Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Sully- who wrote (53044)	6/13/2002 3:46:13 PM
From: T L Comiskey	Respond to of 65232

Financing of US debt not sustainable: report Reversal of capital inflows into US from Asia could precipitate a crisis By Siow Li Sen (SINGAPORE) The United States, by far the largest indebted nation in the world, is being bankrolled by thrifty Asian savers like Japan, China and Singapore. But this is unsustainable and a threat to financial stability, says a report by the New Economics Foundation (NEF), a radical UK think-tank. Savings trends in Asia will decline as its middle classes consume more and a reversal of capital inflows into the US could precipitate a financial crisis or a sudden crash like in Thailand or Mexico. Asian consumers will spend more and borrow more over the next decade, and its savings rates will come down to European or US levels, says the report. It suggests this has already started: in January this year, Japanese investors made their largest net sales of foreign bonds in four years - US$24 billion. One of the NEF's programmes focuses on the debts of the poorest countries and the economic adjustments imposed on them by creditors. Its report - which calls the US a HIPC or 'heavily indebted prosperous country' - was publicised to coincide in April with the International Monetary Fund and World Bank spring meetings in Washington. The US, with a population of 300 million, has accumulated an external debt of US$2.2 trillion, almost the same owed by about five billion people in the whole of the developing world, including India, China and Brazil - US$2.5 trillion. Put another way, every American citizen owes the rest of the world US$7,333 while every citizen of all the developing nations owes only US$500. More disturbingly, the US debt is also financed by the poor countries through capital flight from the latter and the forced holdings of high levels of US dollar reserves, the report says. Poor countries are borrowing at interest rates as high as 18 per cent, while the US borrows through US Treasury bonds at 3 per cent. Continued inflows of capital into the US and UK help to lower interest rates and also inflates the value of their currencies by about 20 per cent. This enables them to buy imports from the rest of the world 20 per cent cheaper than they would otherwise have been able to, the report argues. Poor countries are bled dry through debt service repayments totalling more than US$300 billion a year while the US needs to pay only US$20 billion annually to service an almost equivalent debt. Whether the US deficit is reversed through a sudden crash or a continued decline, 'it is inevitably the poor countries that will bear the highest costs of any correction to the US' unsustainable debts'. The hard-hitting report adds: 'While the growing deficits of rich countries are not understood, are ignored or tolerated by academics, experts and public opinion, the debts of poor countries are the subject of much opprobrium. 'Rich countries are held to be prudent, efficient and competent in managing their economies - and therefore 'deserve' their historically high, extravagant and environmentally unsustainable living standards. In contrast, poor countries are judged as incompetent and corrupt in managing their finances - a fact which is seen to explain the huge 'quantities' of poor country debt.' Another of its controversial claims is that the US deficit is the real driving force behind globalisation. 'Elected representatives of the US and the United Kingdom have actively promoted international financial liberalisation, or 'globalisation', to finance the US deficit,' it states. It argues that globalisation has not been primarily driven by corporations or by development in new technology. Instead, because of the need to finance the steady expansion of the US trade deficit in the 1960s and 70s, the US and UK governments embarked on a deliberate policy to remove statutory controls over the movements of capital.

To: Sully- who wrote (53044)	6/13/2002 4:22:52 PM
From: Dealer	Read Replies (1) \| Respond to of 65232

i2 Tech's Shares Tumble as CFO Warns of Slump By Siobhan Kennedy NEW YORK (Reuters) -ITWO Shares of i2 Technologies Inc.(NasdaqNM:ITWO - News) tumbled more than 13 percent on Thursday after the company's chief financial officer said the slump in technology spending had deepened in the current second quarter. Slowing demand had also forced i2 to reevaluate its business plan, including the possibility of more layoffs, CFO Bill Beecher said. I2 has cut about 10 percent of its workforce in the past year, reducing headcount to roughly 4,800 from 5,300 at the end of the first quarter in 2001. Details of the plan will be announced during the company's second quarter conference all on July 16, he said, warning there was no "quick fix" for i2's problems. "The economic environment has gotten tougher," Beecher told Reuters in an interview. "Demand for our products is down." Shares of i2 were off more than 12 percent, or 36 cents at $2.56 in early afternoon trade on the Nasdaq where the stock was among the top percentage losers. Beecher echoed the gloomy assessment of corporate spending expressed earlier this week by Ken Goldman, CFO of Siebel Systems Inc. (NasdaqNM:SEBL - News) The stock of the No. 1 provider of sales and customer service software got slammed after Goldman told investors as the Bear Stearns conference here that the second quarter was just as bad -- if not worse -- than the first quarter. "The IT (information technology) environment is every bit, if not frankly more challenging this quarter than it was last year," Siebel's CFO Ken Goldman said on Tuesday. COOKING UP PLAN Like other software makers i2 -- which makes so-called supply chain software that enables companies to share their inventory and purchasing data with suppliers over the Web -- has been hit hard by the U.S economic slowdown as corporations put the brakes on technology spending. The company's shares slid throughout 2001 as the Internet bubble burst. As spending declined, i2 posted a string of losses and cut staff. Further evidence of turmoil at the Dallas-based software maker emerged in March, when i2 named former Chief Executive Sanjiv Sidhu its new CEO, after then CEO Greg Brady stepped down. Now i2, which has already shaken up its sales force, is cooking up another plan. "We need to reevaluate the business plan and we need to get back to profitability," Beecher said. In the first quarter, which ended March 31, I2 posted revenue of $168 million, down from $364 million last year. Software license revenues -- widely used to measure a software company's core growth -- fell to $59 million in the first quarter from $73 million in the previous quarter and $211 million a year earlier. NO QUICK FIX "None of this is a quick fix," Beecher warned. Beecher refused to give any specific details on the strategy, other than to say it would address how i2 goes to market with its complex line of manufacturing, inventory and purchasing products. He said details of the plan would be announced on the company's second-quarter conference call on July 16. Asked if the plan could also include job cuts, Beecher said he wouldn't rule it out. "It's a difficult business environment and we're prepared to make the decisions we need to make to make this company get back to profitability," he said. At the same time, the company has managed to reduce expenses to about $215 million in the first quarter compared with $355 million in the year ago quarter. But analysts have said i2 -- which has in part built its business through numerous acquisitions -- needs to cut costs further.