Financial life in a big town

Intel (INTC.O: Quote, Profile, Research, Stock Buzz) will continue to invest in products and technologies even though it sees that a U.S. financial meltdown is likely to affect the emerging markets that are crucial for its growth, its chairman said on Tuesday.

“I think you’d have to be prudent and assume that if the financial marketplace melts down there’s going to be some impact but nobody’s predicting that, nobody knows how big it’s going to be,” Chairman Craig Barrett told Reuters journalists.

“The only thing we can do is look at that part of our future destiny that we can control, and that’s our investment in the future, in the products we create and the technologies we create,” he said on a visit to Reuters.

“We’ve always had the attitude that you have to make that investment in good times and bad,” he said. “It’s R&D, capital, marketing-intensive, and we’re just like a blind greyhound, we just continue to race down the track.”

Of its $38.3 billion 2007 revenue, the world’s biggest chipmaker spent $5.8 billion on research and development and $5 billion on capital items such as property, plants and equipment overnight payday loans.

“You can’t save your way out of a recession, you have to invest your way out, and so we’ve always kept a rainy day plan to accommodate that,” Barrett said, adding that Intel had a financial cash cushion of about $10 billion for that purpose.

Barrett said Intel’s creditworthiness meant it should be able to make acquisitions if the chance arose, even given the current turmoil in financial markets.

Intel has an A+ credit rating from Standard and Poor’s. 

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WASHINGTON–The New Deal it is not. The United States government’s biggest economic bailout since the Great Depression is aimed not at relieving unemployment or reforming questionable business practices, but at resuscitating financial markets debilitated by bad bets on the housing market.

Put simply, the hastily crafted plan lawmakers agreed to in principle yesterday is intended to revive jittery and fragile banks on Wall Street and Main Street with enough money – by using taxpayer funds to purchase billions upon billions of their worst mortgage-related assets – so that lending, the lifeblood of the U.S. economy, flows freely again.

If it is working, signs will emerge almost immediately in the interest rates on U.S. bonds and in an array of obscure – but crucial – financial benchmarks. Loans – particularly those made from one bank to another – would be more available and less expensive in a matter of weeks, if not days.

And as the government gobbles the banks’ toxic assets, the industry would gain the confidence and strength needed to make it easier and cheaper for families to borrow for homes, cars and college – and for firms to secure ample debt to pay for plants, gear and workers.

Still, rising unemployment, high energy prices and falling real estate values will not disappear overnight — and there is no guarantee a recession will be avoided. "At first, there will be some sort of sigh of relief, which I’m afraid would be misplaced, because when you get through the shorter-term terror, you’re left with an economic landscape that will be very fragile," said Michael Farr, president of Farr, Miller & Washington, which manages investment portfolios for people and businesses.

Were the clogged credit markets of the past year – and more crucially, the past few weeks – left to fester without a massive government intervention, the U.S. faced a financial calamity that could have plunged the economy into a deep recession, putting the livelihoods and investments of millions of ordinary Americans at risk, President George W. Bush and Federal Reserve chair Ben Bernanke warned.

Once the liquidity floodgates have been opened – the government will have as much as $700 billion (U.S.) at its disposal to buy banks’ bad mortgages and other rotten assets – the benefits of the bailout proposed by Treasury Secretary Henry Paulson and modified by Congress are expected to trickle down through the rest of the economy. But Americans should be braced to feel economic pain well into next year.

More people will lose their jobs, foreclosures will go up, paycheques will be strained and home values – people’s single biggest asset – will keep falling, experts predict.

Even if the plan is successful, many predict the economy will probably shrink in the final quarter of this year and in the first quarter of next year, meeting the classic definition of a recession faxless payday advance. The jobless rate – now at a five-year high of 6.1 per cent – is expected to hit 7 or 7.5 per cent by late 2009. That would be the highest jobless rate since after the 1990-91 recession.

So, how exactly will we know if the credit clog is breaking up?

Some of the banking industry’s first responses won’t be immediately visible to most Americans, but they are critical to the proper functioning of the financial system.

For instance, a drop in a crucial short-term lending rate called the London Interbank Offered Rate, or Libor, would be a telltale sign that banks are less anxious about extending credit to each other – and the rest of us.

Libor is the rate many banks pay for the short-term loans essential to their daily operations. It’s also the base rate for an enormous amount of commercial lending and many adjustable-rate mortgages.

Another sign of growing confidence in financial markets would be lower rates on "commercial paper," a crucial short-term borrowing mechanism that many companies rely on for financing day-to-day operations, including payrolls and other expenses.

Economists said a properly designed bailout should also cause interest rates on Treasury securities to rise relatively quickly.

If that happens, it would signal that investors – who have been flocking to Treasurys because of their perceived safety relative to other investments – are more willing to bet on riskier types of debt and securities.

"The recovery process is going to come in stages, not in one fell swoop," said Terry Connelly, dean of Golden Gate University’s Ageno School of Business.

"The credit markets had a stroke. We are in intensive care now. We will have to learn how to walk and talk again.”

Assuming these more obscure corners of the financial markets are on solid footing again, consumers should eventually begin to have an easier time taking out loans for homes, cars, furniture and college.

Over time, a healthier financial system should help the value of the dollar rise versus other currencies, reflecting renewed confidence in the U.S. economy and blunting inflationary pressures that have made Americans feel less wealthy.

But it is only after a wide range of industries feel confident that the economic and financial conditions have fully recovered that they will start to ramp up hiring, perhaps by 2010. House prices should stop falling in the summer of 2009 and may start rising in 2010, economists said.

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For some who toil in the murky world of financial derivatives, Satyajit Das is nothing more than a turncoat.

A former industry whiz, the Australian author and risk consultant could be considered the financial world’s Dr. Frankenstein.

After making a handsome sum engineering exotic credit derivatives during his 25-year career, Das has spent the better part of the past decade preaching on their dangers.

Those convoluted debt instruments, particularly toxic credit default swaps, helped trigger the demise some of America’s most storied financial institutions.

With the financial crisis tightening its chokehold on global banks, Das’ forewarnings – outlined in his 2006 book Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – are looking rather timely. Still, some in the industry initially scoffed at his warnings.

"They thought that I had somehow found religion in my old age," Das said in an interview at a downtown hotel. "There were two views. I was a crackpot now … The second was a deep sense of betrayal. Some people felt deeply betrayed. How could one of their own do this?"

Now the industry is paying for his advice. Toronto’s investment community is no exception. Working as a consultant for Jory Capital Inc., Das is bending the ears of all who will listen. "I haven’t had much sleep in 10 days. I’ve been trying to work out for several people what exactly is their exposure," he said.

Much more work lies ahead. Das estimates there is US$600 trillion of derivatives outstanding in the world. It is a whopping sum that reflects the total amount of leverage in the global financial system.

At its core, derivatives are about taking a bunch of risk, cutting up in smaller chunks and selling it off to investors. The idea is to spread the risks through the system.

The problem is that the theory was never tested – until now. "Financial markets are only sophisticated in upswings. In down swings, we get down to really basic things of human fear and fear of loss," Das said.

Global banks have already absorbed more than $500 billion in losses related to the collapse of America’s subprime residential real-estate market, the original catalyst for last week’s historic shake-up on Wall Street. With the International Monetary Fund predicting the final tally could top $1 trillion, the American government has announced its own $700 billion bailout to shore up confidence in the industry.

Das, however, questions the long-term consequences of that move. The clean-up could take years and have profound consequences for the economy.

"The U.S. government has now put its balance sheet at risk, which now means it is at the mercy of foreign creditors," Das said. "… They have $9.5 trillion in debt quick payday loan. Roughly about a third of that is owned by foreigners."

Average Canadians may feel removed from the crisis, but Das warns they are not immune. As Canadian banks deal with ongoing financial fallout, consumers can expect to pick up at least some of that tab.

Domestic banks have an estimated $823 billion of "notional exposure" to the world’s troubled credit default swap market. The notional amount is the face value of the assets underlying the derivatives. Actual losses would likely be smaller, unless their entire value went toward zero.

At the same time, banks around the world are grappling with higher funding costs as they try to shrink the amount of debt on their balance sheets. Banks have been tightening their lending standards for the past year, making cheap credit a thing of the past.

John Aiken, a financial services analyst with Dundee Capital Markets, reiterated some of those concerns yesterday in a note to clients.

"Although the U.S. government may have avoided the complete failure of the financial system, we believe that we are far from out of the woods," Aiken said. " Liquidity will still be hard to come by – although inter-bank lending spreads eased on the announcement, we believe that distrust will remain amongst various lending institutions, creating higher funding costs and lower levels of credit available to be lent out and ease the pressure on the U.S. economy."

Das’ advice to consumers? Brace for even higher fees in the months ahead: "They are going to put up fees. They are going to make your loans more expensive. Ask anybody who has a line of a credit with the bank to go and try to draw it down. It will be cause for some interesting reactions."

Adrian Mastracci, a portfolio manager at KCM Wealth Management Inc., has suggested that Canadian banks could even begin clamping down on unsecured lines of credit to help deal with those higher funding costs.

Meanwhile, that "curtailment of credit" has yet to make its way into the real economy, Das said. Ontario, already hard hit by a slump in the manufacturing sector, could face more tumult in its financial services sector at a time when the provincial government is banking on that key industry to help prop up the economy. The fortunes of Western Canada, meanwhile, will be pinched by the slowing Asian demand for energy exports.

For his part, Das makes no apologies for his role in helping to create complex credit derivatives, suggesting that hindsight is always twenty-twenty. He also believes he has taken more than his fair share of flack for the current crisis. Said Das: "Somebody actually blames me for all of this. I said, `I didn’t invent everything.’"

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NEW YORK — Investment bank Morgan Stanley said Monday it signed a letter of intent to sell up to 20 percent of the company to Mitsubishi UFJ Financial Group Inc.

Financial terms of the deal were not disclosed. If the deal is completed, the price would be based on Morgan Stanley’s book value after Japan’s largest bank completes a due diligence review. The letter of intent signed by both banks is nonbinding.

The framework for a deal comes just hours after Morgan Stanley, one of Wall Street’s biggest investment banks, received regulatory approval from the Federal Reserve to become a bank holding company — making it a commercial bank and allowing it to receive deposits. Morgan Stanley will also now be regulated by the Fed instead of the Securities and Exchange Commission.

The partnership would allow both banks to expand their global footprint and help Morgan Stanley transition to a commercial bank, John Mack, Morgan Stanley’s chairman and chief executive, said in a statement. The deal also provides further financial support to help Morgan Stanley shore up its capital base during the ongoing credit crisis fast payday loan no faxing.
Over the past week, as fellow investment banks Lehman Brothers Holdings Inc. filed for bankruptcy protection and Merrill Lynch & Co. sold itself to Bank of America Corp., reports centered on Morgan Stanley selling itself to Wachovia Corp. or another commercial bank.

The changes come as investors were worried that Morgan Stanley, like Lehman and Merrill, would face liquidity problems and need to find a new parent with access to deposits and steady funding, or face failure. The change in regulatory status and sale of a portion of the company could provide Morgan Stanley with the capital needed to avoid a similar fate.

Mitsubishi, which has $1.1 trillion in deposits, will be able to add one member to Morgan Stanley’s board of directors.

Shares of Morgan Stanley rose $2.79, or 10.3 percent, to $30 in morning trading. Shares have traded between $11.70 and $69.23 during the past year.

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South Korea's department store sales increased at the fastest pace in almost three years in August as outlets lowered prices to attract shoppers.

Sales at the three biggest chains rose 14 percent from a year earlier, more than double July's 5.9 percent gain, the Ministry of Knowledge Economy said in Gwacheon today. Last month's increase was the biggest since December 2005.

Retailers including Lotte Shopping Co. held discount sales in August to woo customers, while shoppers also bought more televisions and sporting goods during the Beijing Olympics. Confidence among consumers rebounded last month from an eight- year low thanks to a drop in oil prices.

“Stores are holding more promotional events to get consumers to open their wallets,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. “But it's still premature to say consumer spending has recovered as concerns about economic growth slowing and financial markets linger.''

Sales of sports goods climbed 12.7 percent in August from a year earlier, today's report showed. Sales of luxury goods at department stores jumped 38.7 percent easy fast cash.

“The jump in sales of luxury goods show there's a bipolarization of income and spending,'' Hyundai's Lee said. “People with higher income seem to be less affected by what's going on in the economy.''

Economic Growth

The pickup in spending may be temporary as renewed turmoil on global financial markets shakes confidence. The Kospi stock index has dropped 23 percent this year and the currency has slumped 22 percent against the dollar.

Asia's fourth-largest economy expanded 4.8 percent last quarter, the weakest pace in more than a year, as spiraling living costs prompted consumers to cut spending.

Shares in Lotte Shopping, the nation's largest department store operator, have fallen 31 percent in 2008, and those in Hyundai Department Store Co., the second biggest, have dropped 26 percent.

Sales at discount stores rose 1.1 percent last month from a year earlier, moderating from a 2.1 percent gain in July, today's report showed.

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new york — Stocks surged Friday in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.

The Standard & Poor’s 500 index jumped 4 percent, capping its steepest two-day gain since the aftermath of the 1987 crash. The Dow Jones industrial average added 929 points from Thursday’s low, and markets from the U.K. to China advanced the most ever.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke ignited the rally by proposing to shore up banks’ balance sheets and guaranteeing money-market mutual funds, while the Securities and Exchange Commission banned short sales of financial firms.

Washington Mutual Inc. rose 42 percent, Wachovia Corp. was up 29 percent and Citigroup Inc. added 24 percent among the 15 companies in the in the S&P 500 Financials index to jump more than 20 percent. General Electric Co. added 7.4 percent.

"What the government and its regulatory agencies have tried to do here is restore some confidence and remove some fear," Robert Doll, chief investment officer of global equities at New York-based BlackRock Inc., which manages $436 billion in stocks, told Bloomberg Television. "That will work in the short run and improve psychology."

The S&P 500 advanced 48.57 points to 1,255.08. The Dow surged 368.75 to 11,388.44, capping its biggest two-day jump in six years. The Nasdaq composite index increased 74.80 to 2,273.90.

The S&P 500 erased its decline for the week, ending 0.3 percent higher. The benchmark index for U.S. equities tumbled 4.7 percent twice in the last five days after Lehman Brothers Holdings Inc. filed for bankruptcy, the U.S. government seized control of American International Group Inc. and Merrill Lynch & Co. was forced to sell itself to Bank of America Corp.

The S&P 500 is still down 15 percent this year, poised for its first annual decline since 2002. Until Friday, financial companies led the retreat as losses stemming from the first nationwide drop in house prices since the 1930s surpassed $500 billion.

A record 3 billion shares changed hands on the NYSE, more than double the three-month daily average. Goldman Sachs Group Inc. and Morgan Stanley, the last remaining major independent investment banks on Wall Street, rose more than 20 percent two days after falling the most ever.

Nine of 10 industry groups in the S&P 500 advanced as a better-than-estimated forecast at Oracle Corp. helped boost tech companies by 2.9 percent and higher oil prices helped Chevron Corp. lead an advance among all 39 energy companies in the S&P 500.

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Only consumer staples, the best performing group year-to-date, declined $500 payday loan. Wal-Mart Stores Inc. fell 2.9 percent to $59.70 for the biggest decline in the Dow.

U.S. and European government bonds tumbled, shedding gains that Thursday drove the prices of some Treasury bills higher than their face value. The dollar rose the most since April against the yen, while the cost of default protection on corporate bonds dropped by the most since the bailout of Bear Stearns Cos. in March. Gold fell.

John Bogle, who created the $106 billion Vanguard 500 Index Fund in 1976, said the U.S. government is "punch drunk," given its proposals to rescue the financial system. "We’re playing a game of casino capitalism, interfering with the way the market is working," Bogle, 79, said.

The S&P 500 Financials index climbed 11 percent after a 12 percent gain Thursday, marking the best two-day advance since the gauge was created in 1989.

JPMorgan Chase & Co. rose 17 percent, and Bank of America added 23 percent.

Wells Fargo & Co. and U.S. Bancorp, which avoided making the riskiest types of loans, rose to records. Genworth Financial Inc., the life and mortgage insurer spun off from General Electric Co. in 2004, surged 67 percent to $15.25 after falling 39 percent over the last four days.

Morgan Stanley snapped seven days of losses, advancing $4.66 to $27.21 as the SEC temporarily banned short-selling in shares of 799 financial companies to curtail the market rout. In a short sale, borrowed stock is sold and sellers profit if the shares fall and they can repay the loan with cheaper stock.

Goldman gained $21.80 to $129.80. Goldman, the biggest U.S. securities firm, and Morgan Stanley are seeking to avoid the type of run on their shares that helped trigger emergency sales of Merrill and Bear Stearns and the Sept. 15 bankruptcy by Lehman, once the fourth-biggest.

Bank of New York, the world’s largest custodian of financial assets, rose $4.13 to $35.70, rebounding from its lowest closing price since October 2005.

Oracle advanced $1.32, or 7 percent, to $20.07.

Crude oil for October delivery gained 6.6 percent to $104.33 a barrel on the New York Mercantile Exchange.

Exxon Mobil Corp., the biggest U.S. oil company, added 2.4 percent to $79.61. Chevron Corp., the second-largest, climbed 5.9 percent to $87.80. Halliburton Co., the world’s second-biggest oilfield services provider, increased 8.6 percent to $37.62.

UBS AG, the European bank hit hardest by the subprime market’s collapse, added 32 percent.

Bank of China, the nation’s second-biggest bank, jumped 17 percent to 3.36 yuan. A 24 percent slump in the month through Thursday left it valued at a record low of 10.5 times profit.

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MONTREAL–The Ontario Securities Commission moved Friday to restrict the short sale of 13 financial stocks that are also listed in the United States after regulators in that country and the United Kingdom suspended short selling of financial stocks.

"This order is being issued as a precautionary measure to prevent regulatory arbitrage with respect to short selling in Ontario of the securities of the financial sector issues and to promote fair and orderly markets in Ontario," the provincial regulator said.

The restriction, effective immediately, expires Oct. 3.

The stocks affected included the Big 5 Canadian banks (TSX:BMO, TSX:BNS, TSX:CM, TSX:RY, TSX:TD), Manulife Financial Corp. (TSX: MFC) and Sun Life Financial Inc. (TSX: SLF).

Ontario Finance Minister Dwight Duncan said the ban was consistent with recent steps taken in the United States and U.K.

"We are actively monitoring market developments and working with the OSC as it continues to work closely with other securities and financial market regulators in Canada and other countries as we go forward," Duncan said in a statement.

Short-selling is a form of trading that makes money for an investor when a stock's price goes down, rather than up. Market observers say it is not as widespread in Canada as on Wall Street.

The Canadian Securities Administrators said it supported the decision by the Ontario regulator.

"Other jurisdictions in the CSA will be taking similar action today, or in the coming days," Jean St-Gelais, chairman of the CSA and head of Quebec's securities regulator, said late Friday.

Earlier in the day, St-Gelais noted that some of short-selling techniques that have been occurring in the United States are banned in Canada.

"We are following this like everyone around the world. If we can have a united approach, so much the better," St-Gelais told reporters, adding Canadian regulators are "in the loop" of discussion by global regulators.

The U.S. Securities and Exchange Commission took the unusual move to temporarily ban short-selling of 799 financial stocks. The rule took effect immediately and extends through Oct. 2.

Short-selling is a complicated form of trading that sometimes unnerves even seasoned market professionals because of the potential for losses is potentially huge, while other money managers consider it a routine manoeuvre.

In essence, the trader borrows shares and then quickly sells them, knowing that the shares will have to be repurchased and returned to the lender.

The only way short sellers make money is if the stock price falls significantly before the shares must be repurchased and returned 1500 payday loans. The strategy can backfire and create losses for the trader if stock price goes up.

It is a legitimate method of trading, but there have been allegations of abuse, such as spreading false rumours or manipulating debt derivatives to drag down share prices artificially.

Christopher Cox, chairman of the U.S. Securities and Exchange Commission, said Friday that the SEC is "committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets."

"The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets," he said.

The move appeared to work, at least in the short term. North American stock markets rebounded strongly Friday, essentially reversing the losses experience throughout the week.

Chyanne Fyckes, chief investment manager at Stone Asset Management, noted, the situation in Canada is complicated by the presence of 13 provincial and territorial securities commissions – not one national regulator like the Securities and Exchange Commission in the United States.

"I think anybody at this point in time would tell you that the fact that we don't have a single securities regulator is a huge impediment," she said.

"It's completely nonsensical and it makes life very difficult."

Tom Caldwell, chairman of Toronto-based money manager Caldwell Securities Ltd., welcomed the SEC ban, but noted that Canadian markets have a so-called uptick rule which helps control short-selling.

The rule, introduced in the U.S. Securities Exchange Act of 1934 after the stock market crash but eliminated last year, aimed to prevent short-sellers from adding to downward price momentum.

The uptick rule prevents short-selling when the last bid is lower than the previous one, but the SEC scrapped it because it can be circumvented by new financial instruments.

-With files from Canadian Press reporter Kristine Owram in Toronto

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Ailing Washington Mutual Inc. moved into a better position to find a reprieve or rescue from its mounting loan problems Wednesday after a major investor removed a potential stumbling block to a sale or another infusion of capital.

The concession by the private equity group TPG came as government regulators tried to arrange a sale of the nation’s largest thrift, reflecting their worries about another possible bank failure that would drain the already depleted Federal Deposit Insurance Corp.

TPG could have stymied that process because of protection that it got as part of a $7 billion investment made in April. A clause in its investment agreement could have required a buyer or another major investor to pay TPG hundreds of millions, if not billions, of dollars in addition to whatever money was injected into WaMu.

But TPG agreed to waive its anti-dilution clause, according to a Securities and Exchange Commission filing, potentially making it easier for WaMu (WM, Fortune 500) to raise more money or for nervous banking regulators to push for a sale of the Seattle-based company.

"It became clear that it would be in the best interests of Washington Mutual and our investors to waive the … provisions," Fort Worth, Texas-based TPG said in a statement. "Our goal is to maximize the bank’s flexibility in this difficult market environment."

The government’s efforts to find a buyer, though, are being complicated by uncertainty about the magnitude of losses still lurking in Washington Mutual’s home loan portfolio.

"No one knows what’s in their books," said a person briefed on the talks between regulators and banks. The person spoke Wednesday on the condition of anonymity because of the sensitivity on the matter.

Citing unidentified sources, the New York Post said the potential buyers include JPMorgan Chase & Co. (JPM, Fortune 500), Wells Fargo & Co. (WFC, Fortune 500), HSBC Holdings PLC cashadvance. (HBC)

The banks all declined to comment.

After losing $6.3 billion in the past three quarters, Washington Mutual believes it is slowly healing under a new chief executive, Alan Fishman, who will receive an $8 million bonus if he can keep the nation’s largest thrift alive through 2009.

"I think people do know what is in our books and we’ve been pretty transparent," WaMu spokeswoman Olivia Riley said Wednesday, pointing to a financial update that the company released late last week. Those figures suggested WaMu’s loan problems are becoming less severe compared to recent quarters, giving some analysts hope that the company can still be salvaged.

Nonetheless, analysts still expect the company to sustain a loss of about $1.8 billion in the current quarter ending Sept. 30. And investors are showing little confidence in WaMu. The company’s shares fell 31 cents to $2.01 Wednesday, leaving the stock price with a decline of about 85% so far this year.

"Something needs to happen soon because WaMu is twisting in the wind," said Bert Ely, an Alexandria, Va. banking consultant. "It’s a detrimental situation that has become corrosive to the franchise."

Assuming that Washington Mutual either can’t find a buyer or doesn’t want to be sold at the price being offered, the thrift could raise more money to fatten its cushion against the losses that are still expected to come.

In a Monday research note, Keefe, Bruyette & Woods analyst Frederick Cannon estimated Washington Mutual probably needs to raise at least $5 billion in additional capital to protect itself from upcoming losses. Cannon thinks Washington Mutual’s credit costs could run as high as $28 billion through 2009. 

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TOKYO–Shares of Sony Corp slid nearly 9 per cent to a five-year low after Goldman Sachs cut its rating on the electronics maker on concerns over the outlook for its flat TV, mobile phone and digital camera businesses.

The Goldman downgrade came on top of a rating cut on Tuesday by JP Morgan, which also cited worries over the profitability of its liquid crystal display (LCD) TV business and a stronger yen.

Shares of Sony, which also makes PlayStation game consoles and Vaio PCs, closed down 8.7 per cent at 3,270 yen, wiping out about $3 billion in market value. During the session the stock fell as low as 3,210 yen, a level last seen in May 2003.

It was the worst one-day tumble since the "Sony shock" in April 2003, when a huge qunomies in Western countries as well as emerging markets like China and Latin America.

A sluggish performance at its mobile phone joint venture with Sweden's Ericsson and a firmer yen had triggered a 39.5 per cent fall in Sony's profit in the April-June quarter.

JPMorgan cut Sony on Tuesday to "neutral" from "overweight" and lowered its price target to 4,000 yen from 5,450 yen.

It said Sony would likely miss its profit forecasts as it copes with a stronger-than-expected currency and sluggish sales of digital cameras and video recorders easy quick payday loans. Continued losses on LCD TVs may also weigh on its earnings.

"We think Sony can achieve its annual sales target of 17 million LCD TVs, but we are not sure if the firm can make the business profitable," JPMorgan analyst Yoshiharu Izumi told Reuters on Thursday.

Goldman Sachs cut its annual operating profit forecast for Sony to 385 billion yen and JPMorgan forecast it would be 416 billion yen, both sharply lower than the company's 470 billion yen target for the business year to next March.

That compares with a 443 billion yen profit forecast in a poll of 21 analysts by Reuters Estimates.

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Mining stocks took another beating today over concerns about falling demand combined with the financial woes on Wall Street, but the industry remained confident thoat a "long-term commodity bull market" will soon reassert itself.

"I think we can conclude that when everything goes up for sale, then nobody's immune to a market selloff, but the demand for commodities is still extremely robust," said Bradford Cooke, chairman and CEO of Vancouver-based Endeavour Silver Corp. (TSX: EDR).

"We're still firmly in a long-term commodity bull market, and the selloff of the commodities in general and the mining shares in particular is overdone," he added.

The diversified metals index on the Toronto Stock Exchange was down more than five per cent in trading today, after a retreat of more than seven per cent Monday.

Prices for commodities fell over investor concern that the financial crisis in the United States will spark a deep recession in that country and spill over to weaken European, Indian and Chinese economies.

India and China have been growing rapidly in recent years and have been at the heart of soaring demand for everything from oil, steel and coal to nickel, grain, chemicals and other commodities.

As well, traders worry that global market liquidation prompted by the ongoing financial crisis on Wall Street, is also prompting the selloff since many financial companies invested in soaring commodities contracts to cash in on rising prices.

Wall Street was rocked Monday by announcements that Lehman Brothers Holdings Inc., the fourth-largest investment bank in the U.S., had filed for bankruptcy protection.

Further jitters were caused by the US$50-billion takeover of struggling Merril Lynch by Bank of America and news that insurer American International Group Inc. could need billions of dollars to strengthen its balance sheet.

But investors tend to see commodities – particularly precious metals like gold and silver – as a safe bet in times of financial crisis, said Cooke.

"Gold and silver in particular having a historic role as hedges against financial crisis and monetary inflation, they lose that role only temporarily in a market selloff and they certainly should resume that role once the peak selloff is past," he said.

Haytham Hodaly, an analyst with Salman Partners Inc., added that the financial crisis will likely result in a weaker U.S free credit report.com. dollar, which will push investors to the "safe haven" of precious metals.

"I think what's going to happen is the issues that we're seeing in the United States will end up resulting in a weaker U.S. dollar, at least in the near term, which will shed some positive light on owning precious metals, particularly gold and silver as basically a safe haven in this time of economic turmoil," said Hodaly.

Monday's gold and silver prices seemed to confirm this. Gold for December delivery rose $22.50 to settle at $787 an ounce on the New York Mercantile Exchange, after earlier rising as high as $791.40, while December silver rose 34 cents to settle at $11.135 an ounce.

Commodity prices "took off" when the U.S. credit crisis began a year ago, but equities didn't follow, said Cooke.

"I've never seen commodity prices move so high so fast in my life … but the equities did not confirm that upward move," he said.

"So the equities, which never joined the commodity price party, have been nailed on the downside."

But Cooke said he's confident that "the bottom is near" and commodity stocks will respond favourably when it hits.

"I feel that if you look at both the fundamentals and the technical charts on these things, this selloff is way overdone. Gold and silver in particular do have a traditional role to play and they're going to resume it, soon," he said.

"It's not a time to panic, it's a time to reflect."

13:31ET 16-09-08

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