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The GoldBugg Report – June 24, 2008

June 24, 2008

-Silver bulls predict price bounce. The ‘poor man’s gold’ is off its March high. ‘This is the time to buy.

-Central bank body warns of Great Depression.

-RBS issues global stock and credit crash alert.

-Will the Hunts buy silver again after selling Hunt Petroleum?

GOLD

-Gold May Rise to $5,000 on Inflation, Schroder Says. Gold prices may rise to $5,000 an ounce as investors seek to protect themselves against accelerating inflation, said Schroder Investment Management Ltd., which oversees $277 billion of assets globally.

“You could easily see for the next several years that prices rise not to $1,000 an ounce, but prices rise to $5,000 an ounce or beyond as inflation psychology becomes more and more embedded and people become desperate to have a source of value,” said Christopher Wyke, London-based emerging market debt and commodities product manager at Schroder, which oversees about $10 billion of commodity assets.

Investors are turning to gold for protection as two-thirds of the world’s population cope with inflation rates that are climbing to more than 10 percent, Wyke said. Cash and inflation- linked bonds are poor substitutes as low interest rates, coupled with surging inflation, erode the real value of assets, he said.

Demand for gold will also rise as central banks become net buyers for the first time in 20 years, driven by developing countries, he added. Last year, world production of gold sank to the lowest since 1937 as reserves are depleted and few new sources of gold have been found.  Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=aF1439PVhAgk&refer;=commodities

-China gold fund manager sees potential for rally. After doubling his money in the gold market in just six months, Wang Weilie, one of China’s leading gold fund managers, believes another surge in gold prices is likely in the next few years as global inflation escalates and the dollar sags.

Wang, who manages nearly 2 billion yuan ($290 million) invested in the Shanghai Gold Exchange and the spot gold market for his own and clients’ accounts, said gold could be a useful hedging tool and worthwhile investment in the next decade for the Chinese, who traditionally think of gold mainly as jewellery.

“I have bought and stored several hundred kilograms of gold bars but I do not wear any gold jewellery,” Wang, wearing jeans and a T-shirt, told Reuters in the Shanghai office of a business partner who manages the country’s largest gold trust.

Wang said gold had the potential to surge again, arguing that the dollar was due for further declines, while stocks, property and other assets were overvalued, making gold more attractive as a store of wealth. “We have reason to believe that gold will hit $2,000 in coming years after it broke the $1,000 level,” he said.  Read more here-http://www.reuters.com/article/idUSSHA27743120080613

-Gold fever. The value of gold has been going through the roof. Its price has quadrupled since 1999, and in March this year it reached $1,000 an ounce for the first time. With uncertainty in the markets and turmoil in the banks, more and more people are turning to gold.

“Since the financial crisis erupted last August, there’s been a flood of investment into gold, really because of its safe haven properties,” says Jill Leyland, economic advisor to the World Gold Council. “Gold is no one’s liability and that means it is the ultimate defense against unforeseen contingencies.”  Read more here-http://news.bbc.co.uk/2/hi/business/7450751.stm

-The Gold to Oil Ratio. The gold to oil ratio remains near all time multi decade lows and clearly shows gold is undervalued vis a vis the lifeblood of the global economy – black gold or oil. With gold at $880 per ounce and oil at $135 per barrel, the gold/oil ratio is now at 6.5. The average in the last 40 years is 15. Oil has well surpassed its inflation adjusted 1980 high of $104 a barrel (the nominal high in 1980 was $39.50 a barrel which equals $103.76 in today’s money).

Gold continues to play laggard as it often does but will outperform oil in the later stages of the bull market as recession and demand destruction leads to a fall in oil prices but leads to safe haven buying of gold. Gold’s inflation adjusted high of $2,200 per ounce remains a very likely price target in the next 3 to 5 years.  Gold.ie

-Is gold too low compared with oil or is it that oil is just too high. With oil costs reaching potentially unsustainable levels, the gold market has to be prepared for a reaction to a possible puncturing of the oil price bubble.  Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=54909&sn;=Detail

-Tokyo bourse says to list first gold ETF.  Read more here-http://www.reuters.com/article/rbssInvestmentServices/idUST2289120080613

-S.Africa gold output down 10.1 pct yr/yr in April. South African gold output fell 10.1 percent in volume terms, while overall mineral production declined 2.0 percent in April compared to the same month in the previous year, official data showed on Thursday. Production of non-gold minerals fell by 0.7 percent in April, Statistics South Africa added.

Mining output in South Africa has taken a hit after state-owned power utility Eskom struggled to provide sufficient power to mines, following a near collapse in the electricity grid in January, which led to a five-day countrywide mine shutdown. Eskom has since supplied around 90 to 95 percent power to mines in the country.  Reuters

-Global gold mine reserve additions stymied by high oil and equipment delays other metals too. The rising costs of equipment and the long delivery times necessary for many items are additional factors increasing capital costs and lead times for the mining sector.  Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=54741&sn;=Detail

SILVER

-Silver bulls predict price bounce. The ‘poor man’s gold’ is off its March high. ‘This is the time to buy.’ Silver has a reputation as a “poor man’s gold,” but some market watchers are betting the metal is poised to gain more respect. While its price in New York is off 17 per cent from its multidecade high of $20.66 (U.S.) an ounce in March, some predict it will rebound and blow past that peak by year end.

With the silver price possibly falling further during the typically weak summer months for precious metals, it may be time to consider investing in silver stocks or bullion for an expected fall rally, observers suggest. “I wouldn’t be surprised to see it [silver] spike down as low as $13.50 or $14″ in the July-August period, said Jeff Christian, managing director of New York-based metals consultancy CPM Group. “That is the time to buy,” he said.

“I am not sure how high it could go, but I wouldn’t be surprised to see it at $22 or $23 by the end of December.” Silver is used in jewellery, but has varied industrial uses, including in electronics equipment. Like many silver bulls, Mr. Christian predicts a big price driver will be rising investor demand for the metal as a “safe haven” because of concerns about inflation, the devaluing U.S. dollar and the global credit crisis.

The recent pullback in price, meanwhile, stems from some industrial users reducing inventories in the face of higher costs, while investors have been taking profits after a strong runup. David Morgan, a U.S.-based precious metals analyst and writer of resources newsletter The Morgan Report, recommended his clients take some money off the table in March. “I love silver, but let’s be realistic,” said Mr. Morgan, who is also founder of Silver-Investor.com.

“These things can get over exuberant.” “I see a bottoming process [for the metal] between June and August,” he added. “By the end of the year, I see gold over $1,000 per ounce, and silver back over $21 an ounce. I think the fourth quarter is going to be very strong for metals.” Mr. Morgan’s bullish case for silver stems partly from the declining supply of above-ground, investable supplies of the metal as governments such as that of the United States have sold off their stockpiles.

Evidence of rising investor demand has been the popularity of the iShares Silver Trust, an exchange-traded fund launched in 2006 and which is now backed by more than 190 million ounces of bullion. Silver has also attracted wealthy investors like Microsoft Corp.’s chairman Bill Gates, whose Cascade Investment LLC is the third-largest shareholder of Pan American Silver. Billionaire investor Warren Buffett’s Berkshire Hathaway bet heavily on silver in 1997, and bought 130 million ounces, but he has alluded to selling this investment by 2006.

Nick Barisheff, president of BMG Management Group Inc. in Toronto, expects silver to rally in the fall because of seasonality patterns tied to the wedding season in India. “Gold and silver are a big part of dowries,” said Mr. Barisheff, who runs the $189-million BMG Bullion Fund, which invests equally in gold, silver and platinum. “My view is that silver will be above $21 (U.S.) by the end of the year.” Silver soared as high at $50 an ounce in January, 1980, when the Hunt brothers of Texas tried to corner the silver market.

But that spike only lasted a day, and the average price for silver that year was about $21 an ounce. Charles Oliver, an investment strategist with Sprott Asset Management Inc. in Toronto, is forecasting silver to reach $40 and gold to hit $2,000 an ounce in four years. The price target stems from calculating that gold historically trades at a 50-to-1 ratio to silver, even though those numbers can get “out of whack, periodically,” he said.

He oversees the $614-million (Canadian) Sprott Gold and Precious Metals Fund, which has 9 per cent of its assets in silver bars and another 20 per cent in silver stocks. “We are probably at the higher end than some of our [equity] competitors” in terms of a weighting in silver, he said. Raymond James Ltd. analyst Brad Humphrey expects the silver price to remain strong for the next 18 to 24 months on the back of a strong gold market, industrial demand and strong investor sentiment. That “will offset the near-term increase in mine supply,” he wrote in a report.  Read more here-http://www.reportonbusiness.com/servlet/story/RTGAM.20080617.wrsilver17/BNStory/SpecialEvents2/home

-Silver’s more than a sparkle in investors’ eyes. Analysts see price for ‘undervalued’ metal hitting $50 in next few years. Silver has been notorious for moving in tandem with gold, but silver prices have yet to trade anywhere near their record level.

Like gold, investors’ appetite for silver has been a key catalyst for the increase in the metal’s prices, according to CPM Group, a commodity research and consulting-services provider. Gold futures climbed past $1,000 an ounce in March to mark their highest level. Around the same time, silver futures reached a high of around $21 an ounce four times higher than the price five years ago, but a far cry from the peak level around $50 in 1980.

“Silver remains the most undervalued of all the commodities and all the precious metals and at the very least, the $50 per ounce nominal high of 1980 is very likely to be reached in the next 2 to 3 years,” said Mark O’Byrne, a director at Gold and Silver Investments Ltd.  Read more here-http://www.marketwatch.com/news/story/silvers-more-sparkle-investors-eyes/story.aspx?guid=%7bA59BEE16-7BF7-4A72-8C4F-582FCF3BC72D%7d&print;=true&dist;=printMidSection

-Strategist Donald Coxe of BMO Capital Markets is also bullish on an old commodities standby: gold. He sees it as a further hedge against both currency risk and the ongoing financial contagion on Wall Street. When investors panic about the prospects of banks, gold a.k.a. “the one true currency” tends to rise.

But investors might also investigate another precious metal: silver. Whereas gold touched new all-time highs above $1,000 an ounce earlier this year before pulling back, silver remains 60% below its 1980 record price of $50 an ounce, even after more than tripling over the past five years. Plus, potential new industrial uses for silver in cutting-edge batteries and nanotechnology could add to demand.  Read more here-http://money.cnn.com/2008/06/06/pf/retirement/okeefe_hot_commodities.fortune/index.htm

-Silver prices to average $18/oz in 2008 GFMS.  Read more here-http://money.ninemsn.com.au/article.aspx?id=579296

-Will the Hunts buy silver again after selling Hunt Petroleum? This week XTO Energy finally agreed to buy Hunt Petroleum for $4.2 billion after a long legal tussle between Hunt family heirs. The firm was founded by the late billionaire HL Hunt whose sons Nelson Bunker Hunt and William Herbert Hunt once cornered the world silver market in the 1970s.

Hunt is a privately held company which makes no public comment on its affairs. But commentators think the Hunts are calling the top of the oil market and that the price for Hunt Petroleum suggests a quick deal was the objective. However, market watchers are bound to wonder if the Hunts are planning to re-enter the silver market which they so dramatically dominated in the 1970s. It was in 1973 that the family first decided to buy precious metals to hedge against inflation, much as many rich investors are doing today.

Together with several wealthy investors the Hunts formed a silver pool and by 1979 held half the world’s deliverable silver supply, some 200 million ounces. Having effectively cornered the markets, the pool used leverage to drive the price of silver to $54 an ounce. But the authorities changed the rules on margin trading and crashed the market. The Hunt brothers eventually declared bankruptcy and by 1987 their liabilities of $2.5 billion exceeded assets of $1.5 billion.  Read more here-http://www.silverbearcafe.com/private/6.08/hunts.html

-A Hidden Silver Default?  Read more here-http://news.silverseek.com/TedButler/1213640342.php

-Recently, when silver was topping out at around $21 per ounce, there was an acute shortage of silver available for investing.  This investment demand problem threatened to kick silver into an industrial deficit driven price revolution.  The problem was resolved via unofficial rationing. 

New silver eagles and new 100 ounce bars have become increasingly unavailable since that time.  In fact the time required to get new 100 ounce silver bars continues to increase.  However, as the futures market price of silver went down from $21 dollars per ounce, weak hands holding silver once again have come forward to sell. 

The weak hands fear further price declines and are unable to wait because of financial stress.  I monitor this by watching the prices on ebay.  These prices have begun to converge with the futures price for the nearest delivery month.  Smart, strong hands are buying this cheap silver.  Read more here-http://news.silverseek.com/SilverSeek/1213458334.php

-New back side silver paste from Heraeus offers savings for silicon PV cell fabricators.  Read more here-http://www.emsnow.com/npps/story.cfm?pg=story&id;=34113

PLATINUM-PALLADIUM

-”Mixed” outlook for platinum, palladium in transport sectors. The Fortis/VM Group’s new Materials in Transport research says demand for platinum and palladium varies in the short and long-term. Interestingly, the possibility of smaller catalytic converters in Europe will lead to lower use of both metals.  Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=54635&sn;=Detail

-The Russian palladium stockpile do we need to worry? Comments on the Russian palladium stockpile caused immediate movement in the market, but do these comments mean much in the scheme of things? The comments from Anton Berlin, the head of Norilsk’s department for analysis and development, that Russian palladium stockpiles might be “depleted” in one to five years, have prompted a rally in the previously somnolent palladium market.  Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=54685&sn;=Detail

-Swiss platinum ETF grows 45% in volume in three months. Zurich Cantonal Bank’s platinum ETF holdings have grown by 45% on concerns over South African platinum supply and a promising demand outlook.  Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page504?oid=54868&sn;=Detail

-Rare metal prices soar on demand for more fuel-efficient jet engines.  Read more here-http://www.ft.com/cms/s/0/a299a7ea-3ccf-11dd-b958-0000779fd2ac.html?nclick_check=1

DEFINITIONS-QUOTES-QUICK HITS

-”Efforts and courage are not enough without purpose and direction.”  John F. Kennedy

-”At times it is folly to hasten at other times, to delay. The wise do everything in its proper time.”  Ovid

-Current Account Deficit. Occurs when a country’s total imports of goods, services and transfers is greater than the country’s total export of goods, services and transfers. This situation makes a country a net debtor to the rest of the world.

A substantial current account deficit is not necessarily a bad thing for certain countries. Developing counties may run a current account deficit in the short term to increase local productivity and exports in the future.  Investopedia.com

-”The odds of rate increases have gone down,” said Matt Zeman, of LaSalle Futures Group in Chicago. “We’re still losing jobs, and housing is incapable of turning around. The dollar has very limited upside potential.”  Kitco Daily Resource

-RBS issues global stock and credit crash alert. The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks. “A very nasty period is soon to be upon us, be prepared,” said Bob Janjuah, the bank’s credit strategist.

A report by the bank’s research team warns that the S&P; 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as “all the chickens come home to roost” from the excesses of the global boom, with contagion spreading across Europe and emerging markets. Such a slide on world bourses would amount to one of the worst bear markets over the last century.  Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/18/cnrbs118.xml

-Central bank body warns of Great Depression. The Bank for International Settlements (BIS), the organization that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.

In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.

According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression. The report points out that between March and May of this year, interbank lending continued to show signs of extreme stress and that this could be set to continue well into the future.  Read more here-http://www.bankingtimes.co.uk/09062008-central-bank-body-warns-of-great-depression/

-Monetary policy should allow a temporary rise in unemployment and inflation to let an economy find its balance from an oil-price shock, said Federal Reserve Vice-Chairman Donald Kohn on Wednesday.

Monetary policy should allow a temporary rise in unemployment and inflation to let an economy find its balance from an oil-price shock, Federal Reserve Vice Chairman Donald Kohn said last Wednesday.  Read more here-http://www.marketwatch.com/news/story/story.aspx?guid={0404E150-F28F-4729-86C6-088FDDF2EFCF}&siteid;=rss

-Iran withdraws $75 billion from Europe: report. Iran has withdrawn around $75 billion from Europe to prevent the assets from being blocked under threatened new sanctions over Tehran’s disputed nuclear ambitions, an Iranian weekly said.  Read more here-http://www.reuters.com/article/topNews/idUSDAH63024720080616?feedType=RSS&feedName;=topNews&rpc;=22&sp;=true

-Iran says it will sell euro instruments for gold and stocks. Good news for long-suffering gold bugs: Iran is switching a chunk of its $80 billion reserves into bullion. Mohsen Talaie, the deputy foreign minister in charge of economic affairs, said Tehran was pulling its money out of euro instruments (presumably Bunds, BTps, EIB bonds, etc.) to avoid sanctions over its nuclear weapons programme.

“Upon the decision of the government’s task force a segment of Iran’s foreign exchange assets will be converted into real assets such as gold and stocks,” he told Iran’s Etemad-e Melli newspaper.  Read more here-http://www.gata.org/node/6368

-Gazprom CEO’s $250 Oil Forecast Deals Doom Options Traders Love. At $250 a barrel for crude oil, food prices double. The U.S., Japan and Europe plunge into deep recession. Companies go bankrupt. Airlines are nationalized. Sport-utility vehicle sales dry up as gasoline tops $7 a gallon. The scenario may not be unimaginable. Alexei Miller, chief executive officer of OAO Gazprom, the world’s biggest natural- gas company, said June 10 that crude will climb to $250 a barrel in the “foreseeable future.”

Prices may reach that level only after a war or attack on major oil installations, says Jeff Spittel, an analyst at Natixis Bleichroeder Inc. in New York. While executives, elected leaders and economists disagree on the probability of Miller’s vision, there is consensus that the price would jolt everyday life.  Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aWwoUcZaR5BY&refer;=home

-The U.S. current account deficit in the first quarter of this year amounted to $176.38 billion, up 5.5 percent from the previous quarter for the first upturn in a year, due to a decrease in the income balance surplus, the Commerce Department said Tuesday.  Read more here-http://www.breitbart.com/print.php?id=D91BRFGG1&show;_article=1

-China’s Retail-Sales Growth Is Close to 9-Year High. China’s retail sales growth stayed close to the fastest pace in at least nine years in May as incomes climbed, underscoring the country’s economic strength amid a world slowdown. Sales soared 21.6 percent to 870.4 billion yuan ($126 billion) after gaining 22 percent in April, the statistics bureau said today.

The increase was seven times faster than the pace of U.S. retail-sales growth and follows a stronger-than-estimated surge in Chinese exports last month. The nation’s deadliest earthquake in 32 years has fed demand, with survivors supplied with 1.1 million quilts, 4.8 million beds and 14 million pieces of clothing, the State Council said yesterday.  Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aO52Z9gbg7Hw&refer;=home

-World’s Most Worthless Money.  Read more here-http://www.portfolio.com/slideshows/2008/3/Worlds-Most-Worthless-Money/?TID=advert/drudge/worthless_moneyPhone

-”Brainwashing 101 for Dummies” and investors! Eleven reasons passive investors let Wall Street steal their money.  Read more here-http://www.marketwatch.com/news/story/11-reasons-passive-investors-let/story.aspx?guid={62AB4A8E-65F4-4D29-8807-8A152450738B}&dist;=TNMostRead

-Life without plastic. You’d be surprised by the benefits of giving up your credit cards even if you never carry a balance.  Read more here-http://money.cnn.com/2008/06/16/pf/without_plastic.moneymag/index.htm

-They cut out their credit cards. 10 families decided it was time to break their bad plastic habits. Here’s how they did it.  Read more here-http://money.cnn.com/galleries/2008/pf/0806/gallery.sans_plastic.moneymag/index.html

-World population to hit 7 billion in 2012.  Read more here-http://www.breitbart.com/article.php?id=D91DB6RO2&show;_article=1

RARE COLORED DIAMONDS

-First publicly listed diamond fund to launch. The first publicly listed fund investing in rare white and coloured diamonds is close to launching on the London Stock Exchange, fund and market sources said on Tuesday. The closed-end fund will invest in the high-quality segment of the physical polished diamond market, according to a prospectus for the initial public share offer, expected to take place on June 24, obtained by Reuters.

Fund-raising will close on Wednesday and one industry source said institutional investors had raised nearly $100 million (50 million pounds). “Catalysts for growth in investment demand are in place for large high-quality diamonds, underpinned by the rising number of high net-worth individuals, especially in the Middle East, Southeast Asia and the Russian Federation,” said the prospectus for investment company Diamond Circle Capital plc. The prospectus said a steadily declining mineral reserve base, compounded by limited exploration success, suggested tight supplies would continue, which industry analysts say could mean long-term growth for the fund.

“It is the first listed polished diamond fund,” said Jamie Strauss, managing director, UK equity products, of BMO Capital Markets (Bank of Montreal), who closely tracks diamond markets. “It will be invested in white and colored diamonds. It will become one of the world’s finest diamond collections.”  Read more here-http://www.reuters.com/article/investmentTrustsNews/idUSNOA83295920080618

-Champagne glasses with diamonds on show. If you thought drinking champagne couldn’t get any more posh, then try downing it from diamond-encrusted glasses worth almost half a million US dollars. An Australian jeweller has unveiled what he says are the world’s most expensive champagne glasses, valued at $400,000 and adorned with 1,700 white and pink diamonds.

Designer John Calleija said five jewellers spent more than three months finishing the two glasses, which were individually chiselled from 8kg blocks of quartz rock crystal. Each glass stands 15cm tall, weighs 250 grams, and together are encrusted with 15 carats of white diamonds and six carats of the rare argyle pink diamonds. They are finished with platinum 18 carat white and rose gold.

Mr. Calleija said he was experimenting with his designs when he came up with the idea, but it just as easily could have been a pair of diamond-encrusted chopsticks. “I just wanted to get into a different area of objects, like luxury goods,” he told AAP. “I drew a whole series of diamond-encrusted letter openers, salt and pepper shakers, scissors, everything, even chopsticks.

“But I drew the glasses and there was just something about them.” Though the designs were at first just a pipe dream, he showed them to one of his long-term clients, who immediately commissioned the pricey artworks. “I told him they’d be around $400,000 and he said ‘I’d like to put my hand up for them, I’ll take them,” Mr. Calleija said.

He also said the buyer, an anonymous Melbourne businessman, had vowed to put the glasses to good use, promising to bust them out for special occasions and to turn them into cherished family heirlooms. The glasses, which will head to London for the official opening of Mr Calleija’s second store, were the pride and joy of his team, the designer said. “Tears were coming from their eyes because they know how much this has been a labour of love,” he said. “We’ve put tonnes of effort and time, and design into these. “They’re just spectacular.”  Smh.com.au

OIL

-Saudi summit aims at oil prices. The world’s largest oil producer, worried the escalating cost of crude will dampen demand, is convening a special meeting on Sunday to seek solutions.  Read more here-http://money.cnn.com/2008/06/19/news/international/saudi_oil/index.htm?postversion=2008061913

-Deals with Iraq are set to bring oil giants back. Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.

Exxon Mobil, Shell, Total and BP the original partners in the Iraq Petroleum Company along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.  Read more here-http://www.iht.com/articles/2008/06/19/africa/19iraq.php

-Bush Urges Congress to End Ban on Offshore Drilling. President George W. Bush called on Congress to lift a 27-year-old moratorium on offshore oil and gas drilling, putting himself in the middle of an election-year debate over U.S. energy policy.

By urging lawmakers to lift the federal ban and work with coastal states to open up more areas of the outer continental shelf to exploration, Bush is reinforcing a similar proposal endorsed yesterday by John McCain, the presumptive Republican presidential nominee. Barack Obama, the Democratic candidate, opposes taking such a step.  Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=auiTIXlxsWCA&refer;=home

-Mexico May Raise Daily Oil Output 4.3 Percent by 2009.  Read more here-http://www.bloomberg.com/apps/news?pid=20601072&sid;=aaZZqwVHFAGs&refer;=energy

-Saudi King: ‘We will pump more oil’.  Read more here-http://www.independent.co.uk/news/world/middle-east/saudi-king-we-will-pump-more-oil-847830.html

-Iran’s Ahmadinejad says oil price artificial. Read more here-http://www.breitbart.com/print.php?id=080617080043.afcygse0&show;_article=1

-Kuwait Says Oil Over $100 Is Too High; Support Saudis. Read more here-http://www.bloomberg.com/apps/news?pid=20601072&sid;=axRA4mkZ9.AU&refer;=energy

-A Monumental Petro-Wealth Transfer. Bottom Line-We are witnessing the beginning of a monumental transfer of wealth to oil-exporting countries that may last beyond our generation.  Saudi Arabia is earning more than US$1 billion a day from its oil exports, and the GCC hold some US$65 trillion worth of oil reserves, most of which will one day be consumed and the GCC will have converted oil into paper assets of this amount.  There are geopolitical, economic and financial consequences from this wealth transfer.  Read more here-

http://www.morganstanley.com/views/gef/archive/2008/20080616-Mon.html#anchor6517

-Oilsands Producers Grapple With Rising Costs Despite High Crude Prices.  Read more here-http://www.resourceinvestor.com/pebble.asp?relid=43704

-U.S. Oil Stupidity.  Read more here-http://www.321energy.com/editorials/casey/casey061308.html?print=on

-SEC to Consider `Modernizing’ Rules on Oil Reserves.  Read more here-http://www.bloomberg.com/apps/news?pid=20601072&sid;=aSB2tK9lEIgU&refer;=energy

-Oil Rally of 697% Surpassed Dot-Com Craze in Speculators’ Mania.  Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a9wRqtCtGjZY&refer;=home

GASOLINE

-$5 Gas Likely by July 4th; Get Ready for ‘Stay-cation’.  Read more here-http://www.cnbc.com/id/25140711

-Oil tumbles $5 as China raises gas prices. Crude prices fall after China says it will raise gas and diesel prices and sentiment spreads about softening demand. China’s National Development and Reform Commission said that prices of gasoline, diesel and aviation fuel will increase by 8% beginning Friday.  Read more here-http://money.cnn.com/2008/06/19/markets/oil/index.htm?postversion=2008061912

-Refining shortage cause of high oil price: UAE.  Read more here-http://uk.reuters.com/article/oilRpt/idUKL1767484120080617

-Gas prices latest worry for real estate market.  Read more here-http://www.latimes.com/business/la-fi-homes17-2008jun17,0,2766175.story

COMMODITIES-FOOD

-JPMAM and BlackRock repudiate commodities bubble. JPMorgan Asset Management and BlackRock commodities managers have dismissed concerns of a growing bubble in the sector, claiming demand will continue to sky-rocket. Ian Henderson, manager of the £1.7bn JPM Natural Resources fund, said: “A few years ago, nobody thought we would be where we are at the moment and who knows where we are going.

“But at the moment there are some very real shortages and people are prepared to pay what they are paying. “The energy sector is not showing the current price of oil in its valuations. It is ridiculously cheap today most companies are representing an oil price of about $60 a barrel, when its currently costs double that.”  Read more here-http://ftadviser.com/InvestmentAdviser/Investments/AssetClass/Equities/News/article/20080616/44bd6c66-37ce-11dd-842b-0015171400aa/JPMAM-and-BlackRock-repudiate-commodities-bubble.jsp

-The ‘age of infrastructure’ will gobble up physical commodities for years. A massive infrastructure build-out to support future growth of emerging markets, combined with a focus on infrastructure repair and replacement in G-7 nations, portends tremendous benefits to global mining.  Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=55003&sn;=Detail

-Corn prices jump as Midwest floods. At nearly $8 a bushel, corn prices climb 11% in past week; world food prices expected to spike as wheat, soybean crops also damaged.  Read more here-http://money.cnn.com/2008/06/16/news/economy/corn_dollars.ap/index.htm?postversion=2008061614

-Cut your grocery bill in half. Everyone’s hurting thanks to high food prices here’s how to slash what you spend on groceries.  Read more here-http://money.cnn.com/2008/06/13/pf/savings_groceries/index.htm

-Food prices force groups that offer square meals to cut corners. As costs rise, the sting is magnified for schools, the military, prisons, food banks and other institutions nationwide.  Read more here-http://www.latimes.com/news/nationworld/nation/la-na-food15-2008jun15,0,946363.story

-Shoppers set to count rising cost of bananas. Bananas have joined the ranks of dairy, meat and wheat products among foodstuffs whose prices are set to surge because of the sharp rise in fuel costs. Chiquita, one of the world’s biggest banana groups, said yesterday that the price of Britain’s most popular fruit had risen 36 per cent last month against the same period a year ago.

The company also said that it expected prices to continue to rise throughout the rest of the year, lifted by mounting fuel and fertiliser costs and adverse weather conditions in Central America. To add to the gloom, Chiquita said that it had raised its forecast for the total cost of increased fuel and fertiliser by $200 million (£101.8 million) over the past four weeks. It expects additional costs of $265 million over the year as a whole.  Read more here-http://business.timesonline.co.uk/tol/business/economics/article4151774.ece

-Hawaiians hit by skyrocketing shipping costs. Americans are paying more for their groceries these days as both food and fuel prices push higher. But Hawaiians who need most of their fresh foods imported are being pinched even more.  Read more here-http://money.cnn.com/2008/06/18/news/economy/Lawrrence_Hawaii_shipping/index.htm

-High food prices “are here to stay,” said Peter Brabeck-Letmathe, chairman of Nestle SA, the world’s largest food company. Food prices “will establish themselves on a higher level but not at the peaks we have seen in some weeks,” he said in an interview Monday.

He added that Nestle has no plans to raise prices further this year. Finance ministers from the Group of Eight nations warned Saturday that surging food and fuel prices have replaced the credit squeeze as the biggest threat to the world economy. Prices of corn, wheat, rice and palm oil have soared, putting millions in Asia at risk, according to the Asian Development Bank.  Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aQx_y9y.0JyM&refer;=home

-USDA’s Schafer Says No Biofuels Policy Changes Needed. Agriculture Secretary Ed Schafer said increased use of corn-based ethanol isn’t a major cause of higher food prices in the U.S. and he doesn’t expect any significant changes in the country’s renewable fuels policy. “We don’t think conditions today warrant changes,” Schafer said today in a meeting with Bloomberg News reporters and editors in Washington.

Industry groups representing companies including Kellogg Co., Tyson Foods Inc. and Kroger Co. said June 10 they are coordinating efforts to reduce U.S. biofuels-use requirements with a new “Food Before Fuel” lobbying campaign. Biofuels produced by Poet LLC, VeraSun Energy Corp. and Archer Daniels Midland Co. are being blamed for rising food inflation.

The White House estimates that ethanol is contributing 2 to 3 percent of the gain, while the Washington- based International Food Policy Research Institute says it accounts for about 30 percent. The Senate Energy and Natural Resources Committee is holding a hearing today on the relationship between the renewable fuel standard and rising food prices.  Read more here-http://www.bloomberg.com/apps/news?pid=20601072&sid;=anQH6p9TN0R0&refer;=energy

INTEREST RATES

-Speculation that the Federal Reserve is about to begin inflation-fighting interest rate increases appears to be dead wrong. Fed Chairman Ben S. Bernanke is worried more about runaway oil prices contracting the global economy than inflating it through a wage-cost spiral. According to sources close to him, America’s leading central banker has no plans for a raise.  Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/06/15/AR2008061501452.html?sub=AR

-Big three central banks tone down rate hike threats.  Read more here-http://news.yahoo.com/s/nm/20080617/bs_nm/global_centralbanks_dc_2&printer;=1;_ylt=ApJZQaXolr96NLmYcVA3w.Kb.HQA

-Bank of England signals interest rates will be at 5pc for some time. Investors have scaled back their expectations for interest rate rises at the fastest speed in 14 years after Meryvn King indicated that borrowing costs may remain on hold for some time. Markets are now pricing in only one rate hike before the end of the year, compared with the three borrowing cost increases they were anticipating only yesterday.

In a co-ordinated move, the world’s big two central banks, the Federal Reserve and European Central Bank, also gave warning that investors were in danger of getting carried away with their expectations of higher rates.

King, the Bank of England governor, used his letter of explanation to the Chancellor to say that, although inflation had hit a 15-year high of 3.3 percent last month and would rise above 4 percent thereafter, the increases would be short-lived.

He said: “There are good reasons to expect the period of above-target inflation we are experiencing now to be temporary,” adding that higher inflation was caused by the rising prices of food and energy goods generated overseas. Significantly, when he explained the actions the Bank is taking to clamp down on prices he did not mention the prospect of a rate rise.  Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/17/bcnrates217.xml

-BOE Voted 8-1 for 5% Rate; Some Considered Increase. Bank of England policy makers defeated David Blanchflower’s call for an interest-rate cut this month as the threat of inflation intensified, prompting some of them to consider an increase.

The Monetary Policy Committee, led by Governor Mervyn King, voted 8-1 to keep the benchmark rate at 5 percent, minutes of the June 5 decision showed. Blanchflower voted for a quarter-point reduction, arguing that there was a small, but growing risk of a “very negative outcome.”  Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid;=aSieqLsf_iP4&refer;=home

-Catastrophic’ event feared as Fed fights ECB on rates. The clash between the European Central Bank and the US Federal Reserve over monetary strategy is causing serious strains in the global financial system and could lead to a replay of Europe’s exchange rate crisis in the 1990s, a team of bankers has warned.

“We see striking similarities between the transatlantic tensions that built up in the early 1990s and those that are accumulating again today. The outcome of the 1992 deadlock was a major currency crisis and a recession in Europe,” said a report by Morgan Stanley’s European experts.

Just as then, Washington has slashed rates to bail out the banks and prevent an economic hard landing, while Frankfurt has stuck to its hawkish line ignoring angry protests from politicians and squeals of pain from Europe’s export industry. Indeed, the ECB has let the de-facto interest rate Euribor rise by more than 100 basis points since the credit crisis began.  Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/16/bcnecb116.xml

INFLATION

-Emerging markets face inflation meltdown. Central banks across much of Asia, Latin America, and Eastern Europe will soon have to jam on the brakes or risk a serious crisis as inflation spirals into the danger zone. As the stark reality becomes ever clearer, this year’s correction in emerging market bourses and bond markets has now accelerated into a full-fledged rout.  Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/13/cnemerging113.xml

-U.K. inflation: Prepare for the worst.  Read more here-http://business.timesonline.co.uk/tol/business/money/article4156227.ece

-British inflation at 16-year high on oil, food prices. British annual inflation leapt above-target to a 16-year high point of 3.3 percent in May on the back of surging food and energy prices, official data showed on Tuesday.  Read more here-http://www.breitbart.com/print.php?id=080617130653.u2gqw6z7&show;_article=1

-Learn to live with inflation, says King. British households must learn to live with higher prices and without increased wages, Mervyn King warned on Tuesday, as he predicted inflation would reach at least 4 per cent by the end of the year. The governor of the Bank of England also surprised markets by failing to use the letter to signal a series of interest rate rises to combat higher inflation.  Read more here-http://www.ft.com/cms/s/0/bfc5f72a-3cab-11dd-b958-0000779fd2ac.html?nclick_check=1

-European Inflation Accelerates to Highest in 16 Years. European inflation accelerated to the highest in 16 years last month as food and energy costs soared, intensifying what finance ministers from the world’s richest nations said is becoming a “more complicated” dilemma. The inflation rate in the euro area rose to 3.7 percent, the highest since June 1992, from 3.3 percent in April, the European Union’s statistics office in Luxembourg said today.

The rate for May is higher than the 3.6 percent estimate published on May 30. Soaring commodity prices have pushed up costs for companies and consumers and at the same time are posing a “serious challenge” to economic growth, officials from the Group of Eight nations said yesterday after a meeting in Japan.

European Central Bank President Jean-Claude Trichet this month said the ECB may raise its benchmark interest rate a quarter point in July, signaling he is setting aside concerns about the economy’s expansion to combat inflation.  Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=akkyzsJZBKG0&refer;=home

-Canada Inflation Rate Rises More Than Forecast on Gas. Canada’s annual inflation accelerated for the second straight month in May as gasoline prices surged, lending support to the Bank of Canada’s assertion last week that prices may keep rising all year.

Consumer prices rose 2.2 percent from a year earlier, the fastest pace since January, Statistics Canada said today. Economists surveyed by Bloomberg said inflation would accelerate 1.9 percent, the median of 22 estimates. Consumer prices rose 1 percent from April, the most since January 1991, exceeding analysts’ 0.6 percent forecast.  Read more here-

http://www.bloomberg.com/apps/news?pid=20601082&sid;=a1yZS1TY_CVA&refer;=canada

-Employer Health Costs to Rise 10 Percent, Double Inflation Rate. Health care costs for employers will increase almost 10 percent next year, double the rate of inflation, on rising hospital charges and costs for covering the uninsured, a study found.  Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid;=acu6wumX6ed0&refer;=us

-U.S. inflation getting ‘uglier and uglier’. Surging energy prices help drive annual cost-of-living rate rise to 4.2%.  Read more here-http://money.cnn.com/2008/06/13/news/economy/CPI/index.htm

-U.S. Wholesale Inflation Increased More Than Forecast. Prices paid to U.S. producers rose more than forecast in May as fuel and food costs climbed. The 1.4 percent jump was the biggest gain since November and followed a 0.2 percent increase in April, the Labor Department said today in Washington. So-called core prices, which exclude energy and food, increased 0.2 percent.

Companies are paying more for energy and raw materials, which erodes profits and makes it more likely they’ll be forced to raise prices. The report reinforces Federal Reserve policy makers’ concern that inflation pressures are picking up.  Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a98NHvUcXIfI&refer;=home

-Inflation hits hard in Hawaii. Residents have long paid above-average prices and the latest inflation spike is especially rough. Imagine going to your local grocery store and paying over $8 for a jar of Jif peanut butter. How about $5.50 for a loaf of white bread, $6.50 for a gallon of milk or $7.19 for a half-gallon of orange juice?

These are just some of the prices we found in a recent survey of Hawaii’s supermarkets. Families there are certainly paying the price for living in paradise. Dave and Susan Ohamada were leaving the Honolulu Safeway when we asked to see their bill.

“I just spent $4.29 for a half-gallon of milk and that was a sale price,” said Susan. “Kleenex! I bought Kleenex for $2.99!” The Ohamadas have two young daughters, Rachel and Erin, and these days, shopping for a family of four is enough to empty their wallets.  Read more here-http://money.cnn.com/2008/06/19/news/economy/Lawrence_Hawaii_inflation/index.htm

-Kodak is likely to raise the price of some films as part of its worldwide response to the increased cost of raw materials. At first Kodak had only suggested that photographic paper and chemistry would be hit. But Patrick Hamilton, the company’s European PR director for consumer digital products, said it is ‘likely’ some films will also be affected though he could not yet confirm details.

Eastman Kodak recently stated that the price of some consumer products would rise worldwide by up to 20% in response to the higher cost of materials such as silver, aluminium and petrol. The price rises take effect from 1 July.  Amateurphotographer.co.uk

-With Inflation, There’s No Free Lunch. Clearly, if you reside in one of the countries mentioned in the chart, and want to avoid being wiped out entirely, one of the safest hedges against inflation is to buy gold and silver.  Richard Benson-Read more here-http://www.321gold.com/editorials/benson/benson061308.html

-Inflation has yet to hit the vital water market. But shortages, rising demand could accelerate prices, analysts say.  Read more here-http://www.marketwatch.com/news/story/inflation-has-yet-hit-water/story.aspx?guid={A603238C-DB8B-4AEC-9684-854EE21800E8

U.S. DOLLAR

-Time to “Wheedle and Cajole.” This past Friday The Wall Street Journal reported that the “U.S. continues to wheedle and cajole to shore up” support for its wars in Iraq and Afghanistan. Wheedling and cajoling can also be used to explain how the U.S. is trying to support the dollar. Barron’s this weekend quotes a prominent bank economist as follows: “I think Ben [Bernanke] is bluffing. [He] is engaged in open-mouth policy in an attempt to stabilize the dollar.”  James Turk-Read more here-http://www.goldmoney.com/en/commentary.php

-China `Not Smart’ to Invest in U.S. Bonds, Cheng Says. China’s government, which invests up to a third of its $1.68 trillion in currency reserves in Treasuries, is “not smart” to invest in U.S. debt and should seek higher returns, a former legislator said.

“I don’t think it’s a smart move to invest in U.S. bonds,” said Cheng Siwei, former vice chairman of the National People’s Congress, China’s legislature, at a Beijing conference. “We need smart capitalists to invest ourselves,” instead of lending money to American investors and earning interest, he said.

Cheng’s remarks on Nov. 7 that China should improve the structure of its foreign reserves by favoring stronger currencies helped pushed the dollar to record lows against the euro. He said today his comments represented his “personal opinion, not the government’s policy.”

Countries in Asia have amassed a record $4.2 trillion in foreign exchange reserves since the 1997-98 financial crisis, seeking to protect their economies from a similar regional currency slump. China set up China Investment Corp., a $200 billion sovereign wealth fund, in September to seek higher returns on its holdings.  Read more here-

http://www.bloomberg.com/apps/news?pid=20601009&sid;=az.moYIdDgYo&refer;=bond

EURO

-Support for euro in doubt as Germans reject Latin bloc notes. Notes printed in Berlin have more currency for bank customers who fear a ‘value crisis.’ Ordinary Germans have begun to reject euro bank notes with serial numbers from Italy, Spain, Greece and Portugal, raising concerns that public support for monetary union may be waning in the eurozone’s anchor country.

Germany’s Handelsblatt newspaper says bankers have detected a curious pattern where customers are withdrawing cash directly from branches, screening the notes to determine the origin of issue. They ask for paper from the southern states to be exchanged for German notes.

Each country prints its own notes according to its economic weight, under strict guidelines from the European Central Bank in Frankfurt. The German notes have an “X”‘ at the start of the serial numbers, showing that they come from the Bundesdruckerei in Berlin.  Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/13/cneuro113.xml

U.S. RECESSION

-Why we’re Gloomier than the Economy. U.S. Consumer Anxiety Outstrips the Data. Ask Americans how the economy is doing, and their answer is stark: It is not just bad, it is run-for-the-hills terrible. Consumer confidence is at its lowest level in almost 30 years. Only 12 percent of Americans think the economy is in good shape. On the Internet, comparisons to the Great Depression are widespread.  Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/06/17/AR2008061702463_pf.html

-A third of CEOs expect to slash payrolls. Most see stronger economy, according to a Business Roundtable survey, but remain cautious about hiring.  Read more here-

http://money.cnn.com/2008/06/18/news/economy/business_outlook.ap/index.htm

-McClatchy Plans to Cut 1,400 Jobs, 10% of Workforce. McClatchy Co., owner of the Miami Herald and 29 other daily newspapers, will cut about 1,400 jobs, or 10 percent of its workforce, to save $70 million annually after a record drop in industry wide advertising sales.

The reductions are part of a plan to cut costs as much as $100 million in the next four quarters, Sacramento-based McClatchy said today in a statement. The Miami Herald plans to eliminate 250 positions, or 17 percent of its staff, and the Charlotte Observer will cut 123 positions, or 11 percent, the newspapers reported.

Tribune Co. and New York Times Co. have also reduced staff to save money as companies that historically advertised in newspapers shift their spending to the Internet. Newspaper print ad sales slumped 14 percent in the first quarter, the most on record, the Newspaper Association of America said June 13.  Read more here-

http://www.marketwatch.com/news/story/mcclatchy-lay-off-10-workforce/story.aspx?guid={C1683653-439C-4BC3-8AB3-FD0D8045BEC2}&siteid;=yahoomy

-Newspaper Advertising Takes Big Fall. Print advertising sales by American newspapers fell the most on record in the first quarter, tumbling 14 percent as the real estate and job markets shrank and business was lost to the Internet. Advertisers spent $8.43 billion on newspaper ads in the first three months of 2008, according to the Newspaper Association of America, the eighth drop in a row.

Real estate and recruitment ads each fell 35 percent. Many of the industry’s biggest advertisers in real estate, automotive and employment are cutting spending and shifting advertising to their own Web sites, said Kip Cassino, research director at Borrell Associates, a consulting firm in Williamsburg, Va. Newspapers’ Web sites are not picking up all of the slack.

Newspaper-owned sites attracted $804 million in advertising during the quarter, the association said, up 7.2 percent from last year and the smallest gain since the industry group began reporting online sales growth in 2004.  Bloomberg

-WaMu cuts 1,200 jobs. The nation’s largest savings and loan announces it has cut 2.6% of its workforce, under pressure from the rising cost of delinquencies and foreclosures.  Read more here-http://money.cnn.com/2008/06/19/news/companies/washington_mutual.ap/index.htm

-How the floods will hurt the economy. Beyond the human tragedy, the flooding in Iowa and other parts of the Midwest may also lead to higher food prices and lower exports.  Read more here-http://money.cnn.com/2008/06/16/news/economy/flooding_impact/index.htm?postversion=2008061707

-Bankruptcy rising among seniors.  Read more here-http://www.usatoday.com/money/perfi/retirement/2008-06-16-bankruptcy-seniors_N.htm

CREDIT CRISIS

-Paulson & Co. Says Writedowns May Reach $1.3 Trillion. John Paulson, founder of hedge fund Paulson & Co., said global writedowns and losses from the credit crisis may reach $1.3 trillion, exceeding the International Monetary Fund’s $945 billion estimate.

“We’re only about a third of the way through the writedowns,” Paulson, 52, told the GAIM International hedge fund conference in Monaco today. “There are a lot of problems out there and it will continue to be felt through the year. We don’t see any signs of stabilizing.”  Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=alYak4riQl0c&refer;=home

-Fed auctions $75 billion to banks. In most recent auction, Fed lets investment firms get emergency loans directly; central bank swamped with bids to help ease credit crunch.  Read more here-http://money.cnn.com/2008/06/17/news/economy/fed_credit.ap/index.htm?postversion=2008061710

-The Federal Reserve is just days away from completing the financing for its bailout of Bear Stearns Cos., after which the central bank will have another big decision to make: how to account for it.  Read more here-http://www.gata.org/node/6382

-Fidelity sued over short-term bond fund. Investor claims fund giant didn’t disclose risks; portfolio loaded with mortgage-backed securities.  Read more here- 

http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080612/REG/368121834/1036

-Nearly Half of Wall St. Bank Profits Are Gone. Read more here-http://www.nytimes.com/2008/06/16/business/16earnings.html?_r=2&oref;=slogin&partner;=rssyahoo&emc;=rss&adxnnlx;=1213578294-YuMp24lK1Bcp9AhIf1S2Ng&pagewanted;=print&oref;=slogin

-Lehman Brothers posts $2.87 billion 2Q loss. Read more here-http://news.yahoo.com/s/ap/20080616/ap_on_bi_ge/earns_lehman_brothers_12&printer;=1;_ylt=AiiFZF_jWnzR7xRDBo51Oltv24cA

-Morgan Stanley’s profits take a tumble. Earnings drop 57%, hurt by slower investment banking, fixed income activity; stock slumps.  Read more here-

http://money.cnn.com/2008/06/18/news/companies/morgan_stanley/index.htm

-More big bank dividend cuts lie ahead. After a sharp selloff, BofA, Wachovia and other high-yielders may need to cut their payouts before long.  Read more here-

http://money.cnn.com/2008/06/17/news/dividends.we.fall.fortune/index.htm

-Citi to suffer more ’substantial’ writedowns. CFO says banking conglomerate will increase writedowns related to leveraged loan and bond insurers but decrease CDO writedowns.  Read more here-http://money.cnn.com/2008/06/19/news/companies/bc.apfn.citigroup.outlook.ap/index.htm

-Secrecy for NY Fed’s derivatives bailout scheme challenged. The New York Federal Reserve’s closed-door rule making with top players in the massive $60 trillion credit default swaps market came under legal fire on Sunday, as a fair finance activist filed a complaint questioning why it was done in the dark.

“The Federal Reserve seems to think it can engage in rule making in secret only with the industry,” said Matthew Lee, executive director of the New York-based non-profit group Inner City Press/Community on the Move.  Read more here-http://www.gata.org/node/6373

-Crime and delusion on Wall Street. Prosecutors allege two ex-Bear Stearns hedge fund managers misled investors. Perhaps, but Wall Street has long been kidding itself about the credit crunch.  Read more here-http://money.cnn.com/2008/06/19/news/newsmakers/bear_cioffi.fortune/index.htm?postversion=2008061914

AIRLINES-HARD TIMES

-Air travellers more vexed by poor service than high prices: survey. Overall satisfaction with the North American airline industry has dropped to its lowest level in three years, largely owing to flagging customer service, according to a consumer satisfaction survey.

Customers interviewed in the J.D. Power and Associates survey, released by the consumer research company Wednesday, said they had grown less satisfied with the knowledge and courtesy demonstrated by gate agents and flight crew.  Read more here-http://www.cbc.ca/consumer/story/2008/06/19/airline-survey.html

-Air Canada to cut 2,000 jobs. The airline slashes 7% of its workforce and reduces capacity, citing record fuel prices as a contributing factor.  Read more here-

http://money.cnn.com/2008/06/17/news/international/aircanada_jobs.ap/index.htm

-Northwest announces more capacity cuts. Airline expects to trim total capacity by as much as 10% below last year’s levels; also says that layoffs are possible.  Read more here-

http://money.cnn.com/2008/06/17/news/companies/northwest_airlines.ap/index.htm

-Southwest Says Fares Must Rise `Continuously’ on Fuel. Southwest Airlines Co., the biggest discount carrier, must keep increasing fares “gradually and continuously” as jet-fuel prices surge, Chief Executive Officer Gary Kelly said. The U.S. airline industry is struggling with a “terrible” operating environment as fuel stays near $4 a gallon, Kelly said today at a Merrill Lynch & Co. conference in New York.

“We’re going to have to move fares along gradually and continuously to be able to overcome these dramatically high fuel costs,” Kelly said. An 82 percent surge in jet fuel in the past year is forcing Dallas-based Southwest to juggle its low-fare business model with the need to charge more to recoup its costs. Kelly said that after taking no first-quarter price increases, Southwest has adopted three this quarter.  Bloomberg

-U.K. Holidaymakers face 40% hike in airfares due to soaring price of fuel.  Read more here-http://www.dailymail.co.uk/news/article-1027778/Holidaymakers-face-40-hike-airfares-soaring-price-fuel.html

-5 ways to fly for cheap. The deals are still out there, but travel experts say flexibility is key when looking for discount air fares.  Read more here-http://money.cnn.com/2008/06/16/pf/cheap_tickets/index.htm

MOTOR VEHICLES-THE FUTURE?

-Ford shuts SUV plant due to low sales. Lackluster demand forces American automaker to close plant for 9 weeks and layoff 1,400 hourly workers.  Read more here-

http://money.cnn.com/2008/06/16/news/companies/ford_suvs.ap/index.htm

-Adapt or die: Future of big SUVs. Large trucks and SUV will still be needed in 5 to 10 years. But they’ll need to change.  Read more here-

http://money.cnn.com/2008/06/11/autos/future_suv/index.htm

-Honda rolls out fuel cell car. Japanese automaker’s hydrogen-powered FCX Clarity promises twice the efficiency of gas-electric hybrids.  Read more here-

http://money.cnn.com/2008/06/16/autos/honda_zev.ap/index.htm

-GM: 18,657 took buyouts, retirements. The Detroit auto company will replace some workers with new, entry-level employees.  Read more here-

http://money.cnn.com/2008/06/19/news/companies/bc.gm.buyouts.ap/index.htm

-Deepening gloom at General Motors. As the auto giant grows sicker, its chances for a full recovery get dimmer.  Read more here-

http://money.cnn.com/2008/06/19/news/companies/taylor_gm.fortune/index.htm

-5 electric cars you can buy now. With gas prices soaring, plugging in has its appeal. But there are trade-offs: high costs and low speed.  Read more here-http://money.cnn.com/galleries/2008/autos/0806/gallery.electric_cars_now/index.html

REAL ESTATE

-Canadian real estate boom over, statistics indicate.  Read more here-http://www.cbc.ca/money/story/2008/06/13/crea-house.html

-U.S. Housing Starts Drop to Lowest Level in 17 Years.  Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aVrx2EuK2NzU&refer;=home

-When Builders Go Broke.  Read more here-http://biz.yahoo.com/bizwk/080618/jun2008bw20080617159524.html?.v=1&printer;=1

-Builders’ confidence matches record low. A survey of homebuilders’ assessment of the housing market shows the industry’s sentiment tied the mark set in December.  Read more here-

http://money.cnn.com/2008/06/16/news/economy/builders_confidence/index.htm

-NAR: 4% Quarterly Gain is (Oops) Actually a 30% Loss. We have long complained about the spinmeisters at the National Association of Realtors (NAR) for their pollyannish views and their continual bottom calling. It turns out that the spin from the NAR isn’t the only thing that is suspect. It seems their data collection and basic math skills are questionable, also.

Case in point: Q1 Housing Sales. James Bednar is Editor of the NJ Real Estate Report a blog about Garden State realty issues. James is also a realtor, and was rather surprised to learn back on May 13th, that first quarter sales in New Jersey were up 4% year over year. At least, that’s what the National Association of Realtors claimed when they released their first quarter 2008 sales data.

That didn’t jibe with what James was seeing, so he requested the data from the NAR. Five times all to no avail. Despite what local realtors were experiencing, both the NAR and the NJAR believed that NJ was improving. Good news and proof of the housing bottom at last! Only, it was not to be. As was reported in the Star-Ledger this morning, NJ home sales were not up 4% in the first quarter; they had (whoops!) plunged 30 percent!  Read more here-http://bigpicture.typepad.com/comments/2008/06/nar-30-loss-4.html

-Chuck Prince Finds Selling Home No Easier Than Fixing Subprime. Former Citigroup Inc. Chief Executive Officer Charles O. “Chuck” Prince III lost his job because of the housing slump. Now he’s having a hard time selling his home. Prince’s five-bedroom Tudor-style house in Greenwich, Connecticut, has been on the market for six months. He has cut the price by $300,000 to $5.85 million, according to the property listing.  Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=auXmRexARYhc&refer;=home

-California Home Market Shows First Signs of Recovery. The California housing market may be showing the first signs of a recovery after three years of declining sales and two years of rising foreclosures, the UCLA Anderson Forecast said today.

While home prices in the most populous U.S. state are still weak, the number of houses and condominiums changing hands in some parts of California is rising, according to the Anderson Forecast at the University of California, Los Angeles, which released its 127-page forecast for both the state and the U.S. today.

“The combination of steep price declines, lower interest rates and an easing of the credit crunch may now be bringing bargain-hunting buyers back into the market” for California homes, Ryan Ratcliff, an Anderson Forecast economist, wrote in the report. Riverside County posted a year-on-year gain in the number of homes sold, he wrote.

The collapse of the subprime-mortgage market contributed to an increase in foreclosures as well as drops in home prices and sales in California. In the first quarter, mortgage defaults in the state rose 143 percent to the highest level in 15 years, according to La Jolla, California-based DataQuick Information Systems.

Foreclosures will probably continue to hurt California’s housing market for the rest of this year and then start to moderate in 2009, the Anderson Forecast said. While a “normal” housing market “is still a long way off,” according to the report, the increase in home sales in some parts of the state is a positive sign.  Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aKG8Ek_sgLWM&refer;=home

FORECLOSURES-MORTGAGES

-Foreclosures Rise 48% in May as Repossessions Double. Bank repossessions more than doubled in May and foreclosure filings rose 48 percent from a year earlier as previously foreclosed properties dragged down housing prices, trapping borrowers in mortgages they couldn’t afford, RealtyTrac Inc. said in a report today. One in every 483 U.S. households either lost the home to foreclosure, received a default notice or was warned of a pending auction, RealtyTrac said.

That was the highest rate since the Irvine, California-based company began reporting in January 2005 and the 29th consecutive month of year-over-year increases. Nevada, California and Arizona posted the highest rates in the U.S. and New Jersey entered the top 10. “It’s definitely a different kind of market than what we got used to a couple years ago,” said Devin Reiss, owner of Realty 500 Reiss Corp. in Las Vegas. “We used to sell homes in a day. Now 50 percent of our sales are foreclosures.”

Foreclosures add to inventory and crowd out regular sales, Michelle Meyer and Ethan Harris, economists at Lehman Brothers Holdings Inc. in New York, wrote in a report yesterday. Foreclosures will account for 30 percent of national home sales this year as 1.2 million foreclosed single-family homes will eventually enter the market, they said. They estimate foreclosed properties, which typically sell for about 20 percent less than other homes, will depress home prices nationally by 6 percent.  Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aexLG6Bdlf8g&refer;=home

-Property-flipping rule suspended. The White House temporarily suspends a rule that imposes a 90-day waiting period before foreclosed homes can be sold to receive government loans.  Read more here-http://money.cnn.com/2008/06/13/real_estate/property_flipping.ap/index.htm

-How homeowners, speculators and Wall Street dealmakers rode a wave of easy money with crippling consequences.  Read more here-

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/14/AR2008061401479.html

-Mortgage fraud inquiry nets hundreds. Government official says losses in the fraud cases total about $1 billion. Hundreds of people across the country have been arrested by law enforcement officials targeting crooked mortgage brokers, real estate agents, and other industry officials, the head of the FBI and a top Justice Department official said Thursday.  Read more here-http://money.cnn.com/2008/06/19/real_estate/mortgage_fraud/index.htm

GEOPOLITICAL NEWS

-Get Osama Bin Laden before I leave office, orders George W Bush.  Read more here-http://www.timesonline.co.uk/tol/news/world/us_and_americas/article4138791.ece

-Ahmadinejad says West failed in Iran nuclear crisis. President Mahmoud Ahmadinejad said on Thursday the West has failed to break Iran’s will in the nuclear standoff, days after world powers presented Tehran with a new offer aimed at ending the crisis. “In the nuclear issue, the bullying powers have used up all their capabilities but could not break the will of the Iranian nation,” Ahmadinejad was quoted as saying by state television.

World powers Britain, China, France, Germany, Russia and the United States on Saturday offered Tehran a new package of technological and economic incentives in exchange for suspending uranium enrichment activities.  Read more here-http://www.breitbart.com/print.php?id=080619105417.ysx0pu2g&show;_article=1

-Iran Considering Proposals to Drop Enrichment Program. Iran is studying incentives from the world’s powers for the country to drop its uranium-enrichment program and will respond “at an appropriate time,” Foreign Minister Manouchehr Mottaki said.  Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=anr6u_8MRiZA&refer;=home

-Is Israel indirectly buying Iranian oil? Read more here-http://www.jpost.com/servlet/Satellite?cid=1212659723371&pagename;=JPost%2FJPArticle%2FPrinter

-US N-weapons parts missing, Pentagon says. The US military cannot locate hundreds of sensitive nuclear missile components, according to several government officials familiar with a Pentagon report on nuclear safeguards.

Robert Gates, US defence secretary, recently fired both the US Air Force chief of staff and air force secretary after an investigation blamed the air force for the inadvertent shipment of nuclear missile nose cones to Taiwan.  Read more here-http://www.ft.com/cms/s/0/04dfa24c-3db6-11dd-bbb5-0000779fd2ac.html

-Smugglers Had Design For Advanced Warhead. Read more here-

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/14/AR2008061402032_pf.html

-Pakistan’s Khan denies selling advanced nuke blueprint.  Read more here-http://www.breitbart.com/print.php?id=080617075252.37a1b9ik&show;_article=1

© 2012, Worldwide Precious Metals Canada Ltd.
www.wwpmc.com

The GoldBugg Report – June 24, 2008
Posted by Worldwide Precious Metals on Tuesday, June 24, 2008

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