Look ahead to 2009

More economic pain seen


By Kim Coghill, Reuters

Wednesday - Dec 31, 2008

Many investors said good riddance on Wednesday to one of the worst years on record and prayed that government rescue plans will pull the global economy out of its fierce tailspin later in the new year.

More pain is expected in the near-term as bleak economic reports roll in, flagging more bankruptcies, bad debts and layoffs through at least early 2009, and more sleepless nights for everyone from central bankers to consumers struggling to pay off mortgages and credit card bills.


The biggest financial crisis in 80 years, sparked by a U.S. mortgage meltdown, made this year one of the worst ever for investors as recession stalked the global economy.

"It has been a shocking year, hardly anything was spared in the market carnage," said Michael Heffernan, senior client adviser and strategist at Austock Group in Australia.

The slump wiped out nearly $14 trillion in market value, according to the benchmark MSCI world index of larger companies.

For all markets, the damage was probably much worse. The World Federation of Exchanges, which tracks stock markets in 53 developed and emerging economies, said some $30 trillion in market value evaporated through to the end of November.

The crisis also radically changed the financial landscape, bringing down U.S. investment banks Bear Stearns and Lehman Brothers, saddling many other banks with huge losses and freezing the credit system that keeps the world economy humming.

The U.S. S&P 500 benchmark has lost about 40 percent with just one trading day left in 2008. Its biggest yearly drop was in 1931 during the Great Depression, when it fell 47.1 percent.

Victims of the crisis are still piling up, with announcements almost daily of fresh company losses, more layoffs, and slumping prices for assets from cars to homes.

Oil slid below $37 as economic slowdown bit into demand. Gold was one of the few commodities to end the year higher, gaining about 4 percent, as panicky investors grabbed assets seen as safer in times of trouble.

Tuesday brought news from the United States that single-family home prices were down 18 percent in the year to October and consumer confidence was at a record low.

On Wednesday, data showed Finnish industrial output down over 10 percent in the year to November, the biggest drop in 17 years.

But with central banks cutting interest rates to spur growth and governments pumping money into the system, some investors see more positive signs for 2009.

"I think we'll move ahead a bit in the new year and then stabilize for a while. Global policymakers are doing their utmost to ensure the recession doesn't degenerate into a deflationary malaise," said Mike Lenhoff, chief strategist at Brewin Dolphin.

World governments have pumped more than $1 trillion into their economies, and more aid is expected in 2009 as leaders battle to stave off an even deeper recession.

China's central bank reaffirmed on Wednesday that it would implement a moderately loose monetary policy as it seeks to reinvigorate its once fast-growing economy.

Some economists forecast as little as 5 percent growth next year, which would be the country's lowest rate in nearly two decades. The Chinese central bank has cut interest rates five times since mid-September.

Indonesia's president promised further fiscal stimulus to help Southeast Asia's biggest economy withstand the slump. It is still growing but may not reach the 6 percent analysts say it needs to prevent unemployment from rising.

Global credit markets are showing some signs of improvement, but banks remain reluctant to lend to businesses and consumers, fearing a rash of bad loans as economies worsen.

Government stimulus plans, corporate bailouts and rate cuts also take time to be felt, and their full benefits are still being hotly debated by analysts and economists.

Mounting job losses are raising fears of social unrest in some countries, and piling pressure on governments to act quickly, even if it means huge deficits and debts that will have to be paid off somehow in the future.

Investors are now looking to January, when Barack Obama is sworn in as U.S. president on Jan. 20. He is expected to unveil a government spending program which sources say could range from $675 billion to $775 billion over two years.

The new year will also mark attempts by policymakers to overhaul outdated regulatory systems to head off future crises and give them more power to oversee increasingly complex financial products.

Outgoing U.S. Treasury Secretary Hank Paulson said the U.S. government had to battle the financial crisis without the tools needed to do the job effectively, the Financial Times newspaper reported on Wednesday.

"We're dealing with something that is really historic and we haven't had a playbook," he said.

(Reporting by Reuters bureaus worldwide; Editing by Matthew Tostevin)

© 2008 Thomson Reuters. All rights reserved.

There's no business like shoe business

‘Bush Shoe’ Gives Firm a Footing in the Market

By SEBNEM ARSU

Dec. 21, 2008

ISTANBUL — When a pair of black leather oxfords hurled at President Bush in Baghdad produced a gasp heard around the world, a Turkish cobbler had a different reaction: They were his shoes.

“We have been producing that specific style, which I personally designed, for 10 years, so I couldn’t have missed it, no way,” said Ramazan Baydan, a shoemaker in Istanbul. “As a shoemaker, you understand.”

Although his assertion has been impossible to verify — cobblers from Lebanon, China and Iraq have also staked claims to what is quickly becoming some of the most famous footwear in the world — orders for Mr. Baydan’s shoes, formerly known as Ducati Model 271 and since renamed “The Bush Shoe,” have poured in from around the world.

A new run of 15,000 pairs, destined for Iraq, went into production on Thursday, he said. A British distributor has asked to become the Baydan Shoe Company’s European sales representative, with a first order of 95,000 pairs, and an American company has placed an order for 18,000 pairs. Four distributors are competing to represent the company in Iraq, where Baydan sold 19,000 pairs of this model for about $40 each last year.

Five thousand posters advertising the shoes are on their way to the Middle East and Turkey, proclaiming, “Goodbye Bush, Welcome Democracy” in Turkish, English and Arabic.

For now, Mr. Baydan’s customers will have to take his word for it. Muntader al-Zaidi, 29, the journalist who launched the shoes at a news conference a week ago, was wrestled to the ground by guards and has not been seen in public since. Explosives tests by investigators destroyed the offending footwear.

But Mr. Baydan insists he recognizes his shoes. Given their light weight, just under 11 ounces each, and clunky design, he said he was amazed by their aerodynamics. Both shoes rocketed squarely at Mr. Bush’s head and missed only because of deft ducks by the president.

Throwing a shoe at someone is a gross insult in Arab countries, and Mr. Bush is widely unpopular in much of the region. But as he enters his last weeks in office, he seems to have gained a small foothold of appreciation here.

Noting the spike in sales, Serkan Turk, Baydan’s general manager, said, “Mr. Bush served some good purpose to the economy before he left.”

Copyright 2008 The New York Times Company

Read this! Yawn!

The Yawn Explained: It Cools Your Brain

Jennifer Viegas, Discovery News

Dec. 15, 2008 -- If your head is overheated, there's a good chance you'll yawn soon, according to a new study that found the primary purpose of yawning is to control brain temperature.

The finding solves several mysteries about yawning, such as why it's most commonly done just before and after sleeping, why certain diseases lead to excessive yawning, and why breathing through the nose and cooling off the forehead often stop yawning.

The key yawn instigator appears to be brain temperature.

"Brains are like computers," Andrew Gallup, a researcher in the Department of Biology at Binghamton University who led the study, told Discovery News. "They operate most efficiently when cool, and physical adaptations have evolved to allow maximum cooling of the brain."

He and colleagues Michael Miller and Anne Clark analyzed yawning in parakeets as representative vertebrates because the birds have relatively large brains, live wild in Australia, which is subject to frequent temperature swings, and, most importantly, do not engage in contagious yawning, as humans and some other animals do.

Contagious yawning is thought to be an evolved mechanism for keeping groups alert so they "remain vigilant against danger," Gallup said.

For the study, the scientists exposed parakeets to three different conditions: increasing temperature, high temperature and a moderate control temperature. While the frequency of yawns did not increase during the latter two conditions, it more than doubled when the researchers increased the bird's ambient temperature.

A paper on the findings has been accepted for publication in the journal Animal Behavior.

"Based on the brain cooling hypothesis, we suggest that there should be a thermal window in which yawning should occur," Gallup said. "For instance, yawning should not occur when ambient temperatures exceed body temperature, as taking a deep inhalation of warm air would be counterproductive. In addition, yawning when it is extremely cold may be maladaptive, as this may send unusually cold air to the brain, which may produce a thermal shock."

The parakeets yawned as predicted.

It's now believed yawning operates like a radiator for birds and mammals.

If air in the atmosphere is cooler than brain and body temperatures, taking it in quickly cools facial blood that, in turn, cools the brain and may even alter blood flow. Prior studies reveal yawning leads to a heightened state of arousal, so a morning yawn may function somewhat like a cup of coffee in providing a jolt of energy.

The new findings also explain why tired individuals often yawn, since both exhaustion and sleep deprivation have been shown to increase deep brain temperatures, again prompting a yawn-driven cool down. Yawning additionally appears to facilitate transitional states of the brain, such as going from sleep to waking periods.

Gordon Gallup, Jr., a State University of New York at Albany psychologist, did not work on the study, but, as Andrew Gallup's father, paid close attention to the research. The senior Gallup also happens to be a leading expert on the science of yawning and other widespread evolved traits.

"It is interesting to note that instances of excessive yawning in humans may be indicative of brain cooling problems," Gallup, Jr., told Discovery News, pointing out that patients with multiple sclerosis often experience bouts of excessive yawning "and MS involves thermoregulatory dysfunction."

"Bouts of excessive yawning often precede the onset of seizures in epileptic patients, and predict the onset of headaches in people who suffer from migraines," he added.

In the future, researchers may focus more on brain temperature and its role in diseases and their symptoms. But the new study on yawning changes the popular notion that yawns are mere signs of boredom.

On the contrary, as Gallup said, "yawning more accurately reflects a mechanism that maintains attention, and therefore should be looked at as a compliment!"