There was, a week ago, a glimmer of hope in the world with regards to the food crisis. Not anymore. Prices of essential food items have gone drastically up with the past few days.

One thing is for sure that we have gone from an era of plenty to one of scarcity. Experts agree that food prices are not likely to return to the levels the world had grown accustomed to any time soon.

In Liberia last week, it was reported that people had stopped purchasing imported rice by the bag, and instead they bought it by the cup! This situation certainly brings up memories of the food riots that sunk Liberia’s into chaos in 1979.

In Kenya’s Rift Valley, “the bread basket of East Africa”, farmers are planting only a third of what they did last year. Now, if they could sell at higher prices, why wouldn’t they plant even more? Because they cannot afford fertilizer, which is also skyrocketing in price.We see the same in Mali, Laos and Ethiopia; a perfect prescription for disaster.

In Kathmandu, the government announced yesterday that it has decided to ban export of food items in a bid to tackle the soaring food prices. A senior official at the Ministry of Supplies said the decision to ban the exports was taken to protect his country of food crisis. “We are dependent on India for food items. India has stopped exporting to us now. On the other hand, we export wheat flour to Tibet, China and basmati rice to Bangladesh,” said Gyan Darshan Udhas.

And the thriller is set to be continued….

UBS AG Chief Executive Officer Marcel Rohner confirmed analysts’ fears today that UBS, the largest Swiss bank will put its investment banking business on a much tighter leash. UBS will ‘no longer aim to offer everything to everyone in investment banking” Rohner told investors at the annual shareholder meeting in Basel today.

UBS has about $3 trillion assets under management, making it not on Switzerlands’ biggest bank, but also the world’s largest wealth management company. But losses of almost $37.5 billion since July have long exceeded the $32 billion earned by the division in the past 10 years.

UBS shares have lost 55% of their value over the last 12 months. The bank eliminated 1,500 jobs at the end of 2007 and may well cut another 2,500 or 11% of the employee force in the investment banking division.

Merrill Lynch & Co. posted a $6.5 billion on mortgage writedowns, the third straight quarterly loss. Mother Merrill Lynch, as people who worked there used to call it, announced shortly after that it is cutting around 3,000 jobs. CEO, John Thain, said today he is expecting to face even more difficult months going forward.

Merrill Lynch’s stock has lost half its value in the past twelve months, and maybe even more importantly, its total revenue fell 69% and now stands to $2.9 billion in the first three months of 2008 compared to the same period a year earlier.

Despite the fact Fed policy makers cut the rates seven times already since September 2007, which amounts to a total of 3% decrease in borrowing costs, the average rate for a 30-year fixed mortgage dropped only half a percentage compared to the same period.

‘So, if that didn’t do the trick, then what will’ is the real question. These news come as a blow to consumers and who are due to refinance mortgages this year, as they will come face-to-face with a sharp jump in monthly payments.

“The Fed is trying to drive a car with only slight control of the steering wheel and no control of the gas or the brakes” said Clive Granger according to Bloomberg News. Clive Granger is professor emeritus at University of California, San Diego� and the 2003 Nobel laureate in Economics. And the truth is that currently the fixed-mortgage rates seem to have disconnected from the 10-year Treasury bond.

Property investor in San Diego refused to make an offer on a property until she can get a fixed rate of 5.5% and that’s exactly the kind of buyers the Fed needs at the moment. But chief economist for the California Association of Realtors - which is based in Los-Angeles by the way -, said that the Fed’s interest rate reductions are having little near - term direct effect on the housing market.

Finally, as most buyers have put their plans on hold and are awaiting the housing decline, until prices hit rock bottom, the liquidity in the market worsens which eventually will force lenders to tighten up even more the supply of home loans.

Centaurus Capital Ltd’s chairman and CEO, Bernard Oppetit, said he is buying loans and bonds being sold off by banks and rival funds.

“We are seeing some credit and bonds trading at stupid prices,” Oppetit, the $4 billion London-based hedge fund’s founder said in an interview on March, 28. “There are a lot of people forced to liquidate their positions. There’s been a real crash. It’s the worst I’ ve seen as far as I can remember.”

Although Oppetit confirmed that he is not buying mortgage - backed debt, he did not want to be more specific about Centaurus Capital’s investments. He said however, that he is finding more value in senior secured loans than bonds.

Loans and bonds are trading at very low prices, due to lack of liquidity in the market. But given the market crash, how easy is it to tell which one is a bargain or a rip-off?

Just when the dollar showed some signs of recovery, it was hit by a South Korean bomb. The dollar’s vulnerability was highly underscored by the announcement of South Korean’s National Pension Fund that would no longer buy US treasuries as yields were too low.

The Fund also announced that it is now looking to diversify its holdings, without giving any more information. The fund has almost $220 billion in assets. Analysts said that this kind of news support current sentiment of further weakness expected in the USD.

However, the Financial Times reported that the fund holds around $14 billion in U.S. government debt, which amounts to a small percentage of the $4.5 trillion overall Treasury market.

I guess it’s down to the investors now to decide who is right and who is wrong.

Lehman Brothers Holdings Inc., the largest underwriter of mortgage-backed bonds is struggling to cope with the economic slowdown, and thus is eliminating 5% of its total employees. Continue Reading »

When the numbers do the talk… see below a list of the most important equity indices from around the world and their year to date percentage change.

A report released on March 7 by the Labor Department showed that job cuts continued in February for the second straight month. This month’s loss, the biggest in five years, has cost 63,000 their jobs.

Funnily enough, the unemployment rate dropped to 4.8% from 4.9%, which clearly shows that the labor force is shrinking, as people are being forced to give up even looking for a new job!

All this happen, despite the fact that the Fed has lowered its target for the federal funds rate 5 times already since September. The most recent rate cut was on January 30, with rates standing at only 3%. The Fed’s recent moves include the central bank’s first rate cut since 2001.

Growth is weakening everywhere, but most in US. The dollar fell to a record low against the euro and the weakest in almost three years versus the yen. Continue Reading »