Even after all the shelling we saw in the subprime debt market, the end is not yet in sight. Despite banks writing down billions of dollars in bad debts and CEOs being fired for their pure incompetence, there are still more bombs that have yet to be exploded. For example,
Florida local governments and school districts pulled $8 billion out of a state-run investment pool, or 30 percent of its assets, after learning that the money- market fund held over $700 million of defaulted debt.

Given the flow of easy credit and abusive mortgage lending practices, nobody knows with certainty the creditors and investors exposure to these debts. What could avoid more subprime debt writedowns in the coming quarters are the current talks of freezing the reset rates between the major banks and Federal officials.

If an agreement is not soon worked out on these adjustable mortgage rates, there could be more foreclosures. With more housing properties going into the market with a smaller pool of buyers due to tighter credit standards, an already bad situation could be made worse. The markets can handle bad news but not the uncertainty. Before the capital markets can stabilize, they need to see the light at the end of the subprime debacle bubble.

The turmoil in the world’s credit markets sparked by the collapse of the U.S. subprime market is likely to have the world’s central banks slash interest rates to ward off a recession in the global economy. Because banks have to set aside funds for the write downs of bad debts, they are less likely to be making new loans. Without adequate liquidity in the credit markets, consumers and businesses could have trouble funding their activities.

To ward off a threat of a global recession, the U.S. central banks along with its counterparts in the rest of the Western developed world will likely have to lower their key lending rates. What the market fears is that the worse of the mortgage crisis has not yet being felt. The reset of the borrowing rates on the mortgage is expected to occur. Most of these loans will have higher borrowing rates, making it too expensive for many borrowers to afford making payments.

As the year’s biggest holiday ends, we give thanks for all that we have even if our homes are being foreclosed and our stock portfolio is tanking. If we have any money left to take advantage of the massive bargains on Black Friday, the day will be a good one. Let’s face it, compared to other countries, our situation is not that bad.

Monday will be considered the first true stock trading day. The last month has been brutal for equities to say the least. Worries about subprime debt, the weak housing market and corporate profitability has been shelling the markets. We will only hit the bottom once the all the sellers have been taking out. We are close to the bottom but not just there yet.

The signs that we are hitting the bottom is when everybody are at their most negative. People are saying that the portfolio of stocks should be completely liquidated. Analysts are saying that the end is near. When the investing crowd gets hysterically negative, it is the time to start buying. At this point, those who want to sell will have done it.

The positives for the stock market includes the fact that we are in a interest rate easing period. With the weak US dollar, exports are booming. Developing nations such as China and India are experiencing good economic growth. Stock valuations are on the low side, not the high side.

When tankers from the oil producing nations unload their goods at our ports, we send them money. As our consumption of oil goes up and its prices go up, we send more money to the oil producing nations. In the end, this results in a transfer of wealth from us to them. Flushed with cash, these nations are using their government sponsored investment agencies to make strategic acquisitions overseas.

Case in point is DIFC Investments, the Dubai government’s agency. They have already made high profile investments including buying a stake in Deutsche Bank. They are now eying US assets once the credit crisis settles down. This includes the US financial firms and subprime mortgages. State sponsored investment agencies have been making investments all over the world.

There is nothing wrong with these agencies making investments as long as its interests are aligned with that of the corporation it is buying. The trend is somewhat disturbing for major energy consumers such as the United States. To keep our cars and trucks running, we are selling away part of our assets. Time to start acting on conservation.

With oil prices running close to $100, more oil producing countries are shifting more of their oil production from private oil companies to state owned companies. The reasoning is that more governments want to grab a bigger share of the oil revenues. The latest country to go this route is Brazil. Government owned Petrobas has found between 5 billion and 8 billion barrels of light oil and gas at the Tupi field, 155 miles offshore southern Brazil. The company believes there are several more 1 billion barrel plus oil deposits.

For private companies such as Exxon, finding new reserves to replace current production is increasingly becoming more challenging. Countries are shutting out the private companies from their oil fields or are demanding more concessions. For developed countries, they are increasingly at the mercy of these oil producing nations where most of the new oil reserves are found.

To ensure economic stability, energy conservation and new alternative energy sources are a must. Particularly in America, the nation still consumes too much oil. We don’t really need the big homes or 2 SUV’s in the driveway. We will soon have to change the way we live if we to want to keep our economy running.

When you visit the auto shows, it seems that car makers are mimicking Toyota’s push into hybrid cars by coming up with their own versions of the Prius. Who would not want to see an eco-conscious Hollywood star arriving at the red carpet in one of their hybrid cars? Will the consuming public actually make the big switch to these engine and battery powered cars? Not likely.

Hybrid technology is still early. Getting these cars fixed especially after the manufacturer’s warranty expired can be extremely expensive. Compared to conventional cars, the premium charged for hybrids are still huge. Furthermore, owning and running hybrids is more expensive than conventional cars. Fuel savings likely does not justify the costs.

For drivers interested in getting better fuel economy, diesel engines are the likely solution.  The new crop of diesel engines are very fuel efficient and emits very little pollution. Furthermore, they are not that much more expensive to own and operate. The infrastructure is already there to properly support the diesel engine.  Forget hybrids, diesel is the real solution. Just as the Europeans.

Yahoo Inc. on Tuesday reached an out-of-court settlement with the families of two Chinese journalists thrown into jail for dissidence after the company disclosed their identities to local police. To maintain good relations with the Chinese government and be in a position to profit from the burgeoning Chinese market, Yahoo had disclosed the dissidents’ information.

Along with other businesses, multi-nationals and democratically elected governments, they tend to choose profit over human rights. If that country is a major trade partner or is sitting on major resource deposits, their government’s less than stellar human rights records tend to be overlooked. Economic interests always triumph human rights.

Examples of these arrangements abound. Besides the Chinese, the U.S. supports Saudi Arabia. This is a country where there is no free election and where its enormous oil wealth is concentrated in very few hands. Another human tragedy is Dafur. Despite talk by the UN of acting on the situation, nothing has been done. China keeps vetoing any efforts in order to protect their oil interests in Sudan.

The brutal housing market devastated Home Depot’s third-quarter profits. However, the home improvement retailer offered some optimism Tuesday with some better-than-expected guidance. Does this mean that the suffering seen in the housing market is near the end? The answer is it’s too early to say.

There is still too much housing inventory. With the tighter credit conditions, getting a mortgage could be challenging. A lot of people who had taken out adjustable rate mortgages are expected to see their borrowing rates reset during the fourth quarter to a much higher level. The worry is that the higher monthly payments will push many of these borrowers into foreclosure.

Most market analysts believe that a bottom won’t be reached until late 2008 or early 2009. The credit situation is no where near to being resolved. For the housing market to recover, the excess supply needs to be absorbed and the credit picture must be improved.

The news certainly do not look good for the US economy. Consumers are being hit by plummeting housing prices, surging energy and food costs. The days of easy credit is likely a thing of the past. Financial institutions are sitting on billions of bad debt that will likely have to be written down. Because of the uncertainty, consumers and businesses are finding it harder to get more financing.

As a result, consumer activity is down. Retailers are bracing for a tougher holiday season. Because of the turmoil in the banking and housing sector, the usually resilient consumer is showing signs of holding back due to lower confidence about their economic situation.
The weaker US dollar is helping American exporters. They are finding good demand for their competitively priced products and services.

Given the situation with the banks, the Fed will likely cut again in their Dec 11 meeting. Despite the financial disasters, the U.S. still has one of the most dynamic economy in the world. If the write-downs are quickly dealt with and there is clarity on the degree of exposure to these bad debts, the financial sector should stabilize. In this scenario, a recession is likely avoided.