Monday began with several European companies, including electronics giant Philips (PHG) and insurance and banking conglomerate ING, announcing job cuts of 6,000 and 7,000 employees respectively.

The gloomy start to the workweek quickly turned into a bloodbath as more than 75,000 jobs were lost in a single day, when a who’s who of U.S. household names launched a gauntlet of layoffs:

● Sprint Nextel Corp. (S), the wireless phone carrier said it is eliminating about 8,000 positions in the first quarter.

● Caterpillar Inc. (CAT), the world’s largest maker of mining and construction equipment, is in the process of shedding about 20,000 jobs.

● Pharmaceutical company Pfizer Inc. (PFE), is buying rival drugmaker Wyeth (WYE) for $68 billion, and said it would cut 8,000 jobs as part of the merger strategy.

● Home Depot Inc. (HD) the home-improvement retailer said it was closing four small business units, trimming about 7,000 jobs in the process.

● General Motors Corp. (GM) said it will cut 2,000 jobs at plants in Michigan and Ohio.

● Texas Instruments Inc. (TXN), which makes chips for cell phones and other gadgets, said it will axe 3,400 jobs.

And the bad news continued yesterday (Tuesday) as Owens Corning (OC) said it is cutting 3,500 jobs, or 13% of its payroll.
It was a stark reminder of how rapidly the recession is claiming jobs. Already 170,000 jobs have been lost in January. The U.S. economy lost 2.6 million jobs in 2008.

Moreover, a growing number of economists say the U.S. has only reached the halfway mark of job losses expected for this recession.

“Some of the worst job losses are ahead of us, not behind us,” Wells Fargo & Co. (WFC) senior economist Scott Anderson told USA Today.

Anderson expects 3 million Americans to lose their jobs in 2009. Approximately 2.6 million were cut last year – the most since 1945, the final year of World War II. The layoffs are happening in “all industries in all areas of the world,” Anderson says.

The worst news, though may be that the U.S. economy is not just shedding jobs temporarily, but is undergoing a fundamental restructuring process that will eliminate some types of jobs for good.

“They [represent] structural, not cyclical, changes to the economy,” Peter Morici, a professor at the Robert H. Smith School of Business at the University of Maryland told BusinessWeek. “We’re looking at a permanently smaller economy with prolonged unemployment at an unacceptable level.”

Morici says that housing, real estate, automobiles, finance, and retail sectors are resetting to “permanent lower levels” of employment.

Mike Montgomery, an economist with IHS Global Insight, asserts that many jobs in autos, manufacturing, apparel, and textiles aren’t coming back. Those industries “have been in a long-term decline, and the recession is knocking them out.”

Jobs began disappearing in home building and mortgage operations early in the recession, then across finance and banking more generally. Now the ax is falling across large swaths of manufacturing, retailing and information technology sectors.

The news ratchets up the pressure on the Obama administration and Congress as lawmakers debate an $825 billion stimulus package intended to save or create millions of jobs.

“These are not just numbers on a page,” President Obama said citing the layoff announcements in remarks Monday. “As with the millions of jobs lost in 2008, these are working men and women whose families have been disrupted and whose dreams have been put on hold.”

The House of Representatives will vote on its version of the bill today (Wednesday), and Senate committees will begin pulling together a companion bill this week.

But Obama’s stimulus package is based largely on an estimate that the unemployment rate will rise to between 8% and 9% this year, according to the proposal summary from the House Appropriations Committee. If unemployment soars into double digits, as some economists expect, the financing may not be enough.

Many economists see the nationwide jobless number rising to at least 9% this year, possibly reaching double digits in 2010. Thirteen states are already above the national average of 7.2%, with Michigan (9.6%), Rhode Island (9.3%), California (8.4%), and South Carolina (8.4%) topping the list.

But as Money Morning reported Monday, the government’s recently released official unemployment number of 7.2%, already vastly understates the number of jobless Americans because it fails to account for “discouraged” and “unattached” workers who have given up even looking for work.

Our research further indicates that if the number included unemployed farm and self-employed workers, “real” unemployment levels would approach 18%.  Whatever the unemployment number is, the new administration’s stimulus plan is the only glimmer of hope for newly laid-off workers.

While stimulus spending on public works may take some time to get going, some companies could bring back displaced workers quickly if the government initiative generates new orders.

And because many businesses were already operating with a lean workforce when the recession began, there is some hope they will fill vacated positions when the economy improves.

“The vast majority of the job loss is strictly short-term,” said Global Insight’s Montgomery. “When consumer demand and sales come back, the jobs will come back.”

But as Univeristy of Maryland’s Morici contends, many companies may not rush to increase staffs even if business begins to pick back up.  “We are very early in the cycle,” he said. “We are going to see the fury of the Old Testament for what we have done to the economy.”

Source: Black Monday Brings Massive Layoffs – Economists Say Some Jobs Could be Gone for Good

The Macquarie and Rogers China Agriculture Index is an investable index that will track price changes of the market “basket” of the agricultural commodities most commonly consumed in China. Macquarie Funds is the asset management arm of Australia’s Macquarie Group.

Macquarie actually created the product in November, and continued to operate it in December, when the China agricultural index posted a return of better than 11% – outperforming most agricultural indices and handily besting most stock markets in that part of the world, Asian Investor reported. That provided Macquarie Funds with the two-month performance needed to actually launch and start marketing the index.

“Apart from being the world’s most populous nation, China is [also] one of its fastest-growing and as such, Chinese dietary patterns should play an influential role in determining the prices at which agricultural produce is exchanged” Harry Krkalo, Macquarie Funds’ Singapore-based head of Asian retail funds sales, told Asian Investor. “Developing an investable index which effectively tracks the price changes of commodities with reference to the quantities of each agricultural product consumed in China is an innovative and exciting way to invest in the sector.”

Indices that track commodities are usually calculated utilizing so-called “supply-side” factors, and the commodity weightings are based on global production. The Macquarie and Rogers China Agriculture Index is unique because its component weightings are determined using current and projected data on commodities consumption in China.

The index allows investors to track – on a daily basis – the price changes of the agricultural commodities basket, and will ultimately enable investors to capture the price impact of current and potential changes in China’s food consumption patterns. What’s more, it also allows fund managers and other marketers of financial-services products to create and sell financial products that are linked to this innovative and topical theme. It uses exchange-traded futures contracts on physical commodities to do so.

The China agricultural index is the first one manufactured in Asia by Macquarie Funds, which is trying to use its geographic location to its advantage, and bolster its Asian presence. As of the end of September, Macquarie Funds had $53 billion in assets under management worldwide, including $1.5 billion sourced from investors in Asia.

“Macquarie is a leader in trading commodities futures. Jim Rogers has worked with other groups before but nothing specifically with China,” says Krkalo. “So when we put those bullet points down, a Chinese consumption-based product made sense and it is an interesting first index for us to roll out.”

From Investor to Icon

Rogers first made a name for himself with The Quantum Fund, a hedge fund that’s often described as the first real global investment fund, which he and partner George Soros founded in 1970. Over the next decade, Quantum gained 4,200%, while the Standard & Poor’s 500 Index climbed about 50%.

It was after Rogers “retired” in 1980 that the investing masses got to see him in action. Rogers traveled the world (several times), and penned such bestsellers as “Investment Biker” and the just-released “Bull in China.”

He also made some historic market calls: Rogers predicted China’s meteoric growth a good decade before it became apparent and he subsequently foretold of the powerful updraft in global commodities prices that fueled a year-long bull market in the agriculture, energy and mining sectors.

Rogers’ prescience is well known, and his candor and willingness to criticize the bailout strategies under way in Washington means that his comments almost always receive substantial media coverage.

Rogers sat down for extended conversations with Money Morning Investment Director Keith Fitz-Gerald twice in the past year. For the first of those two interviews, Fitz-Gerald traveled from his Oregon home all the way to Singapore, where Rogers now lives with his family. Rogers warned investors that there were tough times ahead for the U.S. dollar, and for the nation’s central bank.

In the second interview, Fitz-Gerald met with Rogers in Vancouver, British Columbia, where both were to speak at a major wealth management conference. During that April discussion, Rogers warned Money Morning readers that the U.S. financial crisis was destined to grow much worse – an assertion that echoed Fitz-Gerald’s own predictions and that’s also proved to be highly accurate.

In all his discussions, however, Rogers remains highly bullish on two things: China and commodities. The new index addresses both.

“I bought more [commodities] recently. I know that one of the few bull markets that I can see going up in the next five to 10 years is in agriculture,” Rogers said. “You may not have bull markets in cars or financial institutions or lots of other things, but I know the world is not going to stop eating.”

Roller-Coaster Ride for Commodity Prices

Commodity prices across the board have been whipsawed over the past two years. Food-and-energy prices soared in the last part of 2007 and continued their climb in the first part of 2008. In fact, as Money Morning reported in early April, food prices rose so far and so fast in the early part of last year that the leader of the United Nation’s World Food Programme warned that a “silent tsunami” of hunger was sweeping the globe.

But after the world commodities markets sold off sharply for most of the last half of last year, a committee made up of Rogers and key members of the treasury and commodities team in Macquarie Funds created the index.

“Macquarie is one of the largest traders of agricultural commodities globally and Jim Rogers is one of the world’s leading commodity investors so it’s a great partnership,” Matthew Long, Sydney-based executive director of Macquarie Funds, said in an interview with Asian Investor. “The index methodology is a refreshing way to approach investing in commodities and over time we believe that consumption patterns, particularly those of China, will increasingly influence agricultural prices. We expect the index to perform quite differently from existing agricultural indices.”

Macquarie Funds plans to launch, in the near future, a series of funds linked to the Macquarie and Rogers China Agriculture Index in the Asian region in addition to issuance in Switzerland, according to published reports.

“The investing public is still worried about where to put their money so any product launch for the next six months is going to be a carefully thought-out launch,” Krkalo says. “But this commodities index is interesting for both short-term and long-term reasons.”

In view of the projected demand for food over the next decade – especially with the emergence of the world’s largest middle class, taking place right now in China – the decline in food-based commodities was badly overdone, Macquarie’s Krkalo says. From a profit standpoint, the short-term opportunity stems from attractive valuations, while the long-run outlook is all about massive and growing global demand.

Krkalo and Rogers both make a strong case that everyone should be invested in commodities. Even with the big decline in prices that took place in the last half of last year, here in the U.S. market alone, for instance, prices for food in U.S. grocery stores jumped 6.6% last year – the biggest spike since 1980. If anything, that underscores yet again that inflation is a much bigger problem than government officials, or most economists, say it will be. It also calls into question the veracity of the statistics that say there was such a drop-off in prices.

Last year was the second one in a row in which U.S. consumers were forced to pay a lot more for their groceries, Money Morning reported. In 2007, food prices at supermarkets rose 5.6%. Prices rose only 1.4% in 2006.

Of all food categories, prices for cereal and baked goods hit U.S. consumers the hardest, zooming 11.7% in 2008 over 2007. Prices for meats, poultry, fish and eggs gained 5.1%. Fruits and vegetable rose 3.4%, while dairy products advanced 2.7%.

Asia’s Promise

Commodities indices actually outperformed stock markets in December, with the Dow Jones-AIG Agriculture Total Return Index and the Macquarie and Rogers China Agriculture Index posting returns of approximately 9.8% and 11.6% respectively, Asian Investor reported.

Most major Asian stock-market indices – including Japan’s Nikkei 225, Hong Kong’s Hang Seng, MSCI Singapore, Kospi 200 and the MSCI Taiwan – posted positive returns, the largest of which was the Kospi 200 with a performance of around 6.2%.

The worldwide financial crisis and the sell-off in stocks that’s resulted have singed the mutual-fund industry. Mutual-fund assets in Asia – excluding Japan – could drop by nearly 20% this year, and won’t equal last year’s record levels until 2010, Boston-based financial researcher Cerulli Associates reported back in October.

Assets in Asian funds soared 86% to $1.126 trillion in 2007, before dropping 12% in the first half of last year. Macquarie’s Krkalo told the China Daily that when markets improve, the region’s investors would scramble to find opportunities.

“Asian investors are really quick to move,” Krkalo said.

Asia’s fund industry is dominated by such heavyweights such as ING Groep NV (ADR: ING), Schroders PLC, JPMorgan Chase & Co.’s (JPM) JF Asset Management unit, and Prudential PLC, as well as Nomura Holdings Inc. (ADR: NMR) and Citigroup Inc.’s (C) Japan-based Nikko Asset Management unit, which the U.S. banking giant is trying to sell.

Source: New Index Combines Jim Rogers’ Top Two Profit Plays: Commodities and China

Gross domestic product (GDP) in the 15-country Eurozone increased by 0.7% in the first three months of the year, Eurostat reported. Analysts had predicted a growth rate of 0.5%.

Germany and France – which together account for nearly half the Euro region’s GDP – made the difference. The German economy, the continent’s largest, expanded by 1.5% in the first quarter, compared with a growth rate of 0.3% in the final three months of 2007. France also turned in a respectable performance, advancing at a 0.6% clip.

Although the strong growth underscores the global economy’s resilience in the face of a sputtering U.S. economy, and appears to justify the European’s Central Bank’s focus on taming inflation, analysts warn the celebration may not last.

A key cause for concern: Despite their strong performance, both France and Germany showed signs of declining consumer demand, which is why analysts are skeptical that such stellar growth can continue.

“A Chinese proverb says that it is better to light a candle than to curse the darkness,” Carsten Brzeski, an economist for Dutch finance group ING Groep NV (ADR: ING), told Reuters.” However, at the current juncture, one should not be blinded by the German GDP numbers.”

Indeed, earlier this month, data from Germany’s Federal Statistics Office showed retail sales in March were down 0.1% from February, and down 6.3% from a year earlier. Food, drink, and tobacco sales led the decline, as consumers cut back in the face of soaring inflation.  Consumer prices in April jumped 2.4%.

The story is the same for a multitude of other European nations. Eurozone inflation backtracked slightly in the month of April, sliding to 3.3% from a 16-year high of 3.6% in March, but remained well above the ECB’s 2.0% ceiling.

“There are significant pressures facing consumers in Europe,” Howard Archer, chief European economist at Global Insight Inc., told Forbes.com. “Higher inflation and soaring food prices are weighing down on consumer purchasing power in Europe. It is a depressing factor throughout the continent.”

“Consumer confidence is weak in Europe and low spending is bound to hurt the overall economy,” he added.

The European Central Bank (ECB) has remained hawkish on inflation, which it considers “the main problem that we have to face in the short term.” The ECB has held its benchmark interest rate steady at 4.0% for nearly a year now, despite an aggressive string of rate cuts by the U.S. central bank that has left the benchmark Federal Funds Rate at 2.0%.

Still, rising worldwide commodities prices and a weak U.S. dollar continue to drive up inflation throughout the Euro region.

The European Commission (EC), the executive branch of the European Union, said last month that Eurozone growth would continue to erode throughout 2008 and 2009.

The EC predicted the combined growth rate for the 15 countries that use the euro would slow to 1.7% this year and 1.5% next year. It was second time in six months that the commission has reduced its growth estimate for the region. In November the group was projecting growth of 2.2%.

According to the EC, “the recent sharp rises in food and energy prices have depressed households’ purchasing power and consumer spending in the last quarter of 2007 and are expected to continue to do so during most of 2008.”

If the Eurozone does lose its momentum in the months ahead, the ECB could find itself in a precarious position, as abiding inflation might keep the bank from cutting rates to spur growth.

“There is definitely no room for the ECB to cut rates,” Joerg Kraemer, chief economist at Commerzbank AG (OTC: CRZBY) in Frankfurt told Bloomberg News.

Source: European Growth Strong in the First Quarter, but Will it Last?

Given the attention focused on how creditworthy our banks are, some may well be tempted, as The Daily Telegraph’s Stephen Ellis notes, to “stuff it all under the mattress”.

However, that is not only rather risky, but also should be unnecessary, thanks to an investor safety net – the Financial Services Compensation Scheme (FSCS) – which pays out if a bank or building society holding your cash goes bust.

At first glance, the scheme is pretty simple; if a bank goes bust and a customer is unable to recover a cash deposit via the normal liquidation process, then they are entitled to claim 100% of any amount up to a maximum of £35,000. So far, so reassuring. However, there are some quirks to be aware of.

First off, the £35,000 applies per person and not per account. So if you have two accounts with a single bank, say a current account and an online savings account, the balances are combined to test the £35,000 threshold. Also, some banks, such as HBoS, have a single Financial Services Authority (FSA) registration for all of their operations – including the likes of Intelligent Finance, Birmingham Midshires, Halifax and Bank of Scotland. That means you only get a single £35,000 claim to cover balances across the whole group. So a cautious investor should limit single deposits to £35,000 and, ideally, spread them across different banks.

It’s also worth noting that the scheme only pays out if your bank is FSA-authorised. You can check this on the FSA Register, or call them on 0845-606 1234. Be aware too that certain banks, such as Bank of Ireland, ING, Landsbanki and Fortis, get their primary authorisation to operate here from local regulators rather than the UK FSA. Although you would still be entitled to claim from the FSCS should the local scheme pay less than £35,000, the process may take longer, given the complexities of dealing with two different regulators.

If this all sounds like a lot of homework for a simple cash deposit, remember that the Government’s bail-out of Northern Rock suggests a major UK bank is unlikely to be allowed to fail, so the FSCS may never be tested. That’s perhaps just as well, given that under new FSA rules from 1 April it can only raise a maximum of £4bn a year in funding, hardly enough to cover all the deposits in a major retail bank.

But if you still have doubts, consider investing with the Government-backed National Savings Bank instead. One savings product stands out if you don’t mind locking up your cash short-term – index-linked certificates. Running for three or five years, the investment limit for each is £15,000. They each pay tax-free interest at 1.35% above the retail price index (a key measure of inflation) currently sitting above 4%. For a higher-rate taxpayer that’s equivalent to a gross annual return of just over 9%, with your deposit guaranteed by the Treasury.