Cheap Oil + Strong Dollar = No Relief

Here we go again. Asian markets were trading significantly down yet again on Thursday, CNN reports this morning, following Wednesday's 500-point plunge on the Dow. Yesterday's big market sell-offs were particularly worrying when you consider all the signs were strong for a solid day of trading. "Despite cheaper oil, a stronger dollar and looser credit, stock investors on Wednesday could not shake their fears about the consequences of an economy that many believe is already in a recession," the New York Times writes. The market tumult, which sent the Dow to a near-five-year low and the S&P to a five-and-a-half-year low, sank oil prices by more than 7 percent, and most international currencies fell dramatically against the dollar. The dollar hit a five-year high against the British pound and a two-year high against the euro, the Wall Street Journal reports. Name a currency, and it's struggling against the dollar, a bad sign for developing economies. "An enduring credit crunch and slumping global economy clearly now threatens all emerging market currencies," James Malcolm, a currency strategist at Deutsche Bank in London, was quoted by the WSJ as saying.

On a positive note, Wednesday was a day without any dramatic government intervention. This could change as soon as today. At a Senate banking committee hearing this morning, Federal Deposit Insurance Corp. Chairman Sheila Bair is expected to introduce a $40 billion proposal to help forestall home foreclosures, the WSJ writes. And the White House isn't done there. The Bush administration is calling for a global economic summit of the world's top 20 trading partners for mid-November in New York. "At the top of the agenda are steps to avoid a repetition of the crisis," MarketWatch writes.

Mid-November is smart timing if only because this brutal earnings season will be over by then. On Wednesday, Wachovia reported a staggering $23.9 billion third-quarter loss. And, the NYT warns, "the red ink is unlikely to end soon." How bad could it get? "Wachovia projected an additional $26.1 billion in mortgage-related losses in 2009. And it wrote down only a tiny portion of its $219 billion commercial real estate and corporate loan portfolio," the NYT adds. It all amounts to one massively untidy "swan song" as the bank prepares to sell itself to Wells Fargo, the Charlotte Observer reports.

The carnage in the financial sector didn't end there. Details leaking out of sinking hedge funds only get worse. According to the WSJ, Bain Capital's "credit-investment funds are choking on losses of as much as 50%," citing people in the know. Other scalps include London hedge fund Centaurus Capital LP and Tudor Investment Corp., where fund manager James Pallotta said he'll split with longtime partner Paul Tudor Jones. The NYT, meanwhile, tallies losses for the entire hedge-fund sector at $180 billion over the past three months.

Over in the insurance world, AIG executives, past and present, will not be collecting a bonus this year, thanks to unyielding pressure applied by New York's attorney general, Andrew Cuomo. According to the NYT, the insurer has agreed "to suspend payments to executives from a $600 million bonus fund as well as $19 million in payments to its former chief executive," Martin J. Sullivan, who was ousted in June. And the Pension Benefit Guaranty Corp., the federal agency that guarantees pensions, announced yesterday it's had a bad year. It's lost $2.1 billion in investments this year, the NYT writes.

The 85-year-old media tycoon Sumner Redstone has had a tough few weeks, too. Mounting debts at his family holding company, National Amusements Inc., have forced him into tense negotiations with creditors to restructure $1.6 billion they are owed. But, an adamant Redstone tells the WSJ's Merissa Marr that "there's 'not a chance' he'll sell Viacom or CBS Corp. to resolve the debt issues." Redstone's personal life appears just as fraught. Earlier this week it emerged that he and his second wife, 46-year-old Paula Fortunato, were divorcing after five years; Fortunato will collect at least $5 million as spelled out in the terms of their parting agreement, the Los Angeles Times reports.

Now to tech news: Amazon.com reported a better-than-expected third-quarter profit rise of 48 percent on Wednesday, the Seattle Post Intelligencer reports. Still, shares fell by 14 percent in after-hours trading on guidance that the make-or-break Christmas season could likely be weak. Things look little better for Japan's Sony. On Thursday morning the consumer electronics giant issued a surprisingly deep profits warning, predicting a net decline of 57 percent in the upcoming quarter as the global downturn sinks demand for "its digital cameras, LCD televisions and other gadgetry," the Times of London reports. It's not all bad news, however. The "strictly business" social network LinkedIn scored $22.7 million in funding from blue-chip investors Goldman Sachs, SAP, and McGraw-Hill, writes the San Jose Mercury News. That's some funding coup considering this morning's news that Goldman Sachs is poised to slash 10 percent of its 32,500 work force, the WSJ writes, citing people familiar with the downsizing plan. Staying on layoffs, Merck will slash 7,200 jobs, or 12 percent of its work force, over the next three years, the WSJ reports.

And, finally, the wave of privatizations and taxpayer-funded bailouts we've experienced over the past month have not dented U.S. business competitiveness. The World Economic Forum's annual "Global Competitiveness Report" ranks the U.S. atop the pack of world economies. BusinessWeek writes that "so far the financial meltdown has had little effect on the relative competitiveness of the world's most advanced countries, according to the ranking."