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The GoldBugg Report - August 13, 2008

August 13, 2008

-Gold and silver seemed to have stalled out, raising questions as to whether or not the bull market is still intact. It still is! I remember during the bull market of the ‘70s when gold and silver stalled out for as much as two years with a decline of up to 30% on the way to their eventual highs of $50 silver and $850 gold. Then as now we heard a chorus of voices claiming the bull market was over, so liquidate! The fundamentals of money-supply growth were still in place, so I begged you to hang on, and we were eventually handsomely rewarded. Howard Ruff

GOLD

-Gold price could hit $1 500/oz next year, says Holland. Gold could trade as high as $1 500/oz in 2009, the head of Africa's second-biggest producer of the yellow metal said on Friday.

Gold Fields CEO Nick Holland said that the industry was operating slightly above break even at a gold price of $900/oz, not leaving room for profits.

"I don't think the gold price has really performed anywhere near where it should have done, particularly given the rise in the commodity prices in other sectors, given the rise in the oil price, and particularly given the state of the economy in the US," Holland said in a transcript of an interview posted on the company's website. "Certainly $800/oz I think is a very good floor price for gold. I don't see it going below that. And secondly, the sky is the limit. You know, $1 000/oz by the end of the year and maybe $1 200/oz to $1 500/oz during 2009, I think, is very possible," he added.

Meanwhile, presenting Gold Fields' results for the year ended June 30, Holland said that he "wouldn't be surprised" if gold were to trade at levels of around $1 000/oz to $1 200/oz, as the all-in costs of the industry had climbed to some $800/oz. "I think gold has got substantial upside," he stated, adding that he saw the metal trading at $1 000/oz by the end of the year. Read more here-http://www.miningweekly.com/article.php?a_id=139752

-Gold price may hit $US1200: Sino Gold. Gold could rise to $US1000 an ounce again by the end of this year, before moving up to $US1200, as investors seek to insulate themselve from rising global inflation, the head of Sino Gold Mining Ltd said. Gold's value natural a hedge against inflation in the current environment of financial market instability would continue to rise, chief executive Jake Klein said today.

As well, maturing gold deposits and fewer new discoveries are keeping supply tight and adding to the upward pressure on the price of the precious metal. "We closed out all of our hedges on the basis that we had an optimistic view of the gold price," Mr. Klein told journalists at the annual Diggers and Dealers conference in Kalgoorlie, Western Australia.

"I think $US1,200 an ounce seems like a reasonable target. "I'd be very surprised if we didn't see $US1,000 per ounce by the end of the year." Gold peaked over $US1,000 in March this year at $US1,030 and is currently trading about $US890 an ounce. Read more here-http://www.wabusinessnews.com.au/en-story/1/65232/Gold-price-may-hit-US1200-Sino-Gold

-Gold & Silver the August lows are upon us! Read more here-http://www.321gold.com/editorials/degraaf/degraaf080708.html

-Go for Gold-Gold is one of Leslie Phang's top picks. The head of investments at Schroders Private Clients tells CNBC's Martin Soong, Amanda Drury & Sri Jegarajah to buy the commodity, not the gold stocks. Watch video here-http://www.cnbc.com/id/15840232?video=809934675

-Gold and Silver: Safe-havens in Troubled Times? Each day we hear another piece of bad news on the banking front. It was called the sub-prime crisis, then it was the credit crunch; what we have in reality is a full blown banking crisis. Where in the past credit was easily given, full-blown consumer spending was encouraged and when it went too far, bankers saw asset values were dropping below loans against them and banks started to go bust.

We are now seeing banks sued by the New York Attorney General. Hardly an environment in which confidence in the banking and financial systems can be retained? The huge gap between the value of gold and the value of money must narrow. Whether it is through the rise in the value of gold and silver or through the fall of the value of money dictates the future of the financial system.

Either way, gold and silver will prove to be the safe-haven it has been since money was part of man's world. And the second half of this year is likely to be as dramatic as the first half but with a golden or silver sheen to it. Read more here-http://news.goldseek.com/GoldForecaster/1217948400.php

-July's gold-commodities purge offers long-term opportunity. Are we at the end of the commodity bull market or does this battered sector offer an attractive buying opportunity? Read more here-http://news.goldseek.com/GoldSeek/1217868660.php

-Hope only flickers for South African gold industry. The Fortis Yellow Book says if challenges are managed well the SA gold industry does not have die a slow death, but could rather see a graceful decline over 40 years. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=58816&sn=Detail

-An example of gold's historic role as a safe haven asset in times of economic uncertainty is seen in the following data. The industry performance of Physical Gold Versus the S&P 500 during eleven stock market declines of 15% or more in the Post-War period (since 1946). Gold.ie

SILVER

-Gold and silver seemed to have stalled out, raising questions as to whether or not the bull market is still intact. It still is! I remember during the bull market of the ‘70s when gold and silver stalled out for as much as two years with a decline of up to 30% on the way to their eventual highs of $50 silver and $850 gold. Then as now we heard a chorus of voices claiming the bull market was over, so liquidate! The fundamentals of money-supply growth were still in place, so I begged you to hang on, and we were eventually handsomely rewarded.

Today is the same, only more so. With government unfunded liabilities (for Social Security, Medicare and Medicaid) more than $50-trillion, and no end in sight, and government doing its ostrich act (head in the sand) hoping the pain will just go away, and their standard practice of just throwing money at every intractable problem, we have set the stage for continuing soaring inflation.

I am doing a lot of radio talk show interviews, and the hosts keep asking me "what proof do you have of future inflation?" My answer? "Haven't you been to the grocery store lately, or bought any gas? It's here now; the proof is all around you." So hang in there and be patient. Someday you will brag about buying silver below $20 and gold under $1000. Howard Ruff-Read more here-http://www.kitco.com/ind/Ruff/ruff_aug012008.html

-Another silver buying opportunity. The precious metals usually make a nice bottom at the end of summer between August and October and this year looks like it will be no exception. There should be a strong precious metals rally into the Fall and Winter 2009. Quality mining companies are great buys at current levels and gold and silver should be near a bottom.

The lowest levels I expect would be $825 for gold and $15.50 for silver. Closes much below this might indicate that we are moving into a more bearish intermediate forecast for gold and silver. For cash purchases, dollar cost average over the next few weeks and you will be quite satisfied 6 to 9 months from now. Tim Silvers-Read more and see charts here-

http://news.goldseek.com/GoldSeek/1218089220.php

-Special Got Gold Report August Silver Swoon Again. In the first two weeks of last August (2007) silver sold off strongly. So far this August the metal seems to be following the same script. Just as last year at this time, there are signs that silver is closer to a bottom than a top, but the signs are not exactly the same.

In addition to the strong demand for SLV on the street in the U.S. there is a continued scarcity of just about all silver metal products with spot silver trading in the $16 to $17 neighborhood. In a quick check of electronic silver bourses on Tuesday, August 05, 2008, all bar silver products were BID at least $0.60 the ounce over the cash market close dealer to dealer. Even the very large average 1,000 ounce heavies were bid about $0.50 the ounce over spot and there were very few offers at any price.

Bar silver is currently commanding high premiums, but customers that want to add popular coin silver have an even bigger shock coming. As of Tuesday, the best offers showing for U.S. silver eagles in quantity were close to $2.00 over spot. When even dealers are offering significantly higher than normal premiums in order to buy the metal, it means that the metal has become scarcer than usual. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=45097

If anything, the premiums for physical silver this August are considerably higher for the same metal than they were last August. High premiums are already here and they are one reason that SLV is continuing to see such strong demand in this August's silver swoon.

-Paper Selling, Physical Buying. Recent data confirm a recurring pattern in the price of silver, namely, a clash between what is occurring in the paper COMEX futures market and the physical market. To keep it simple, recent speculative selling of long positions has overwhelmed physical buying, resulting in the short term sell-off.

Of course, I have written of this repeatedly over the years, simply because it has recurred so often. I look forward to the day I can stop repeating myself. That's because the paper market should not dictate at what price the physical market should clear. I believe that day will arrive, sooner, rather than later. Ted Butler-Read more here-http://news.silverseek.com/TedButler/1217880612.php

PLATINUM-PALLADIUM

-Platinum price fall may imply otherwise, but this market's still in a deficit. Analysis of fundamentals suggests that platinum has been oversold and that the price will bounce back later in the year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=59063&sn=Detail

-Platinum Market Seen In 500,000 Oz Deficit In 08. The global platinum market is expected to remain in deficit by approximately 500,000 troy ounces during 2008, according Wednesday to diversified mining company Xstrata PLC. This is because production will remain unchanged due to the various supply disruptions, the company said, often associated with safety issues and rising costs as operations access deeper and lower grade reserves.

"Any further supply-side disruptions could result in further price increases for platinum and rhodium," Xstrata added. While Xstrata expects demand for platinum group metals to remain strong for the remainder of 2008, driven by tightening automotive emissions legislation and consequent increased demand for catalytic converters, the company noted some issues affecting growth.

For instance, current high platinum prices have negatively impacted jewelry demand, the company said, while platinum demand growth may also be tempered by substitution, driven by high prices and the price differential between platinum and palladium. At the same time, a slowdown in global economic growth is likely to dampen automotive demand for platinum group metals, which accounts for approximately 56% of platinum consumption. Dow Jones

-Anglo American says platinum a growth metal. Strong demand for platinum, used in car manufacturing, was leading to a supply shortfall, Anglo American Plc's exploration head for Africa and Asia-Pacific Ian Willis said on Wednesday. Anglo American controls nearly 40 percent of the world platinum market and competes with fellow South African Lonmin, also a top supplier of the metal.

"We see a substantial deficit in the platinum market in coming years," Willis said at a conference in the west Australian outback mining town. Willis said Anglo American was looking to expand its platinum-making arm as part of a broader push to build the company's mining activities. Read more here-http://africa.reuters.com/business/news/usnBAN625625.html

DEFINITIONS-QUOTES-QUICK HITS

-Black Box Model. A computer program into which users enter information and the system utilizes pre-programmed logic to return output to the user. The "black box" portion of the system contains formulas and calculations that the user does not see nor need to know to use the system. Black box systems are often used to determine optimal trading practices. These systems generate many different types of data including buy and sell signals. Investopedia.com

-You and I know that gold is going to $1,200 and then to $1,650 because of all the traffic going to the Begging Bowl Fed Window. This will crater the dollar, meaning gold must go to at least $1,650. Jim Sinclair

-Sprott warns of 'meltdown'. North America is the midst of a "systemic financial meltdown," Eric Sprott warned this week. "I'm not trying to be shocking to anyone, but let's face it," said Mr. Sprott, chief executive officer of Sprott Inc. "When Bear Stearns goes down, Freddie and Fannie go down, and IndyMac goes broke, we have major issues out there."

The firm will load its funds with gold and energy stocks in the months ahead while selling the financial industry short. "We're trying to position our funds to survive the difficulties," he said. "We've gone into gold on the long side because it will survive as a replacement to fiat currency and into energy stocks because of our belief in the peak oil thesis." Theglobeandmail.com

-Financial roundtable called "Making sense of the bear market." Quotes and overview below, read full story here-http://news.goldseek.com/GoldSeek/1217610000.php

-"For the next three months the US dollar should be fine. On weakness physical gold should be bought as it is the only honest currency." Marc Faber

-Gold, in my opinion, is the asset of last resort. It is no one else's liability and has shown its value in crises over the millennia. That situation remains unchanged. It is still cheap relative to oil on a historical basis and is only 40 percent of its all time high on an inflation adjusted basis.

New supplies coming onto the markets are constrained by high costs and a lack of mining skills after a generation when no new graduates entered the sector. Given the global geopolitical tensions added to the banking crisis, gold remains a superb insurance policy. Before the present cycle exhausts itself I would not be surprised to see gold reach all time highs on an inflation adjusted basis i.e., $2500.

Silver is also interesting here since it is a minor precious metal with expanding industrial applications. On an inflation adjusted basis it is even cheaper than gold. William Thomson, Chairman of Private Capital Limited, Hong Kong and adviser to Axiom Alternative Funds, London

-"A water-torture stock bear market has begun." Mark Mobius-Franklin Templeton

-Overview of roundtable. This is the worst financial crisis since the 1930s and equity prices have more room to fall. All told, the total losses could run into trillions of dollars. High inflation is likely to persist, at least for some months. Investors can seek refuge in precious metals and selected emerging markets.

Since the sub-prime mortgage crisis burst upon the US a year ago, there have been market rallies and claims that the worst is over, only to be followed by fresh plunges in values and sentiment. Are we near the bottom now, or just at the start of a long, slow meltdown? Our experts take the latter view. Where can investors find a safe haven in this sea of trouble and uncertainty? Gold is still a good refuge, suggests one expert, who expects the price go as high as $2,500 an ounce.

More fundamentally, our experts see developing markets in Asia and beyond as the promised land that will emerge relatively strong from a potentially massive destruction of wealth in the old world. The needs of these emerging markets for food and natural resources will be strong, so farmland and plantations could be good investments.

-My forecast is for silver to break above the critical 21 resistance level before gold breaks above the critical 1020 level. The heavy corrosion to the U.S. dollar is about to enter a very damaging phase. The autumn season is near, when the gold and silver bull markets realize some seasonal breakouts.

By year end, gold should be near 1200 and silver near 25. One big reason why so many shenanigans are being played with banks and the U.S. Dollar, is that the gold favourable season is near in arrival. As the U.S. Dollar is undermined during a multi-faceted corrosive process and the season arrives, gold & silver will thrive. Jim Willie CB-Read more here-

http://www.321gold.com/editorials/willie/willie080108.html

-Elliott Wave Gold Update. The gold market is in the process of completing Large wave II of Major wave THREE. Once Large II is finished, Large III of Major wave THREE will commence. As detailed in Update 20, this should be a strong upward impulsive wave that could reach to above $1,500 before it is completed. Alf Field-Read more here-

http://www.321gold.com/editorials/field/field080608.html

-At the moment, "the dollar has and continues to be the main influence on the gold price, so when today it pushed back to the upper limit of its trading range, it influenced the gold price to the downside again," wrote Julian Phillips of GoldForecaster.com. However, a prolonged gold slump seems unlikely given that the global economy still appears to be extremely troubled.

"The factors pushing the price down are not substantive enough to change the [upward] trend of the gold price," Phillips continued. "Only a sound dollar, healthy global economic growth, low inflation, confidence in the world monetary system will change this trend, but then this is the sort of thing dreams are made of." Given the slim chances that such a scenario will occur, it is only a matter of time until gold resumes its upward movement. The Daily Resource

-David Beahm of Blanchard wrote that he "continues to see distinct weakness in the U.S. economy over the long-term," and believes that gold will move "north of $1,000 during the coming months and achieving a new record high near $1,150 by the end of the year."

Mark Obyrne of Gold and Silver Instruments Ltd. agrees that there was a correction due in gold prices. He said, that "while the short-term trend remains down, we expect a summer low to have been reached or to be reached in the coming days prior to a significant move upwards in mid to late August and into gold's strong months September and October." "In the coming months we should see gold reach $1,200/oz." The Daily Resource

-According to Peter Grant of USAGOLD-Centennial Precious Metals, "inflationary pressures are going to remain stubbornly high, despite the pullback in commodity prices." He continued that "the best way to protect yourself against a weaker dollar and the resulting inflation, along with persistent risks to the banking system, is to own physical gold." Mark O'Byrne of Gold and Silver Instruments Ltd. agreed that while gold may go down in the short run, "gold's long-term fundamentals remain sound." The Daily Resource

-Governments caused credit crisis, capitalism gets blamed. Read more here-http://www.gata.org/node/6475

-U.S. Headed Toward Bankruptcy, Says Top Budget Committee Republican. The ranking Republican on the House Budget Committee said the U.S. government is headed toward bankruptcy if it stays on its current fiscal course. "We know that for a fact," Rep. Paul Ryan (R-Wis.) told CNSNews.com in a video interview. "All the actuaries, all the objective scorekeepers of the federal government, are predicting this." Watch video here-http://www.cnsnews.com/public/content/article.aspx?RsrcID=33574&print=on

-US Budget Deficit to Grow Much Worse. Read more here-http://www.caseyresearch.com/library/articles/2189/merk-market-outlook:-us-budget-deficit-to-grow-much-worse/

-McCain Embraces Deficit Critic David Walker as Truth Teller. Presidential candidate John McCain said that, if elected, he would tap former U.S. Comptroller David Walker to help balance the federal budget, calling the deficit hawk someone who could help convey the "truth'' of the nation's budget deficit to the public.

"He is the most articulate person on this issue of the debt that we've laid on future generations of Americans,'' McCain, the presumptive Republican nominee said last night. ``We've got to communicate more directly to the American people and tell them the truth.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aFi0AJthqc54&refer=home

RARE COLORED DIAMONDS

-Diamonds Attract Funds as Largest Gem Prices Surge 76% in Year. Diamonds, like art, are a commodity that is gaining attention as an alternative investment. Increases in the price of the rarest colorless and colored diamonds are attracting wealthy investors and structured funds as stock markets and real-estate values decline. The price of 5-carat gems with the potential to be sold at $1 million or more has risen 76.5 percent in the year to May 2008, according to Idexonline.com, the Web site of the International Diamond and Jewelry Exchange.

"There's a group of very savvy, tremendously wealthy people who have put a small portion of their fortunes aside to invest in diamonds,'' said Francois Graff, managing director of London- based Graff Diamonds International, in a telephone interview. ``They've made incredible returns.'' Five years ago, dealers were paying $70,000 per carat for colorless diamonds of 10 carats and more, said Graff. "Now we're paying over $200,000 per carat,'' he said. There are only about 200 highest-grade, D-flawless colorless diamonds of more than 5 carats discovered per year, according to Raymond Sancroft-Baker, Christie's International's European director of jewelry.

The annual yield of large-scale blue and pink stones is considerably smaller. "Diamonds are getting rarer. The earth just isn't giving them up,'' said Sancroft-Baker in a telephone interview. The commodity asset-management firm Diapason Commodities Management SA listed a specialist investment fund, Diamond Circle Capital Plc, on the London Stock Exchange on June 25. Full story here-http://www.bloomberg.com/apps/news?pid=20601093&sid=aKVjxYejpss0&refer=home

-Super-rich still pay dear for rare diamonds. The rapid rate of increase in wholesale prices of rare polished diamonds is unsustainable, but for now the growing number of super-rich are paying rising prices for top-tier diamond jewelry. Charles Wyndham, founder of PolishedPrices, a leading index of wholesale diamond prices, said on Friday prices of larger, rare, near-flawless gemstones had shot up by roughly 200 percent over the past 18 months. Read more here-http://www.reuters.com/article/newsOne/idUSL0416926920080705

-Demand for rarest diamonds outstrips supply. Read more here-http://www.reuters.com/article/reutersEdge/idUSL0646558820080606

COMMODITIES

-Commodities bull market is not over. In what marked a significant change in investor attitude, commodity prices in July experienced on of their largest corrections since 1980. Much of it due to a fall in oil prices. Like others Danske bank sees the correction as a test of whether or not the bull market in commodities is over, taking the view while risks remain, the fundamentals are still supportive.

While an oil price of more than $140 per barrel was probably excessive, the recent correction is more the result of demand destruction, in the groups opinion. This is evidenced by U.S. gasoline demand in the past month, which is down 3% from the same time last year. The decline being mainly due to total miles driven slipping 3.7% in may from a year ago.

The weakness across the commodities sector sparked by the oil price correction may well continue over short-term, in the groups view, given it signals a change in sentiment. However longer-term market fundamentals still suggest prices can go back up. The bank has lowered it forecasts for the September and December quarters as a result, but its 2009 numbers remain essentially unchanged. Read more here-http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=95B3ACF3-1871-E587-E1D9206598239340

OIL

-Fat Prophets' Wendt Sees Oil Price at $175 by Year End. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T=Fat%20Prophets%27%20Wendt%20Sees%20Oil%20Price%20at%20%24175%20by%20Year%20End&clipSRC=mms://media2.bloomberg.com/cache/vorNJheJ8ap4.asf

-Home Energy Prices Are Expected to Soar. In a season of roller-coaster energy costs, the drop in oil and natural gas prices in recent days was greeted as good news. But they remain so high that experts are predicting that heating bills this winter will far exceed those of last year. Read more here-http://www.nytimes.com/2008/08/06/business/06fuel.html?ref=business&pagewanted=print

-The War for Oil. Read more here-http://news.goldseek.com/GoldSeek/1217609580.php

-Boone Pickens may be a fine man, and has played a colorful and useful role on the American stage for decades. But his "energy plan," which he's spending a fortune to promote on cable TV, is not a plan. Read more here-http://online.wsj.com/article/SB121797900578415011.html?mod=todays_us_opinion

GASOLINE

-Gas prices down 21 days in a row. The national average price for a gallon of gas slips to $3.849. Only 10 states are above $4 a gallon. Read more here-

http://money.cnn.com/2008/08/07/news/gas/index.htm

-More Americans feel gas price pain. CNN/Opinion Research poll finds high prices causing hardship for three quarters of Americans. Read more here-

http://money.cnn.com/2008/08/01/news/economy/poll_gasprices/index.htm

-Scooters, Shuttles Replace Silicon Valley Mercedes. Driving a Mercedes E500 gave Wes Richards a smooth ride to his office in Redwood City, California. Now he hops on a scooter for the 5-mile commute from his home in Atherton.

The price of gasoline trumped comfort, Richards said. He traded both his Mercedes sedan and his wife's Mercedes R350 sport-utility vehicle for a Piaggio scooter, a two-seat Smart car and a Toyota Prius.

"I don't miss having those cars,'' said Richards, 56, managing director of the Silicon Valley office of Korn/Ferry International, an executive-search firm. "Those feelings are reinforced every time I visit the pump and fill up for $28, where before it was $90.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=a_i30q6xMCo0&refer=home

INFLATION

-June U.S. inflation jumps as incomes barely rise. Consumer prices jumped at the sharpest rate in more than a quarter century during June, and consumers coping with soaring costs received their smallest income gain in a year, the government said on Monday.

The Commerce Department said personal incomes edged up 0.1 percent after rising 1.8 percent in May. June's rise was the smallest since April 2007, when income was flat. On a year-over-year basis, prices rose 4.1 percent in June, up from 3.5 percent in May, for the biggest annual gain since May 1991. Read more here-

http://www.reuters.com/article/ousiv/idUSN0125539420080804

-Shadow stats alternate data on the U.S. economy. See charts here-http://www.shadowstats.com/alternate_data

-Philippine July Inflation Accelerates to 16-Year High. Philippine inflation accelerated to the fastest pace in more than 16 years in July on costlier food, oil and higher wages, adding pressure on the central bank to raise interest rates for a third month in August. Consumer prices rose 12.2 percent in July from a year earlier, the National Statistics Office said in Manila this week. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aEX5P2zrCURA&refer=home

-Bridgestone to Raise Tire Prices in U.S., Canada From September. Bridgestone Corp., the world's largest tiremaker by sales, will raise tire prices in the U.S. and Canada by as much as 10 percent to pass on higher rubber costs. The company will raise prices for car, truck and motorcycle tires from Sept. 1, Tokyo-based Bridgestone said in a release on its Web site today. Bloomberg

INTEREST RATES

-Fed Keeps Rate at 2% as Inflation Accelerates, Growth Stagnates. The Federal Reserve kept its benchmark interest rate at 2 percent for the second consecutive meeting as inflation accelerates and the economic slowdown shows signs of deepening. "Although downside risks to growth remain, the upside risks to inflation are also of significant concern to the committee,'' the Federal Open Market Committee said in a statement today in Washington.

Chairman Ben S. Bernanke is constrained by threats to both sides of his mandate to achieve stable prices and full employment. A rate cut risks pushing inflation higher still; an increase would further tighten credit, undermine troubled banks and starve the faltering economy of investment and spending. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=auyxfYj6zV0Q&refer=home

-The fed's next move is down. Investors should expect falling worldwide interest rates. Short-term government bonds in inherently strong currencies, like Swiss Francs, remain attractive. As hyper-stagflation and acute financial stress becomes manifest, gold will likely rise significantly. Read more here-http://news.goldseek.com/GoldSeek/1218041147.php

-Mobius Says Fed Should Cut Rates to 1% to Fuel Growth. The Federal Reserve should cut its benchmark interest rate to 1 percent to boost the economy as falling oil prices reduce the threat of inflation, investor Mark Mobius said.

"With oil prices beginning to soften, there may be a chance for them to give a boost to the economy by lowering rates again,'' Mobius, 71, who oversees about $40 billion in emerging- market stocks as executive chairman at Templeton Asset Management Ltd. in Singapore, said in an interview on Bloomberg Television. "That's still in the cards, but no one really knows.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aIUC1MrJSyIc&refer=home

-BOE Keeps Rate at 5% as Economy Slumps, Prices Rise. The Bank of England kept the main interest rate unchanged for a fourth month after inflation accelerated and the economy teetered on the brink of a recession. The Monetary Policy Committee, led by Governor Mervyn King, left the bank rate unchanged at 5 percent Thursday. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8Et6pNqZOXs

-ECB Leaves Interest Rates at Seven-Year High to Fight Inflation. The European Central Bank kept interest rates at a seven-year high to fight inflation even as evidence of an economic slump mounts. ECB policy makers meeting in Frankfurt left the benchmark lending rate at 4.25 percent. The bank, which raised rates last month, will wait until the second quarter of next year to cut borrowing costs, a separate survey shows.

The ECB is concerned that the fastest inflation in 16 years will help unions push through demands for higher wages and prompt companies to lift prices. At the same time, record energy costs and the stronger euro are strangling growth. Economic confidence dropped the most since the Sept. 11 terrorist attacks in July and Europe's manufacturing and service industries contracted for a second month. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aviqt3l6EPcQ

-Rate cuts likely ahead for European Central Bank. Read more here-http://www.gata.org/node/6476

-Bank of Korea Raises Rate to 5.25% to Curb Inflation. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a8OXPho716AQ&refer=home

ROUBINI-HUNDREDS OF U.S. BANKS WILL FAIL

-The United States is in the second inning of a recession that will last for at least 18 months and help kill off hundreds of banks, influential economist and New York University Professor Nouriel Roubini told Barron's in Sunday's edition. Taxpayers will pay a big price for helping bail out the rest of the financial services industry as well, Roubini said -- at least $1 trillion and more likely $2 trillion.

The banks will become insolvent because of mounting losses as a result of the housing bust and because they have only written down their subprime loans so far, he said. Still in front of them are their consumer-credit losses, for which they lack the reserves, Barron's reported. He also said there are hundreds of millions of dollars outstanding in home-equity loans that could be worth zero, too.

U.S. consumers, meanwhile, are "shopped out" and saving less, while the Federal Reserve's performance in handling the crisis has been poor, Roubini said, because it failed to see that the problem extended beyond subprime mortgage debt. Now, Roubini told Barron's, the government is over regulating, bailing out troubled participants and intervening in every market.

"The regulators should investigate themselves for bailing out Fannie Mae and Freddie Mac the creditors of Bear Stearns and the financial system with new lending facilities. They have swapped U.S. Treasury bonds for toxic securities," he told Barron's. "It is privatizing the gains and profits, and socializing the losses as usual. This is socialism for Wall Street and the rich."

He said that sometimes it is necessary to use public money to rescue institutions, but in a way that does not bail out the people who made the mistakes. "In each one of these episodes, the government bailed out the shareholders, the bondholders, and to some degree, management," Roubini told Barron's. As for the banks that will go bankrupt, they will include community banks that finance homes, stores, downtown areas, commercial real estate and other mainstays of U.S. towns and cities, Roubini said.

"Of three dozen or so medium-sized regional banks, a good third are in distress," he told Barron's, saying half of the group could go bankrupt. Some big banks could wind up insolvent, he added, but said they might be deemed too big to fail. Nouriel stressed that he is "quite bullish" about the state of the global economy and that he is positive about the medium and long term. Full story here-http://www.reuters.com/article/marketsNews/idUSN0344130720080803

U.S. BANKING CRISIS

-IndyMac Bancorp Inc., once the second- largest U.S. independent mortgage lender, filed to liquidate its remaining assets three weeks after its bank was seized by U.S. regulators and put under other management.

IndyMac's liabilities are between $100 million and $500 million, according to the Chapter 7 filing by the bank holding company yesterday in U.S. Bankruptcy Court in Los Angeles. IndyMac said it has fewer than 50 creditors, including law and accounting firms and other banks, none of whose outstanding claims were listed.

IndyMac was seized by U.S. regulators on July 11 with its $19 billion in deposits, after a run by depositors left the mortgage lender strapped for cash. The Federal Deposit Insurance Corp. is running a successor institution, IndyMac Federal Bank, and regulators have said they intend to eventually sell the seized bank, while adding that its high risk-lending and mortgage losses make it "unattractive.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a98PghxW29do

-FDIC warns four US banks over liquidity. The Federal Deposit Insurance Corporation revealed on Friday that it had issued warnings to four small US banks that lacked sufficient reserves to cover potential loan losses.

The cease-and-desist orders issued in June said the four banks needed to raise more capital, expand their loss allowances and better oversee and diversify their loan portfolios. A fifth bank was cited for violating consumer protection laws. Losses on mortgages and other loans have helped bring down eight US banks this year, including one small Florida institution on Friday.

The banks receiving cease-and-desist orders in June were MetroPacific Bank in Irvine, California; Bank Haven in Haven, Kansas; Clarkston State Bank in Clarkston, Michigan; and Hastings State Bank in Hastings, Nebraska. Read more here-http://www.ft.com/cms/s/0/f52c86b4-6018-11dd-805e-000077b07658.html?nclick_check=1

-First Priority Becomes Eighth Failed Bank; SunTrust Buys Assets. First Priority Bank with six branches on Florida's Gulf Coast was closed by state regulators, becoming the eighth U.S. bank to collapse this year amid failed loans and writedowns linked to a slump in home prices.

First Priority, with $259 million in assets, was shut yesterday by the Florida Office of Financial Regulation, and the Federal Deposit Insurance Corp. sold $227 million in deposits to SunTrust Banks Inc. of Atlanta, the agency said in a statement. Six First Priority branches in Bradenton, Sarasota and Venice will open Aug. 4 as SunTrust offices, the FDIC said.

The pace of bank closings is accelerating as securities firms report more than $480 billion in writedowns and credit losses since 2007, when three banks were shuttered. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a87bC3u64eTc

-Greenspan says more financial institutions may face insolvency. More banks and financial institutions are likely to face insolvency and need bailouts before the global financial crisis is over, according to former Federal Reserve chairman Alan Greenspan. Writing in the Financial Times, Greenspan called the current crisis which started a year ago a once or twice in a century event and said insolvency would only end once U.S. house prices stabilized, underpinning mortgage-backed securities.

Until then, the threat of collapse among banks and other global financial institutions would persist. "Fears of insolvency have not, as yet, been fully set aside," Greenspan wrote in an article published online on Monday. "There may be numbers of banks and other financial institutions that, at the edge of defaulting, will end up being bailed out by governments." Read more here-http://www.usatoday.com/money/industries/banking/2008-08-04-greenspan-financial-institutions_N.htm

-The Maestro Won't Face the Music. Greenspan's most brazen contention was that he had tried to warn us of the dangers that Fannie and Freddie could pose to the entire economy. Excuse me, but when exactly did he sound this alarm?

His points that Fannie and Freddie should not exist, and that the moral hazard of private profits and socialized losses is an accident waiting to happen would have been right on point had he actually made them while still Fed Chairman. Too bad Maria Bartiromo did not remind Greenspan that the accident has already taken place. Fannie and Freddie's flawed design may have rendered them destined to slip but it was Greenspan himself who supplied the banana peel. Read more here-http://news.goldseek.com/EuroCapital/1217609758.php

-Uninsured Depositors May Be 'Iceberg' for US Economy. Uninsured depositors, including company payrolls, are the next "potential iceberg" for the U.S. economy, said Larry Lindsey, CEO and president of The Lindsey Group economic advisory firm.

"All you need is one case where the uninsured depositors, the big deposits, don't get covered, and you have the potential that they start to run," he said. "To run an economy, to have a function that works, you've got to have a place where people can keep their money safely. Unfortunately, the way the Congress has structured it now, that's not the case." Read more here-http://www.cnbc.com/id/26008619

-Fallout in Financials-Insight on where banks are headed, with Meredith Whitney, Oppenheimer & Co. director, equity research. Read more here-http://www.cnbc.com/id/15840232?play=1&video=812131599

-Whitney: Credit crunch far from over. The star analyst tells Fortune magazine that housing woes will force banks to keep taking writedowns. Read more here-

http://money.cnn.com/2008/08/04/news/newsmakers/whitney_oppenheimer.fortune/index.htm?postversion=2008080408

FREDDIE-FANNIE

-Freddie Posts Loss, Cuts Dividend as Slump Deepens. Freddie Mac, the U.S. mortgage-finance company hobbled by record foreclosures, slashed its dividend at least 80 percent after posting a quarterly loss that was three times wider than analysts' estimates. Freddie doubled its reserves for future home-loan losses to $2.8 billion, signaling Chief Executive Officer Richard Syron sees no end in sight to the worst housing slump since the Great Depression.

Freddie has 22,000 properties in foreclosure, more than ever before, and it now anticipates losing 26 percent on each loan, up from 22 percent. McLean, Virginia-based Freddie has plunged 76 percent this year on concern the company may not have enough capital to overcome delinquencies on the $2.2 trillion of mortgages it owns and guarantees, prompting Treasury Secretary Henry Paulson to step in with a rescue plan.

"Neither we nor anyone else can predict when the housing market will recover and it will be folly for anyone'' to try, Syron said on a conference call with analysts today. ``There's still a large amount of inventory to work through the system and record foreclosures.''

Almost one out of every 10 mortgages in the U.S. was in trouble during the first quarter, the highest in records dating to 1979, according to the Mortgage Bankers Association in Washington. Delinquencies, or home loans with payments 30 days or more overdue, rose to 6.35 percent of outstanding mortgages and the share of homes in foreclosure rose to 2.47 percent. Freddie's properties in foreclosure are triple that of 2002. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a8m_9i9.5MeE&refer=home

-Pimco's Gross Says U.S. Will Rescue Fannie, Freddie. Bill Gross, who manages the world's biggest bond fund, said the U.S. Treasury will probably be forced to buy as much as $30 billion of preferred shares in both Fannie Mae and Freddie Mac to help shore up their capital.

"By the end of the third quarter, the preferred stock in Fannie and Freddie will be issued, the Treasury will have bought it,'' Gross, co-chief investment officer at Pacific Investment Management Co., said today in an interview on Bloomberg Television. ``We'll be on our way toward a joint Treasury-agency combination.'' Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=an9sljJCqNNk&refer=home

-Freddie's risks all too plain to see. Investors blanch at the mortgage giant's effort to reveal the risks it bears as house prices tumble. Read more here-

http://money.cnn.com/2008/08/06/news/freddie.transparency.fortune/index.htm

MORE AIG FINANCIAL TROUBLE

-AIG Plummets as Insurer Won't Rule Out Capital Raise. American International Group Inc., the biggest U.S. insurer by assets, fell the most since going public in 1969 after writing down more than $11 billion of holdings and saying it won't rule out raising capital.

"It's very hard to predict right now when and if we'll need more capital," Chief Executive Officer Robert Willumstad said today in a conference call with analysts. "Future losses can change that assumption and we're obviously dependent on the condition of the U.S. housing market."

Willumstad faces increasing pressure to turn around AIG after the insurer posted more than $18 billion in losses over the past three quarters. The second quarter's $5.36 billion loss, reported yesterday, was worse than analysts predicted and renewed concern that AIG may need to raise cash by selling shares. Willumstad called current capital "satisfactory." Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=ah3fZe3a.Eqc&refer=home

NORTHERN ROCK FINANCIAL BAILOUT

-Northern Rock posts $1B loss. Nationalized British bank swings to first-half loss on mortgage defaults. Read more here-

http://money.cnn.com/2008/08/05/news/international/northern_rock_earnings.ap/index.htm

-Northern Rock Gets 3.4 Billion Pound State Injection. Northern Rock Plc, the first British bank to suffer a run in 150 years, will receive as much as 3.4 billion pounds ($6.7 billion) from the government, as house prices decline and repossessions soar. Britain's government will convert some outstanding debt and preference shares into equity in the mortgage lender after it posted a 592 million-pound loss for the first half, the Newcastle, England-based bank said in statement today.

It repaid 9.4 billion pounds to the Bank of England, about a third of its 27 billion-pound debt. Northern Rock was bailed out by the central bank last year when it ran out of funds and was nationalized by Chancellor of the Exchequer Alistair Darling in February. The bank's losses were worsened by a tripling in arrears to 1.2 percent, amid the steepest decline in house prices since 1992. "Darling assured Parliament that taxpayer loans to Northern Rock would be fully secured on mortgage assets,'' said Vincent Cable, the opposition Liberal Democrat Treasury spokesman.

"This is clearly not true. 3.4 billion pounds of the Government's loan to Northern Rock is now being converted into ordinary shares, which rank right at the bottom for repayment. Continuing losses at the bank put this money at great risk.'' Repossessions rose 67 percent to 3,710 by the end of June, Northern Rock said today. The surge ``was expected,'' Chairman Ron Sandler told journalists today. Read more here-http://www.bloomberg.com/apps/news?pid=20601102&sid=aGXJJlkdqrLw

GLOBAL RECESSION

-Japan Says Economy Deteriorating, Signals a Recession. Japan's government said the economy is ``deteriorating,'' acknowledging for the first time that the country's longest postwar expansion has probably ended.

"There is a high possibility the economy has entered a recession,'' Shigeru Sugihara, head of business statistics at the Cabinet Office said in Tokyo today. The government bases its assessment of the economy on the coincident index, its broadest indicator of economic health. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid=agPMgTnteJP0&refer=home

-Party's over for jittery New York. Read more here-http://www.breitbart.com/print.php?id=080804143812.o8igyxho&show_article=1

-U.S. July Job Cuts Double Year-Earlier Level, Challenger Says. Job cuts announced by U.S. employers soared last month, led by reductions at airlines and financial firms, according to a report by a private placement firm. Firing announcements increased to 103,312 last month, up 141 percent from 42,897 in July 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today. That's the biggest year- over-year percentage increase since November 2001, at the end of the last official recession.

Companies are trimming payrolls as fuel prices increase and the housing slump drags on. The Labor Department last week said that the U.S. economy lost jobs for a seventh straight month in July and the unemployment rate reached the highest in more than four years.

"We have seen job cuts increase in the majority of industries that we track,'' John A. Challenger, chief executive officer of the placement company, said in a statement. ``The downturn, which was isolated to the housing and financial sectors just a few months ago, has spread throughout much of the economy.'' Companies have announced a total of 579,260 cuts so far this year, up 33 percent from the first seven months of 2007, according to the report. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid=aLDBTCBZ6vYQ&refer=us

-Jobless claims surge to highest level in 6 years. Claims for unemployment insurance at highest point since March 2002; layoff filings worse than expected. Read more here-

http://money.cnn.com/2008/08/07/news/economy/jobless_benefits.ap/index.htm

U.S. DOLLAR-LOONIE

-What Is Money? Read more here-http://news.goldseek.com/DollarCollapse/1218142611.php

-Has The Dollar Fallen Enough? Has the dollar fallen far enough? How large are unsustainable international imbalances? This article presents new estimates of fundamental equilibrium exchange rates, concluding that the U.S. dollar has fallen enough with respect to the euro and pound but is overvalued against Asian currencies. Read more here-

http://www.resourceinvestor.com/pebble.asp?relid=45163

-India's central bank shifts slowly away from U.S. dollar. Read more here-http://www.gata.org/node/6467

-Loonie Loses Currency Wings as Canada Hurt by U.S. Currency traders are beginning to realize that for all its riches in oil, copper and lumber, Canada's economy may not be so different than the U.S. after all. While Canadians celebrated last year as the country's dollar reached parity with its U.S. counterpart for the first time since 1976, traders now predict the currency will fall as much as 17 percent through 2009.

After soaring 17 percent in 2007, the loonie, as the currency is known because of the aquatic bird on the one-dollar coin, is down 3.1 percent in 2008 amid a shrinking economy and an 13 percent drop in oil prices the past month. It's one of five of the 16 most-widely traded currencies to drop against the U.S. greenback, joining the New Zealand dollar, South Korean won, South African rand and British pound. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=a_msEHNvep2k&refer=home

STOCK MARKET-BONDS

-"Long-term trend is now down." Commentary: Richard Russell has turned bearish on major trend. Richard Russell celebrated his 84th birthday last week, but he finds little to celebrate in the stock market's recent action. Russell is the editor of Dow Theory Letters, a newsletter he has been writing continuously since 1958.

That makes him the granddaddy of the investment newsletter arena; no other current investment newsletter editor has been publishing for as long and most don't even come close. In fact, many of today's investment advisers weren't even born when he inaugurated his letter. Read more here-http://www.marketwatch.com/news/story/richard-russell-now-says-stock/story.aspx?guid={E6D41CC7-402E-4409-B9A3-D3FCD6744596}&dist=TNMostRead

-Naked shorting's early critic starts to see some vindication. Over the past several years, Patrick Byrne's campaign to clean up Wall Street and end a practice that has destroyed companies and cost unwary investors billions of dollars generated plenty of publicity for him, mostly the wrong kind.

Critics labeled him nuts, a conspiracy theorist, a complete wack job. Byrne, the chief executive of the Utah-based discount online retailer Overstock.com, even found himself tagged a member of the "tin-foil hat" brigade, a reference to the flying saucer fanatics of the 1950s who adorned their heads with aluminum to ward off, or enhance, thoughts from aliens in outer space. These days, when people talk of Byrne, the word "vindication" comes up a lot. Read more here-http://www.gata.org/node/6468

-U.S. Corporate Bond Sales in July Fall to Lowest in Five Years. Sales of U.S. corporate bonds in July fell to the lowest since 2003 as borrowing costs reached the highest in six years.

General Mills Inc. and Memphis, Tennessee-based AutoZone Inc. were among companies selling $38.1 billion of debt, compared with $39.8 billion in July 2007, according to data compiled by Bloomberg.

General Mills paid a record yield, or spread, over benchmark rates to issue five-year notes, while Autozone, the largest U.S. auto-parts retailer, for the first time sold bonds that provide for a higher coupon if the company's ratings are cut. Near-record-high corporate bond spreads pushed borrowing costs to the highest since April 2002, five months after the last recession ended. Monthly sales were the lowest since August 2003.

The top five U.S. banks or brokers sold the fewest corporate bonds since December 2000, Bloomberg data show. Those companies accounted for about a quarter of all investment-grade offerings in 2007. "I just don't know that it's very economical right now to raise money unless you absolutely have to,'' said John Weaver, a portfolio manager at McGlinn Capital Management in Wyomissing, Pennsylvania, which manages $500 million.

"I don't think that Armageddon is a non-trivial risk here. This deleveraging may take longer than everyone thinks.'' The extra yield investors demand to own investment-grade bonds widened 26 basis points this month to 300 basis points, 5 basis points from the record reached March 20, according to Merrill Lynch & Co.'s U.S. Corporate Master index. That pushed average yields to as high as 6.74 percent on July 23. A basis point is 0.01 percentage point. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=amD.PUoGKY.4

TOUGH TIMES AHEAD FOR U.S.-EUROPEAN PENSIONERS

-A miserable time looms for America as the boomers become pensioners. Heaven knows, America's miserable now. With US unemployment up to 5.7 per cent in July, and with US inflation in June running at 5.0 per cent, life is no longer quite as comfortable as it used to be.

Combining these two measures generates the so-called "misery index", a gauge of the overall degree of economic distress resulting from an unfortunate combination of rising joblessness and higher inflation. According to this calculation, Americans have every right to be feeling miserable: the index has reached its highest level since the early 1990s, when another George Bush presided over an economy which, like now, was on its knees. Read more here-http://www.independent.co.uk/news/business/comment/stephen-king/stephen-king-a-miserable-time-looms-for-america-as-the-boomers-become-pensioners-884334.html

-Now Wall Street Wants Your Pension, Too. JPMorganChase, Citi, Cerberus, and Morgan Stanley are among the firms lobbying Washington to let them take over and run corporate pension funds.

The folks who brought you the mortgage mess and the ensuing hedge fund blowups, busted buyouts, and credit market gridlock have another bold idea: buying up and running troubled corporate pension plans. And despite the subprime fiasco, some regulators may soon embrace Wall Street's latest scheme. Read more here-

http://www.businessweek.com/magazine/content/08_33/b4096000769608.htm?campaign_id=rss_topStories

-Europe Tries to Handle Political Fallout of Pension Cuts. Social Security is known as the "third rail" of American politics, and fiddling with retirement benefits can prove politically fatal in Europe too. Yet, in recent months and years some Europeans have tried to defuse the time bomb posed by millions of retirees receiving government benefits. Read more here-

http://www.nytimes.com/2008/08/06/business/worldbusiness/06pension.html?_r=2&oref=slogin&partner=rssyahoo&emc=rss&adxnnlx=1217998835-Mb7KRTAHZ08VLrCtZlf3yg&pagewanted=print&oref=slogin

SELLING TOXIC DEBT TO SENIORS

-Selling toxic debt to seniors. Memphis broker Morgan Keegan is under fire for allegedly failing to disclose the subprime risks of seven funds. The subprime securities that created carnage on Wall Street are bringing new pain to Main Street.

Regulators in five states are investigating whether Memphis brokerage Morgan Keegan failed to disclose the risks of seven mutual funds stuffed with toxic debt and whether it inappropriately sold them to seniors and other small investors. Six lawsuits and dozens of arbitration cases claim it did. Read more here-

http://www.businessweek.com/magazine/content/08_33/b4096024633079.htm?campaign_id=magazine_related

AUTO MAKERS

-Big Three face bankruptcy fears. After huge losses and plunging sales, experts aren't ruling out the possibility that GM, Ford or Chrysler might eventually be forced to declare bankruptcy. Read more here-http://money.cnn.com/2008/08/06/news/companies/big_three_woes/index.htm?postversion=2008080610

-Auto Makers Pull Back From Fuel-Economy Drive. The auto industry said federal regulators are pushing too far, too fast in their effort to raise fuel-mileage rules. The complaints from the industry, which had previously voiced support for tougher standards, underscore how economic hardship is affecting a major policy debate. Read more here-

http://online.wsj.com/article/SB121789813230412201.html?mod=AutosChannelMain_RelatedStories

-Chrysler Falls Short of $30 Billion Financing Goal. Chrysler Financial's failure to get all of the $30 billion in renewed funding it sought may further restrict the lending unit's ability to support auto sales to Chrysler LLC customers and its dealers.

Chrysler Financial said yesterday it obtained $24 billion from a group of lenders, 20 percent below its target. The Farmington Hills, Michigan-based lender attributed the shortfall to "conditions in the credit markets and changes in the company's retail strategy.'' The finance unit stopped offering leases on Aug. 1 because of rising borrowing costs. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=au05zqFSzI2s

-GM Has $15.5 Billion Loss on U.S. Sales Drop, Leases. General Motors Corp., the largest U.S. automaker, reported a second-quarter loss of $15.5 billion because of plunging U.S. sales and the declining value of truck leases.

The deficit of $27.33 a share marks GM's fourth straight quarterly loss and compares with a profit of $891 million, or $1.56, a year earlier. Excluding costs GM considers one-time, the per-share loss was 4 times bigger than analysts projected. Labor strikes contributed to a $9.9 billion drop in North American revenue, and sales worldwide tumbled 18 percent to $38.2 billion. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=apNQZDTc1VTo&refer=home

-Automakers Race Time as Their Cash Runs Low. Read more here-http://www.nytimes.com/2008/08/02/business/02gm.html?_r=1&oref=slogin&partner=rssyahoo&emc=rss&pagewanted=print

-Detroit's Losses Mean Higher Car Payments for Those Who Lease. Leasing a car is about to get more expensive. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=arqlQq5DHSMs

-Chrysler, Nissan team up on midsize cars: report. The collaboration would not be the first for the two automakers. Read more here-

http://money.cnn.com/2008/08/07/news/international/bc.us.chrysler.nissan.midsize1.ap/index.htm

REAL ESTATE

-Home Values Fell in 23 of 25 U.S. Metro Areas, Radar Logic Says. Home prices fell in 23 of 25 U.S. metropolitan areas in May from a year earlier as foreclosure sales pushed down values and most areas remained mired in the housing recession. Sacramento had the biggest price drop, falling 31 percent from May 2007. Las Vegas declined 29.5 percent, San Diego 27.2 percent, St. Louis 26.9 percent and Phoenix 25.8 percent, said real estate data company Radar Logic Inc.

Sales rose in 22 areas in May from April, driven by ``motivated'' sellers including banks, the company said. ``Price declines are occurring in areas where subprime lending was heavily concentrated, and a large percentage of sales are foreclosure sales,'' Susan Wachter, professor of real estate finance at the University of Pennsylvania's Wharton School, said in an interview.

Prices for "those sales are always significantly lower than transactions that are not forced.'' U.S. foreclosure filings more than doubled in the second quarter from a year earlier as almost 740,000 properties, or one in every 171 households, was foreclosed on, received a default notice or was warned of a pending auction, according to Irvine, California-based RealtyTrac Inc., a seller of default data.

The S&P/Case-Shiller home-price index of 20 metropolitan areas dropped 15.8 percent in May, the most since at least 2001. Foreclosures led to increased sales in some areas where prices declined and ``people began to bargain hunt,'' Michael Feder, president of New York-based Radar Logic, said in an interview. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aGO27j0pZO38&refer=home

-Highest Home Supply Since '82 Seen Needing 50% Cut. Hovnanian Enterprises Inc., New Jersey's largest homebuilder, cut the number of unsold houses by more than 50 percent over the past two years after lowering prices and still had 1,500 on its books as of April. "We pretty much start a home these days when we have a contract from a buyer wanting to purchase one,'' Chief Financial Officer Larry Sorsby said in an interview from his office in Red Bank, New Jersey.

The company's sales price in the northeast for homes under contract dropped 7.4 percent in April from a year earlier. ``We don't build them and hope they come,'' he said. There are 3.9 million unsold existing single-family homes, the most since at least 1982, when the Chicago-based National Association of Realtors started compiling the data. The inventory of existing houses and condominiums must fall by almost 50 percent for prices to stabilize, said William Wheaton, an economics professor at the Massachusetts Institute of Technology in Cambridge.

There is an 11.1 month supply of existing unsold homes at the current sales pace, up from 4.6 months in September 2005, according to the National Association of Realtors data. It now takes 10 weeks to 12 weeks on average to sell a house, compared with four weeks or five weeks at the height of the five- year housing boom, said Walter Molony, a spokesman for the Realtors group. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=avPV2OxmwF9w

-Pending Home Resales in U.S. Unexpectedly Rose 5.3%. More Americans unexpectedly signed contracts to purchase previously owned homes in June, a sign that lower prices are drawing some buyers back into the market. The index of pending home resales rose 5.3 percent after a revised 4.9 percent decline in May, the National Association of Realtors said today in Washington. The gain is the third this year.

Plummeting property values, spurred by mounting foreclosures, may be helping to stabilize the market by making houses more affordable. Still, repossessions may keep growing as stricter lending rules make it harder for owners to refinance their mortgages.

"What we're getting is a little bit of foreclosures thrown in with voluntary home sales,'' John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, said in an interview with Bloomberg Television. ``Although foreclosures are up, there seems to be enough of a price decline that buyers are starting to look for bargains and they're willing to purchase.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=agsjwBR2Vgtk

-U.S. house prices falling fastest for 17 years, says Nationwide. House prices are falling at the fastest rate for 17 years, according to figures from Nationwide. The average house is worth £15,000 less than last year after a 8.1 per cent annual slump. The pace of annual decline is unprecedented since the building society began its monthly house price index in 1991.

The figures follow warnings earlier this week that more than 1.6 million home owners could fall into negative equity over the next year. Read more here-

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/07/31/bcnnationwide231.xml

-Australian House Prices Fall for First Time in Three Years. Australian house prices fell in the second quarter for the first time in almost three years as the highest borrowing costs since 1996 deterred home buyers. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=amNetLGYqAC4&refer=home

-WCI, Icahn's Builder, Files for Bankruptcy Protection. WCI Communities Inc., the homebuilder whose chairman is billionaire investor Carl Icahn, filed for Chapter 11 bankruptcy protection after failing to obtain new financing and losing 90 percent of its value in the past year. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=a7lktScJDc7E

-U.S. Farmland Values Reach Record on High Crop Prices. U.S. farmland values are at a record high even as the rest of the country suffers the worst housing crisis since the Great Depression, with the highest crop prices ever pushing up agricultural real estate. The value of all land and buildings on farms averaged $2,350 an acre at the start of this year, up 8.8 percent from a year earlier, the U.S. Department of Agriculture said today in an annual report. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a2FmZilSagA0

FORECLOSURES-MORTGAGES

-A second, far larger wave of U.S. mortgage defaults is building. The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is building with alarming speed. After two years of upward spiraling defaults, the problems with mortgages made to people with weak, or subprime, credit are showing the first, tentative signs of leveling off. But with the U.S. economy struggling, homeowners with better credit are now falling behind on their payments in growing numbers.

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A, or alt-A, mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time. While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said.

Defaults are likely to accelerate because many homeowners' monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks are tightening their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are alt-A loans, many of which were made to people with good credit scores without proof of their income or assets. Read more here-http://www.iht.com/articles/2008/08/03/business/mortgage.php

-Housing Lenders Fear Bigger Wave of Loan Defaults. Read more here-http://www.nytimes.com/2008/08/04/business/04lend.html?_r=4&th=&adxnnl=1&oref=slogin&emc=th&adxnnlx=1218049576-ulKnpwLy0aKGchPKNAfVRg&pagewanted=print

-Morgan Stanley Said to Freeze Home-Equity Credit Withdrawals. Morgan Stanley, the second-biggest U.S. securities firm, told thousands of clients this week that they won't be allowed to withdraw money on their home-equity credit lines, said a person familiar with the situation.

Most of the clients had properties that have lost value, according to the person, who declined to be identified because the information isn't public. The New York-based investment bank will review home-equity lines of credit, or HELOCs, monthly from now on, the person said yesterday.

Wall Street firms including Morgan Stanley are ratcheting back on risks after the collapse of the subprime mortgage market and ensuing credit contraction saddled banks and brokerages with almost $500 billion of writedowns and losses. Consumers fell behind on home-equity credit lines at the fastest pace in two decades in the first quarter, the American Bankers Association reported last month. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=afQ0PVYvOgzI&refer=home

-Connecticut sues Countrywide. The state accuses the mortgage lender of misleading borrowers into taking on home loans they could not afford. Read more here-

http://money.cnn.com/2008/08/06/news/companies/countrywide_lawsuit.ap/index.htm

-Deutsche Bank to Foreclose on $3.5 Billion Casino. Deutsche Bank AG will foreclose on the $3.5 billion Cosmopolitan Resort & Casino in Las Vegas after developer Ian Bruce Eichner defaulted on a $760 million loan, two people briefed on the situation said.

Germany's biggest bank weighed selling the complex after Eichner's January default, said the people, who asked not to be named because the discussions are private. Deutsche Bank will take over the Cosmopolitan and is talking with companies including MGM Mirage and Hilton Hotels Corp. to help run its 80,000-square-foot casino, the people said.

Sagging commercial real estate prices, weighed down by record subprime defaults, forced banks to hold projects until prices rise or sell at a loss. The Frankfurt-based bank would oversee an 8.5-acre development with two high-rise towers, three wedding chapels, a sandy beach overlooking the Las Vegas Strip and a deck featuring ``European-style bathing.''

"Deutsche Bank wants to be engaged in banking, not running a casino,'' said Matthew Clark, a London-based analyst at Keefe, Bruyette & Woods. ``They've had to decide between selling the Cosmopolitan into a bad market or holding on for better times.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=alpUP8xoYnJE&refer=home

-More U.K. repossessions than stated, says Shelter. Thousands more homeowners are having their houses repossessed than official figures suggest, a leading housing charity has said as the City watchdog prepares to publish repossessions data for the first time this week. Read more here-http://www.timesonline.co.uk/tol/money/property_and_mortgages/article4460989.ece

-U.K. home repossessions are soaring in the credit crunch according to a shock new report with one desperate family forced to live in a pigeon shed. Read more here-

http://www.thesun.co.uk/sol/homepage/woman/real_life/article1519444.ece

-Sir James Crosby's report predicts mortgage market paralysis for three years in U.K. Read more here-http://www.timesonline.co.uk/tol/money/property_and_mortgages/article4426026.ece

GEOPOLITICAL

-Olympic Terrorism Threat Video. An Islamic group has threatened attacks against the Olympics in China and urged Muslims to stay away from events there. The threat, attributed to the Turkistan Islamic Party (TIP), is contained in a new video which shows a burning Olympics logo and an explosion imposed over a venue to be used for the Beijing Games. It claims the communist regime's alleged mistreatment of Muslims justifies holy war. Watch video here-http://www.liveleak.com/view?i=13a_1218125381&p=1

-Iran Heads Toward Nuclear `Breakthrough,' Israel Says. Iran is on a path toward a ``major breakthrough'' in its nuclear program that is ``unacceptable,'' Israeli Deputy Prime Minister Shaul Mofaz told a Washington audience today. "It is an existential threat,'' Mofaz said at a forum on Iran at the Washington Institute for Near East Policy. "We have to make sure we are prepared for every option.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=auec_5cG.5k0&refer=home

-Israel mulls military option for Iran nukes. Israel is building up its strike capabilities amid growing anxiety over Iran's nuclear ambitions and appears confident that a military attack would cripple Tehran's atomic program, even if it can't destroy it.

Such talk could be more threat than reality. However, Iran's refusal to accept Western conditions is worrying Israel as is the perception that Washington now prefers diplomacy over confrontation with Tehran. Read more here-http://news.yahoo.com/s/ap/20080806/ap_on_re_mi_ea/israel_striking_iran&printer=1;_ylt=AiLuamzhUqnpGoZVZvgDJe8UewgF

-Iran's Rebuff of Incentives May Bring More Sanctions, U.S. Says. The U.S. and its international partners will pursue further sanctions against Iran if it doesn't respond to an offer to suspend uranium enrichment in exchange for economic benefits.

The permanent five members of the United Nations Security Council, plus Germany "are disappointed that we've not yet received a response from Iran as requested in Geneva on July 19th,'' State Department spokesman Gonzalo Gallegos said today in Washington. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=ayczmPcCPcYk

-US: Iranian response on nukes unacceptable. Read more here-http://www.breitbart.com/print.php?id=D92C9MC81&show_article=1

-Iran threatens to shut Gulf shipping lanes. Iran has warned it is ready to shut down the shipping lanes of the Gulf as it boasted of a new missile system designed to "prolong" war at sea. Read more here-http://www.telegraph.co.uk/news/worldnews/middleeast/iran/2497782/Iran-threatens-to-shut-Gulf-shipping-lanes.html

-Iran Tests Anti-Ship Weapon, Repeats Stance on Hormuz. Iran's military tested a new anti- ship weapon, the commander of the Islamic Revolutionary Guards Corps said as he repeated a warning that his forces could respond to any attack by closing the Strait of Hormuz, an oil transit point. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=a8ij5RBCP3gA&refer=home

-GCC chief slams Iran for attacking Arab monarchies. Read more here-http://www.breitbart.com/article.php?id=080807173815.y7383v74&show_article=1

-Book Claims White House Forged War Intel. Ron Suskind's "The Way Of The World" Alleges U.S. Faked Letter That Linked Iraq With 9/11. Read more here-

http://www.cbsnews.com/stories/2008/08/05/earlyshow/main4321003.shtml

-Iraqis: Deal close on plan for US troops to leave. Iraq and the U.S. are near an agreement on all American combat troops leaving Iraq by October 2010, with the last soldiers out three years after that, two Iraqi officials told The Associated Press on Thursday. U.S. officials, however, insisted no dates had been agreed. Read more here-

http://apnews.myway.com/article/20080807/D92DKUJG2.html

-Iraq isn't spending oil windfall on infrastructure. U.S. says about 1% of $80 billion goes to roads, bridges. Read more here-

http://online.wsj.com/article/SB121798557456515563.html?mod=hps_us_whats_news

-High oil prices giving Iraq up to $79 billion in surplus cash. Read more here-http://www.iht.com/articles/2008/08/05/mideast/surplus.php

-Pakistan, Afghanistan Need to Build More Trust, Gilani Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aKLdgYmGB6WY&refer=home

© 2008, Worldwide Precious Metals.
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The GoldBugg Report - August 13, 2008
Posted by Worldwide Precious Metals on Wednesday, August 13, 2008