden & Co. Still, analysts were mindful that in recent months Wall Street has been known to soar one day and succumb the next, and that there are still many economic unknowns for the market to weather. And, given that stocks are so badly beaten down, bargain hunting played a part in Wednesday’s turnaround.

Before Wednesday’s session, the Dow had fallen nearly 10 percent since the start of the year, and it was down more than 15 percent since its record close of 14,164.53 on Oct. 9.

Broader stock indicators also surged Wednesday. The Standard & Poor’s 500 index rose 28.10, or 2.14 percent, to 1,338.60, while the Nasdaq composite index rose 24.14, or 1.05 percent, to 2,316.41.

Advancing issues outpaced decliners by nearly 3 to 1 on the New York Stock Exchange. Consolidated volume came to a heavy 7.33 billion shares, up from 6.33 billion Tuesday.

Bond prices turned lower as stocks rebounded. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell in earlier trading but then recovered to 3.55 percent, up from 3.41 percent late Tuesday.

At its lowest point Tuesday, the Dow was 17.9 percent below its October closing high, meaning that the stock market has come perilously close to the 20 percent threshold that defines a bear market.

Investors may go into the market to be sure they don’t miss out on a rally — or the gains may be knocked down again.

Wall Street faces several months of uncertainty, with the bulk of fourth-quarter earnings reports still to come and economic reports likely to be disappointing. When it’s more clear companies and consumers are spending freely, investors might relax.

However, with consumers burdened by debt and cutting back spending, it’s impossible to predict when that relief will come.

The dollar was mixed against other major currencies Wednesday, while gold prices fell.

Battered small-cap companies — which rely heavily on borrowing to grow their businesses — got a lift Wednesday. The Russell 2000 index of smaller companies rose 21.86, or 3.26 percent, to 693.43.

Before the turnaround in U.S. stocks, European stocks closed sharply lower on economic worries and escalating uncertainty about the European Central Bank’s willingness to lower rates. Britain’s FTSE 100 closed down 2.28 percent, Germany’s DAX index fell 4.88 percent, and France’s CAC-40 fell 4.25 percent.

In earlier Asian trading, Japan’s Nikkei stock average closed up 2.04 percent after falling 5.7 percent Tuesday. Similarly, Hong Kong’s Hang Seng index surged 10.72 percent — its biggest gain in 10 years — after falling 13.7 percent in the previous two sessions.

AP Business Writers Leslie Wines and Tim Paradis in New York contributed to this report.

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This is exactly what the credit card companies want you to do - it’s how they make money! One thing you may not realize is that by simply making your minimum payments it will take you a long time to eliminate credit card debt. Moreover, what happens when this credit card debt becomes too great of a burden, when you can no longer afford to keep up with your monthly minimum payments? Or worse, what happens if you suddenly out of job or are facing unexpected medical costs?

Indeed often during this period of hardship, credit card companies or the bank will make your life worse by increasing the rates and fees on your credit card debt. The good news is that there are alternatives way for you to eliminate credit card debt. Each will require patience, financial discipline, and thoughtful consideration on your part.

Accelerated Repayment. One option you have to eliminate credit card debt is to increase the monthly payments you are making on your credit cards beyond the minimum payment. To take full advantage of this strategy, you want to make the largest possible payment on the credit card with the highest interest rate, while making the minimum payments on the remaining cards. You would continue to do this until you have paid off the card with the highest interest rate, and then focus on the card with the next highest rate, and so on until all of your cards have been paid off. Of course, this alternative requires that you have the funds available on a monthly basis to make these accelerated payments. In addition, it could take quite a while to eliminate credit card debt this way.

Debt Consolidation. Another option to eliminate credit card debt is to take out or refinance a mortgage- either a first, second, or line of credit - and use those funds to pay down your credit card debt. This can be a quick way to eliminate credit card debt and save on interest costs. Remember though that you are trading unsecured debt for secured debt and the repercussions of missing a mortgage payment, like potentially losing your home, are much worse than if you miss a credit card payment. Also, you will need to have a favorable credit profile to consider this option to eliminate credit card debt.

Consumer Credit Counseling. A third option to eliminate credit card debt is to speak with a non-profit Consumer Credit Counseling Service (CCCS). These organizations will consult with you to determine if you qualify for a debt management plan, which typically involves making one monthly payment to them, which they then disburse to your creditors. They will also work with your creditors to waive certain fees and lower your interest rates. Keep in mind that this is not the fastest way to eliminate your credit card debt, and there are credit implications that you will need to consider. You will also need to find a reputable agency.

Debt Negotiation. A somewhat less known yet viable alternative to eliminate credit card debt is Debt Negotiation, sometimes referred to as Debt Settlement. In these programs you typically save money into a trust account, and once you have saved enough the company you are working with will negotiate with your creditors for a reduction in what you owe. A big benefit of these programs relative to CCCS, for example, is that you are actually reducing the principal amount of what you owe, and not just the interest rate. Also, these programs are usually a faster way to eliminate credit card debt than CCCS. Be sure to check with the BBB to determine whether the Debt Negotiation company you are speaking with is registered and has a satisfactory rating. In addition, before enrolling make sure you understand the impact that a debt negotiation program will have on your credit, and any other risks involved.

Which program you choose, to eliminate credit card debt, is up to you, but make sure you do your homework and pick the right solution and the right company that meets your personal financial and personal goals.

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The dramatic declines in Asia and Europe were expected to spread to Wall Street, where stock index futures were already down sharply hours before the trading day began.

Japan’s Nikkei 225 index nose-dived 5.7 percent — its biggest percentage drop in nearly 10 years — to 12,573.05, a day after falling 3.9 percent. Australia’s benchmark index sank 7.1 percent, its steepest slide in nearly 20 years. Hong Kong’s Hang Seng index, which slumped 5.5 percent Monday, was down 8.2 percent in afternoon trading.

In China, the Shanghai Composite index lost 7.2 percent to close at its lowest level since August.
Indian Finance Minister P. Chidambaram urged investors to remain calm after trading in Mumbai was halted for an hour when the stock market there fell 10 percent within minutes of opening. In volatile afternoon trading, the Sensex was down 6.2 percent.

“There is no reason at all to allow the worries of the Western world to overwhelm us,” Chidambaram said.
Investors across the region dumped shares in frenetic trading on worries that the U.S. economy, battered by a credit crisis and housing slump, will shrink in coming months, weakening demand for Asian exports. Markets have been plunging amid pessimism about the ability of American authorities to prevent a recession.

The Federal Reserve has indicated it will lower interest rates further, and President Bush has proposed an economic stimulus package that includes $145 billion in tax cuts, but investors around the world are doubtful that the measures will lift the economy quickly.

“Unless we get some positive ’shock effects,’ such as drastic measures from the U.S. government, there is almost no hope for a recovery in stocks,” said Koji Takeuchi, senior economist at Mizuho Research Institute in Tokyo.
Oil and gold prices also fell. Light, sweet crude for February delivery fell to $87.72 a barrel on expectations that slower U.S. growth will lead to less demand for crude. Spot gold, which usually benefits from market uncertainty, fell to a two-week low of $855.20 per troy ounce.

U.S. markets were closed Monday for a holiday commemorating civil rights leader Martin Luther King Jr. But Wall Street future prices were down sharply, portending a plunge when trading begins at 9:30 a.m. Eastern time.
Dow Jones industrial average futures were down 621 points, or 5.1 percent, to 11,485, while Standard & Poor’s 500 futures were down 70 points, or 5.3 percent, at 1,255.

Noritsugu Hirakawa, who monitors stock trading at Okasan Securities Co. in Tokyo, said investors were spooked by the drastic falls on Chinese and Indian markets — the two emerging economies that are viewed as sustaining global growth even as the U.S. economy sputters.

“The end to the slides in Asian stocks is nowhere in sight,” he said. “There is even speculation that China may be exposed to the U.S. subprime mortgage crisis.”

In Europe on Monday, investors also dumped stocks, sending the Britain’s benchmark FTSE-100 down 5.5 percent and France’s CAC-40 Index sliding 6.8 percent. Germany’s blue-chip DAX 30 plunged 7.2 percent to 6,790.19.

That sell-off continued Tuesday throughout Asia, with benchmark indices in South Korea, Taiwan, Singapore and the Philippines all falling more than 4 percent. Indonesia’s market sank 8.5 percent. Asian markets have been in a downward spiral for most of January.

Since the start of the year, Japan’s Nikkei index has tumbled nearly 18 percent, while the Hang Seng is down a stunning 21 percent. Even the usually upbeat Japanese Economy Minister Hiroko Ota acknowledged that threats were growing. “We must take the approach of working together with other nations on this,” she said on nationally televised news.

Associated Press writers Ramola Talwar Badam in Mumbai and Cassie Biggs in Hong Kong contributed to this report

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Asian Markets Sink Amid Pessimism Over US Stimulus Plan; Japan’s Nikkei Tumbles 3.4 Percent

TOKYO (AP) — Asian shares fell broadly Monday morning following declines on Wall Street last week amid investor pessimism over the U.S. government’s plan to prevent a recession.

A contraction in the American economy would likely hurt profits at Asian exporters, although increased trade and investment within the region has made Asia less dependent on the U.S. than in the past. Investors sold off shares, appearing to be unimpressed by the economic stimulus plan President Bush announced Friday. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

Japan’s benchmark Nikkei 225 index slid 3.4 percent in morning trading to 13,395.28 points, while Hong Kong’s Hang Seng index was down 2.3 percent at 24,624.14.

Markets in China, India, South Korea, Australia, Singapore, Taiwan and the Philippines were also down. “People are certainly nervous about a potential recession in the U.S. spilling over to the rest of the world,” said David Cohen, Director of Asian Economic Forecasting at Action Economics in Singapore. “Maybe there’s still some wariness about politicians are able to come up with a compromise and act sufficiently quickly” on a stimulus package, Cohen said. “I think the impact would be marginal anyway.”

On Friday, the Dow Jones industrial average slid 0.5 percent to 12,099.30, and some analysts warned that the U.S. market could be in for a period of protracted declines. Investors also have shrugged assurances from Federal Reserve Chairman Ben Bernanke that the central bank is ready to act aggressively — which means a likely big interest rate cut later this month — to help support an economy pummeled by devastation in the housing and credit markets.

Worries about the U.S. economy — the world’s biggest — have dragged on Asian markets, many of which surged last year. Since the start of the year, Japan’s benchmark index has declined more than 12 percent, while Hong Kong’s blue-chip index is down more than 11 percent.

Still, increased trade and investment within Asia has made the region less reliant on the United States than in the past, prompting some analysts to predict that Asia won’t suffer dramatically from a U.S. recession.
Excluding Japan, 43 percent of Asia’s exports go to other nations in the region, Lehman Brothers calculates, up from 37 percent in 1995.

A drop of 1 percentage point in U.S. economic growth would shave 1.3 percentage points from China’s growth rate due to lower exports, Citigroup estimates. But China’s economy will still likely expand 11 percent this year, the investment bank predicts.

Also, some strategists say Asian markets are now oversold and will rebound as investors snatch up stocks that have fallen to attractive levels.

“We hold our view that the rapid correction in the past two weeks is offering a good opportunity to buy quality stocks,” Taifook Research in Hong Kong said in a note.

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Stocks Extend Plunge As Manufacturing Index Falls; Bond Insurers Fall Amid Fears of Losses

NEW YORK (AP) – Wall Street extended its 2008 plunge Thursday, sending the Dow Jones industrials down 306 points and to their lowest level since last March after a regional Federal Reserve report showed a sharp and unexpected decline in manufacturing activity. Downgrades of key bond insurance companies added to the market’s black mood, with investors fearing an escalation of months of credit market problems.

The Dow lost nearly 2.5 percent, giving the index its worst three-day percentage decline since October 2002. The Standard & Poor’s 500, the index closely watched by market professionals, fell nearly 3 percent Thursday. The Dow, S&P 500 and the Nasdaq composite index have now given back all of the gains they achieved in 2007.

Stocks opened higher but quickly gave up their gains after the Philadelphia Federal Reserve said its survey of regional manufacturing activity registered a negative 20.9 from a revised reading of negative 1.6 in December. The latest number came in well short of what Wall Street had been expecting and underscored the seriousness of the economic worries that have gripped both Wall Street and Washington in recent weeks.

Credit concerns also dogged Wall Street after rating agency Moody’s Investors Service placed bond insurer Ambac Assurance Corp. on review for a possible downgrade. That possibility alarmed investors because it would place all bonds insured by Ambac on review as well. Wall Street are concerned that bond insurers would be unable to absorb a spike in claims.

Investors’ fears of a slowing economy, the consequence of a months-long housing and credit market crisis, dominated trading, as they have since the start of the year.

“The Philadelphia Fed just announced dreadful numbers,” said John O’Donoghue, co-head of equities at Cowen & Co. He said if you look back at Philadelphia Fed data for similar numbers, it takes you back to the 2001 to 2002 recession.

“It’s not rocket science — the economy is slowing dramatically, and it’s being reflected in economic reports.”

The Dow, which had been up more than 50 points early in the session, closed down 306.95, or 2.46 percent, at 12,159.21.

The Dow is now off 8.33 percent for the year; there have been just 12 trading days so far in 2008, but the index’s frequent triple-digit losses have now forced it to give back its 2007 gains. The Dow had its lowest close since it ended the March 16, 2007, session at 12,110.41.

The Dow’s decline also left it about 150 points above 12,000, a level it hasn’t closed below since November 2006.
The broader market indicators also plummeted. The S&P 500 index lost 39.95, or 2.91 percent, closing at 1,333.25, and leaving it was a year-to-date loss of 9.2 percent, while the Nasdaq dropped 47.69, or 1.99 percent, to 2,346.90, giving it a 2008 deficit of 11.51 percent.

Thursday brought the lowest close for the S&P 500 since October 2006 and the worst for the Nasdaq since March of last year.

Declining issues outnumbered advancers by more than 5 to 1 on the New York Stock Exchange, where consolidated volume came to a heavy 5.41 billion shares compared with 5.25 billion traded Wednesday.

Bond prices rose as stocks fell and anxious investors sought the safety of government-issued securities. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.63 percent from 3.68 percent late Wednesday. The dollar was mixed against other major currencies.

The Chicago Board Options Exchange’s volatility index, known as the VIX, and often referred to as the “fear index,” jumped nearly 17 percent Thursday.

Light, sweet crude fell 71 cents to settle at $90.13 a barrel on the New York Mercantile Exchange after Bernanke’s prediction of slower economic growth this year. Slowing growth could dampen demand for oil.

The Philadelphia manufacturing reading caught Wall Street by surprise — igniting fears that the economy is slowing precipitously and that policymakers might be too late in contemplating aid.

Economists had expected the Philadelphia index would come in at a negative 1.5, according to Dow Jones Newswires. Instead, the negative 20.9 figure was the weakest since October 2001 when the economy was reeling from the shock of the Sept. 11 terror attacks.

Jim Herrick, manager of equity trading at Baird & Co., contends that the Philadelphia Fed reading and other recent negative economic reports indicate the economy is likely in a downturn.

Other economic reports added to investors’ glum mood. The Commerce Department said housing starts plunged 14 percent to 1.01 million in December, marking the weakest pace of home building in more than 16 years. In addition, permits to build new homes dropped 8 percent last month to 1.07 million, the lowest level since 1993.

The week’s steady flow of news, much of which has dented investor sentiment, has led to a growing chorus of calls for the Fed to cut rates. The Fed’s monetary policy committee will meet Jan. 29-30 and is widely expected to lower its Fed funds target from the current 4.25 percent level. Bernanke on Thursday reiterated recent signals that the central bank will reduce rates for a fourth straight time.

Some on Wall Street have called for the Fed to intervene sooner with steep rate cuts.
The economic concerns come in a week in which some of Wall Street’s biggest names have posted huge losses following bad bets on mortgage investments. Financial shares fell sharply Thursday after the reports have made clear that there is also increasing weakness in home equity and other consumer banking operations.

Merrill Lynch & Co. on Thursday posted a massive loss that underscored the depth of the economy’s credit problems. The world’s largest brokerage said it lost $9.91 billion in the fourth quarter, hurt by big write-downs from investments and trades battered by tight credit conditions.

John Thain, the new chief executive at Merrill, said he believes the red ink will constitute the bulk of the company’s write-downs from its subprime mortgage exposure. But he would not speculate about what 2008 might hold in store in other areas. Earlier this week, Merrill secured a new round of capital infusions from foreign funds.

Merrill fell $5.64, or 10 percent, to $49.45.

Moody’s announcement that it will review Ambac came after the insurer booked a $5.4 billion write-down on its credit derivative portfolio during the fourth quarter.

Ambac plunged $6.73, or 52 percent, to $6.24, while Ambac rival MBIA Inc. fell $4.18, or 31 percent, to $9.22.

First Horizon National Corp. fell $2.43, or 13 percent, to $16.48 after Standard & Poor’s Ratings Services lowered its rating on the bank’s long-term credit.

The Russell 2000 index of smaller companies fell 19.34, or 2.76 percent, to 680.57.

Overseas, Japan’s Nikkei stock average closed up 2.07 percent. Britain’s FTSE 100 finished down 0.68 percent, Germany’s DAX index fell 0.78 percent, and France’s CAC-40 fell 1.31 percent.

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