It’s also expected to outline cost cutting measures that could include laying off employees, suspending plant operations, delaying the opening of new plants, and cutting the budget for research and development.

According to several Japanese media outlets, Toyota plans to eliminate bonuses for its executives and is expected to post a second-half loss.

One analyst believes the company’s dividend also could be on the chopping block.

“We anticipate that even Toyota could see its post-dividend cash flow turn negative should it keep its dividends at 140 yen,” Morgan Stanley (MS) analyst Noriaki Hirakata wrote in a report. “Thus, in this perfect storm, we expect the firm to cut its dividend to 100 yen per share for this business year.”

That’s a gigantic step backwards from last year, when Toyota took the crown from General Motors Corp. (GM) as world’s largest automaker by selling 9.37 million cars worldwide.

But like all automakers – and nearly every major industry – Toyota has been crippled by a worldwide dearth in demand, brought on by a whirlwind of job losses, devalued property, lack of credit and falling stock markets.

From January to October this year, Toyota sold 7.74 million vehicles. And during its fiscal first half – six months ended September 30 – net revenues fell 6.3% compared to the same period last year.

Year-to-date, Toyota’s New York-listed ADR shares have fallen about 38%, still much better than GM and Ford Motor Co.’s (F) respective stock declines of 83% and 53%. But recently, Toyota’s ADR shares have been moving forward in hopes that the U.S. government will bailout Detroit’s Big Three – GM, Ford and Chrysler LLC – because that would shore up the auto industry’s underpinnings: Dealerships and parts and supply manufacturers.

The United States is also the largest market for most foreign automakers. Allowing one or all of the Big Three to go under would add millions to the running unemployment numbers and deepen the recession, making the U.S. market less likely to buy their cars.

Source: Toyota to Slash 2009 Sales Outlook, Cut Costs

• U.S. sales in November fell 31% for Ford Motor Co. (F) and 34% for Toyota Motor Corp. (ADR:TM) Every line of Ford vehicle posted falling sales, and the company responded by slashing first-quarter North American output for 38% to 430,000 vehicles, Bloomberg reported.

• Crippled by global slowdown, British Airways plc (OTC:BAIRY) said it is in merger talks with Australian airliner Qantas Airways and Spain’s Iberia, Reuters reported. Should the three mesh together, it would create the largest airline company.

• U.S. conglomerate General Electric Co. (GE) said it is looking for ways to cut costs, including job cuts and its finance and industrial units, in order to reach the low end of its fourth-quarter profit forecast. “Obviously the macro environment remains very challenging,” Keith Sherin, GE’s chief financial officer, said in a briefing with investors, Reuter reported. “We know that we have to reduce our cost structure in this environment.”

• In the midst of a dour holiday shopping season, Sears Holdings Corp. (SHLD) posted a wider-than-expected third-quarter loss, as its Sears and K-Mart stores took a beating from the U.S. recession. The company also announced it would close more stores and buy back as much as $500 million of its stock, MarketWatch reported.

• Oil prices fell to a 3-year low yesterday (Tuesday) as mounting job losses and fears of a protracted recession continued to weigh on investor confidence. Light, sweet crude for January delivery fell $2.32 – more than 4% – to settle at $46.96 a barrel on the New York Mercantile Exchange. Prices touched $46.82 earlier in the day, the lowest level since 2005.

• U.S. credit card write-offs will continue to increase in 2009, as the unemployment rate continues to climb from the 6.5% reached in October, the top executive at Discover Financial Services (DFS), said yesterday (Tuesday) according to The Associated Press. David Nelms, Discover’s chief executive, said write-offs could be near 5% in the fourth quarter and 6% in the first quarter of 2009.

Source: Global Investing Roundups Wednesday, December 3rd, 2008

You’ll recall that one of the fairest of the Bubble Era’s revelers was the idea that, over the long run, you would make money in stocks. All you had to do was ‘buy and hold.’ Who didn’t like her? She seemed so easy…so willing…so fetching and attractive.

Yesterday, the Dow lost another 203 points. Investors are down 44% so far this year. Worldwide, they’ve lost $10 trillion this month – far worse than the crash of ‘29.

The most successful economy of the 20th century was the United States of America. The second was probably Japan. It rose from the bombed-out ruins of WWII to become a worldwide export powerhouse, dominating the auto and electronic equipment industries.

But yesterday, stock prices in Japan fell to more than a quarter-century low. Investors in Japanese stocks – including your editor (who is better at giving advice than taking it) – have made nothing in 26 years.

Here’s the press report:

“Tokyo’s Nikkei 225 index closed down 6.4 percent to 7,162.90 – the lowest since October 1982 – with exporters like Toyota Motor Corp. and Sony Corp hit hard. The losses came despite a report that the government was considering massive capital injection into struggling banks in a bid to calm jittery financial markets.”

“Decades of pain and still no relief,” adds the Financial Times, noting that investors in Japan have been waiting for a recovery for the last 18 years.

With the mask off, stocks in Japan are giving investors a Halloween fright.

But what other masks are coming off?

How about the sweet mask worn by housing? ‘Housing always goes up.’ And, ‘you can’t lose money in property.’ Remember those beauties? Those masks hit the floor a year ago. Since then, the whole world has looked at the property market and gasped in horror. How could houses be so ugly, homeowners have wondered; they look like they just woke up.

Oh and there’s oil…down to $63 yesterday. Oil was supposed to go up forever. At least, that was one of the favorite masks of the late Bubble Era.

But there are still a few Bubble Era masks that have not yet come off. In fact, the belle of the ball is the mask on ‘progress.’ People still believe that the world grows and improves – if not steadily, at least episodically. It’s certainly true that long periods of history show what appears to be economic progress. Things get better. But occasionally, something terrible happens – plagues, wars, revolutions, Great Depressions and Dark Ages. Then, the world turns backward. The bull market in progress turns into a bear market of progress turns into a bear market of backsliding.

Today, people are losing faith in stocks and housing…but they still have faith in progress. Just a few months ago, they thought capitalism would make them rich. But wicked capitalism has disappointed them badly; it didn’t guarantee rising asset prices after all. So, now they turn their sad eyes to the feds. ‘Oh ye all-knowing, all-seeing, all-powerful ones…hear us. Save us – from capitalism!

They figure the feds will do the trick… And sure enough, all over the world the federales are playing along. The G7, the IMF, the central banks, the finance ministers and Treasury Secretaries – all have put on their own masks…strutting around, pretending to know what they are talking about. Curiously, France’s president Nicholas Sarkozy is a leading strutter. He’s trying to organize a New World Financial Order…based on something other than the dollar.

These poseurs don’t look too bad – as long as they leave the masks on. Take them off, of course, and you will see the same silly clowns who CAUSED the crisis in the first place.

That is what is so amusing about this stage in the collapse of Western Civilization. You see, most of the world’s financial press has come around; they see things much the way we do. They see, for example, that the U.S. Fed erred – big time – by fixing the price of credit too low for far too long.

Of course, there’s nothing in the Manual of Capitalism that allows the feds to fix the price of credit or support the housing market. This was the government at work, not the market. With the misleading signal coming from the credit markets, the capitalists just did what they always do – they overdid it.

Still, the world’s press, pundits and politicians have convinced themselves that the fault lies not in themselves…but in capitalism. And now, they expect the feds to do something about it.

But that’s just the way it works…one hallucination gives way to another. One delusion on the way up; another on the way down.

*** Even star mutual fund managers are getting walloped by this market. Chris Mayer offers us a few examples:

“Managers with great track records are faring poorly, and it may help you feel better about how you are doing. Jean-Marie Eveillard, for example, has been running money for 50 years. He’s beaten the market handily for a long time. He is a cautious type. He likes gold stocks. He likes Japan. He’s down 27% this year. Robert Rodriguez, another cautious money manager who holds a lot of cash and runs FPA Capital, is down 29%. These are among the best of the best, as the market is down more than 40% this year. William Fries at Thornburg is down 43%. David Winters at Wintergreen is down 37%. Wally Weitz at Weitz Value is down 39%. The list goes on and on…

“So you see, nothing is really working well in this market right now – at least not for investors in stocks. However, there are a lot of cheap stocks out there, bargains I haven’t seen in a long time. Unless the world comes to an end, which it has a habit of not doing, future investors will be a happy lot. Count me a cautious buyer of stocks.”

Caution is the name of the game here…and if you’d like to see what Chris has been thoughtfully recommending to his Capital & Crisis subscribers, see here.

And the bargain hunters were abound this morning, setting up a rally worldwide in the markets.

Also boosting the markets is the anticipation of the Fed’s two-day meeting, that begins today. It is widely believed that the Fed will cut rates…but it remains to be seen what, if any, lasting effect it will have on the markets.

Lurking behind this rally is this unsurprising tidbit: consumer confidence in the United States hit an all-time low in October. The Conference Board reported that expectations have turned “significantly pessimistic with the percentage of consumers expecting business condition to worsen over the next 6 months rising to 36.6% from 21% and those expecting fewer jobs rising to 41.5% from 26.9%”

*** Perhaps the biggest delusion of the financial world now is that the dollar…and dollar-based Treasury obligations…are a safe refuge. In a sense, of course, they are. The U.S. government is in no danger of defaulting on its loans. In an emergency, it can always just print up the money. But that’s the problem. An emergency is coming. More on this when we get a chance to think about it…

*** “I’ll be all right down here,” said our old friend Doug Casey. Doug has bought a place in Cafayate, a town that reminds us of Santa Fe or Aspen, before they were ruined by rich people. He’s building a world-class resort – complete with golf course, riding trails, tennis, health spa, library…everything he wants.

Cafayate also has several things going for it that Aspen and Santa Fe did not. First, it is prettier and the weather is better. It is always sunny, with pleasant temperatures. Wherever you look, you see beautiful mountains. What’s more, it produces some of the world’s best wine.

Doug’s place is right in the middle of a vineyard. In fact, he’s got it set up so that revenue from the vines pays much of the operating costs of running a golf course and so forth.

“Another big plus,” says Doug, “is that this place isn’t going to suffer too much from the credit crisis. Nobody down here had any credit.”

*** Doug is not completely right about Argentina’s credit situation. Believe it or not, there were lenders – mostly big banks – who were foolish enough to extend the nation credit. Naturally, the Argentine government treats these angels like taxi drivers in Buenos Aires treat other foreigners.

Almost every time we go to the airport, the taxi driver tries to pull a fast one. “My meter is broken,” said one, “the standard fare is 200 pesos.” (It is really about 70 pesos.) “We crossed into another zone,” said another, “so I have to add another 50 pesos.” “It’s night time,” came another invention, “after dark you have to pay a surcharge.”

It’s all good fun. The taxi drivers are merely establishing the going rate. The price for a run to the airport is much higher for naïve foreigners, but why shouldn’t it be?

So is the price for lending to the Argentine government.

This from MoneyWeek:

“In December 2001 [Argentina] reneged on its $95bn of sovereign debt.

“At the time, that was the biggest default in world history, though these days such a number looks like chicken feed compared with what the world’s bankers have recently managed to mislay. Only in 2005 did Argentina sort the final details, with a ‘take-it-or-leave-it’ 70% ‘haircut’ on face value, again the largest sovereign debt markdown ever.

“Three years later, it’s back to square one. Inflation is rocketing (some estimates put it at 20% annualized) and the government is once again running out of cash. Argentina’s borrowing needs will swell to as much as $14bn next year from $7bn in 2008, says RBC Capital Markets. And any confidence that the country will be able to repay what it owes is fast flying out of the window.

“Argentina’s 8.28% government bonds are due to be redeemed in 2033. Fat chance of that, the way things are looking right now. Now priced at 22 cents on the dollar, they currently yield 31%, as against ‘just’ 12% a month ago. And still no one wants them.

“What’s more, the price of credit default swaps – market insurance that investors can buy to protect themselves against default (Read: All you need to know about credit default swaps for more) – covering the country’s sovereign debt has more than quadrupled over the past month. These CDS now stand at more than three times the Icelandic level, and suggest there’s almost a 2:1 chance that Argentina will go bust this year.”

Does this worry your editor – who has substantial (for him) investments in Argentina? Not at all. As a dear reader pointed out, the average Buenos Aires taxi driver knows more about financial crises than Bernanke, Paulson and Greenspan put together. The Argentines know how to get through a crisis, in other words, and still put steak on the table and wine in their glasses.

We’re going to learn from them.

*** Finally, another dear reader sends a news item explaining why there was a bagpiper in front of our neighborhood church last Sunday.

It was the “kirking of the tartans,” said the headline. Turns out, the local Scottish Argentine society does this every year…a kind of blessing of the clans, performed by the local priest. “Kirk” in Scottish means church.

Source: The Masquerade is Over

• Myron Ullman, the chief executive officer of department store company J.C. Penney Co. Inc. (JCP), said that he doesn’t intend to provide annual financial guidance at this time, as the market is too cloudy to predict a forecast, Reuters reported. “I’ve been in the business 39 years. I don’t think I’ve ever seen an environment that was as unpredictable as the current environment,” he said.

• Wells Fargo & Co. (WFC) emerged from the first quarter with analyst-beating results, posting an 11% decline in profits but a 12% increase in revenue and 1% decline in expenses. “Despite a weakening economy, the continued downturn in housing and expected higher charge-offs, this was a remarkably strong quarter,” Chief Executive John Stumpf said in a statement.

• China’s economy grew by 10.6% in the first quarter of 2008, only slightly less than the 11.2% expansion in the final three months of 2007. The country was able to maintain double-digit growth despite complications stemming from the U.S. credit crunch, the Chinese New Year and the worst ice storm the country had seen in decades.

• General Electric Co. (GE) plans to invest up to $2 billion in acquisitions and other deals in China over the next three years as part of a strategy to double its revenues in the country, the Financial Times reported. The world’s biggest industrial company, which stunned investors last week when it announced its worst quarter in five years, is looking to hire a team of 20 “in-house investment bankers” to conduct the deals in China.

• Toyota Kirloskar Motor Private Ltd., the automotive joint venture between Japan’s Toyota Motor Corp. (TM) and India’s Kirloskar Group is set to invest $350 million on a new plant in Bangalore. The plant will follow Tata Motor Corp’s (TTM) lead by producing “a strategic new small car” by 2010, IBTimes India reported.

• Qualcomm Inc. (QCOM) announced it would invest in India-based start-up technology companies that offer “innovative technologies and services that enhance wireless communications and semiconductor ecosystems,” The Financial Express reported. San Diego-based Qualcomm’s first investment will be in India’s Tessolve Services Pvt. Ltd., a firm that provides solutions and platforms for semiconductor testing, packaging, qualification and failure analysis.

• The U.S. Department of Justice has approved the $810 million deal that allows Russia’s largest steel producer Severstal OAO to purchase the Sparrows Point steel mill from ArcelorMittal (MT). The DOJ demanded the sale of the Baltimore County, Md.-based plant after the merger between India-based Mittal and Luxemburg-based Arcelor to enforce anti-monopoly laws.

• General Electric Co. (GE) former chief executive Jack Welch demonstrated his frustration yesterday (Wednesday) with his successor, Jeffrey Immelt, after GE’s profit fell 6% in the first quarter. “I’d be shocked beyond belief and I’d get a gun out and shoot him if he doesn’t make what he promised now,” Welch said in a CNBC interview, a cable station owned by GE, The Associated Press reported. “Just deliver the earnings. Tell them you’re going to grow 12% and deliver 12%.”