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The GoldBugg Report - August 20, 2008

August 20, 2008

Why Precious Metals Retreated-Silver and gold lease rates were in negative territory the last few weeks as the central banks are selling cheap silver and gold to stabilize the financial markets, notes Jurg Kiener, CEO of Swiss Asia Capital. He tells CNBC's Martin Soong & Sri Jegarajah more.

http://www.cnbc.com/id/15840232?video=826763189&play=1&__source=RSS*tag*&par=RSS

GOLD

-Citigroup forecasts $950 gold and a strong rebound 4Q in metal prices, mining equities. Is the bullish metals cycle over? Citigroup metals analysts say "no" and forecast a "strong rebound" in metals prices and mining stocks during the fourth quarter. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=59517&sn=Detail

-Gold is Oversold and Likely at Seasonal Lows. Gold' deep and lengthy consolidation since March should see a very sharp rally in gold's favoured Autumn months (as was seen last year and in nearly all years since 2000 see charts below). Correction and consolidation in any market is healthy and normal. This looks likely to be the last such sell off prior to a strong rally into the autumn as is typical. Gold seasonal patterns often result in lows in July or August prior to strong rallies into year end.

Previous years may be instructive in this regard. Last summer, gold fell some 7% from $687 on July 16th to $641 on August 13th. The $641 reached on August 13th marked the seasonal low and subsequently gold rallied strongly in August, September, October and early November. It reached $845 less than 3 months later for a return of nearly 32%.

Gold subsequently had a shallow and brief correction in November and early December prior to rallying from mid December low of $787 to its highs in March of $1003 or a return of 27%. A similar performance can be seen in previous years in this current secular gold bull market as seen in the excellent charts below which featured at the James Joyce Table in Lemetropolecafe.com. See charts here-http://news.goldseek.com/GoldSeek/1218628800.php

-Adam Hamilton of Zeal LLC recently completed another excellent research piece on gold' seasonal price movements and why they take place. His chart shows the strongest months of the year for gold are the autumn months. September is the best month for gold, followed closely by November, December and January.

As Hamilton astutely writes, "So of the six months between early August and early February, gold's massive seasonal autumn rally, fully four are gold's biggest months of the calendar year. You absolutely want to be long gold, and indeed the entire PM-complex since everything PM-related ultimately follows gold's lead, in September, November, December, and January. Seasonal-demand-driven price increases are very compelling then.

Obviously this is really exciting today since we are now on the verge of gold's biggest seasonal rally of the year. But remember that seasonals are a tailwind, a secondary indicator. So if gold was overbought today and greed abounded, the bullish seasonals could easily be overridden. But thankfully it is not, indeed just the opposite has occurred. Gold is deeply oversold today and sentiment is horrendous. Excessive levels of both fear and frustration have conspired to create an explosively-bullish sentiment mixture." Gold.ie

-Stage two of the gold bull market is just beginning. A war breaks out in the Caucasus, pitting Russia against a close ally of the United States. Inflation reaches a new peak in the euro-zone. The CPI reaches the highest in Britain since Bank of England independence. Rampant inflation sweeps the developing world.

Well, my own view is that gold bugs should start looking very closely at something else: the implosion of Europe. Gold bugs, you ain't seen nothing yet. Gold at $800 looks like a bargain in the new world currency disorder. Read more here-http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2008/08/12/stage_two_of_the_gold_bull_market_is_just_beginning

-Four reasons to buy gold now. Remembering that key support has been broken and that in 1974 we had a correction of almost 50% (yes, 50%) in an ongoing bull market, it is with some trepidation that I say gold is a buy down here, just above $800.

On top of all the fundamental arguments for gold, which you will all know only too well, here's why. In the short-term we are due a bounce. For gold to sell off like this for five weeks in succession, even with all the volatility of this bull market, has not been seen since May 2006. We are hugely oversold. We got a big bounce then and should get one now.

The central bank selling appears to have subsided. The dollar is hugely overbought and due a retrace. The inverse applies to precious metals. August is the best month of the year to buy gold and silver. Read more and view charts here-http://www.moneyweek.com/investments/precious-metals-and-gems/four-reasons-to-buy-gold-now-85754.aspx

-Gold Bull Seasonals. The bottom line is gold does have strong seasonal tendencies. Even though gold isn't grown like wheat, the passage of the calendar influences gold investment demand across the globe which directly impacts the gold price. Gold is deeply woven into cultures around the world and their various customs create lumpy gold investment demand. It is clustered at specific times instead of spread out evenly across the year.

Naturally investors and speculators should exploit these seasonal tendencies. The best time seasonally to go long gold and other PM-related trades is right now. From August to February gold's biggest seasonal rally of the year erupts. During this timespan, which includes gold's four best calendar months, the lion's share of its entire bull-market gains have been made. I fully expect the rest of 2008 to unfold according to this precedent. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton081108.html

-Gold is cheap says Richard Russell. My own policy, ever since the year 2000 I have kept a portion of our assets in gold with a smaller section in gold stocks. I've been adding bullion to our position periodically ever since. I don't consider this a trading position any more than I consider our home a trade.

I have always considered gold to be a store of wealth an asset that I don't worry about. That's still my position, unlike stocks or even bonds I never worry about the solvency of gold. Read more here-http://www.321gold.com/editorials/russell/russell081308.html

-In most recent Trading Thoughts we reported that the largest purchases of U.S. government debt by foreign official institutions had occurred in the prior week. Initially, reason for those purchases was a mystery. That is, until Russia decided to crush Georgia militarily.

The Russian army does not move into invasion mode without some prior preparations. Someone knew what was to happen. A massive amount of money flowed, at a $1.4+ trillion annual rate, into U.S. debt in less than a week. Those financial transactions had two ramifications.

First, a shortage of dollars was created which caused the value of the dollar to spike upward. Second, as payments for those bonds were made, a massive amount of liquidity flowed into the Street. That excessive liquidity quickly flowed into financial markets, causing a 300+ point DJIA rally. As news of the Russian mini-blitzkrieg spread, others fled to the dollar.

As this week's chart shows, the U.S. dollar spiked upward on this panic buying. The U.S. dollar is now as over bought as it has been. Note that each time dollar has spiked upward, another down leg was not too far off. Why does this happen? Most Forex trading systems are nothing more than momentum models. Some time is required to turn such models bullish. By the time they turn bullish, the move is old and they come in late.

With the U.S. dollar incredibly over bought, Gold is on the bargain table. Rarely have we witnessed Gold this over sold for this long. Investors should be buying Gold while funds are pushing dollar to unsustainable levels. With "Putin, the Terrible" running rampant in Russia and the calendar moving toward Israel's "Window of Necessity" on Iran, Gold is a must for portfolios. Ned W. Schmidt

-Gold, Oil Ratio `Out of Whack' After Declines. Gold may outperform crude oil in the next six months as buyers in India, the world's biggest consumer of gold, stock up on the metal, according to Patrick Chidley, an analyst at Barnard Jacobs Mellet USA LLC. Gold jewelry demand in India and Turkey was "extremely strong" in the past week, with sales to India the highest since this time last year as buyers took advantage of lower prices and rebuilt inventories, according to UBS AG.

Gold has dropped 16 percent from a record in March as lower oil prices eroded demand for the metal as an inflation hedge and jewelry demand waned. The "black gold ratio,'' showing how much gold it would take to buy a barrel of oil rose to 0.1538 of an ounce on June 12, the highest since at least 1950, and averaged 0.066 since 1970. Based on historical averages, if oil falls to $100, gold would go to $1,515 an ounce.

"This ratio is way out of whack,'' Chidley said from Stamford, Connecticut. ``As we've seen the oil price come off, that relationship could come back into focus and I see the relationship below 0.1 in the next six months with gold coming up. Indian jewelers have to come back to the market.'' The October-December period is the busiest season in India for jewelry sales, spurred by the wedding season and Diwali, the Festival of Light. Bloomberg

-Golden Buying Opportunity, With a Silver Lining! Gold made a bottom at $651 on August 16th 2007 before rallying to over $1025 by March 2008. The anniversary of that low is less than a week away and we suspect history is going to repeat itself as gold prepares for anther tremendous rally. This sell off in precious metals (and oil) has primarily been caused by a strengthening US dollar.

Why has the greenback been making gains? Hot air. The USD has been moving up as the Fed has been talking about inflation and the possibility of raising interest rates. We must keep in mind that the Fed hasn't actually raised rates yet, and even if they do, how far will they go? We expect any rise in interest rates to be minimal. And even if they do embark on a rate raising policy, will this stop golds accent to $2000+? Absolutely not.

The most it will do is delay gold making an inflation adjusted all time high. Remember that in 1980 gold ran to $850 in the face of double digit interest rates. So even if the Fed takes rates up to over 10%, which represent a quintupling in interest rates, this will not be enough to stop gold and silver marching onwards and upwards. Our message for this week is simple: BUY gold and silver then hold on for the ride! Sam Kirtley-Read more here-http://www.kitco.com/ind/Kirtley_Sam/printerfriendly/aug112008.html

-Why Gold Got Crushed This Week and Why It Will Roar Back. Read more here-http://www.kitco.com/ind/Litle/aug142008.html

-Going forward, gold will likely resume its up-trend due to one of two reasons:

Another spell of problems in the financial system will cause gold (and the US treasuries) to once again take the place of safe haven investments, as was the case in the second half of 2007.
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Fear of deflation and a further slowdown in the US will spread around the world. As a result, a vicious wave of competitive devaluation will cause not only price shocks (oil, food, etc.) but also spiraling monetary inflation, eventually raising long-term bond yields. This will be the beginning of a real gold bull market when gold outperforms all other major classes of assets including most hard assets. Read more here-http://www.321gold.com/editorials/sobolev/sobolev081108.html

-The US$ and the Gold Sector. The Dollar Index will probably trend higher over the next few months. If so, will this prevent gold and gold stocks from rallying? We don't think so. Why should strength in the US dollar driven by the realization that other fiat currencies are just as bad as the dollar prevent gold and gold stocks from rallying?

It is also worth noting that the best part of the 1973 rally in gold stocks occurred while the US$ was strengthening relative to other fiat currencies. Steve Saville-Read more here-

http://www.321gold.com/editorials/saville/saville081208.html

-What Made the Gold Price Drop Through $900? Read more here-http://news.goldseek.com/GoldForecaster/1218216673.php

-Got Gold Report, Gold Near a Bottom? The report looks at the gold market and lists factors which suggest that a bottom might be near. Read more here-

http://www.resourceinvestor.com/pebble.asp?relid=45229

-Gold: surviving oil and the dollar? The Bank Credit Analyst sees gold bullion likely finding support around USD 850 an ounce, with fair value in the lower USD 900's. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59470&sn=Detail

-Record gold demand by value in 2Q World Gold Council. Gold demand in dollar terms at a new record, retail investment up 29% year-on-year. Jewellery takes in increasing amount of consumer discretionary spending. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59577&sn=Detail

-Gold's choke point? India's gold bullion imports fell 48% in July; since then dozens of listed gold stocks have plunged, currently to an average 46% lower than their record highs. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59376&sn=Detail update here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59705&sn=Detail

-India's rising gold demand stutters but probably temporarily. Wednesday's price recovery for gold from its near $800 low point caused a pause in the demand resurgence for gold in India, but there are plenty of orders for the yellow metal in the $805-810 range. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page34?oid=59542&sn=Detail

-Thai gold shops fear pretend gold will suppress real gold. Read more here-http://www.gata.org/node/6474

-Global gold de-hedging to slow dramatically in the second half. Analyses from two different banks, Société Générale and Fortis, put out within a few days of each other, both largely draw the same conclusion that the volume of gold dehedging will fall off substantially over the remainder of the current year.

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59379&sn=Detail

-Gold Agreement Central Banks show lack of desire to sell gold. The Fortis/VM Yellow Book says the apparent reluctance of European Central Banks to sell gold is bullish for the gold price. However, central banks remain committed sellers and the prospects of a third Central Bank Gold Agreement is high. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=59125&sn=Detail

-How to Calculate Your Own Gold Price Projection. Read more here-http://www.321gold.com/editorials/casey/casey080808.html

SILVER

-The next intermediate term target for the silver price is $24.50 to $26.50, again towards late 2008 or early 2009. Troy Schwensen-Read more here-

http://www.321gold.com/editorials/schwensen/schwensen080808.html update here-http://www.321gold.com/editorials/schwensen/schwensen081408.html

-The recent price smash in silver, as well as a whole host of commodities, has created questions in every investor's mind as to what happens next. This is particularly true for potential investors in silver, both those new to silver and those in the position to add to existing holdings. The sell-off has been so severe that it demands more than just simple answers. It requires that we go back to square one; back to the start.

Let me give you advance notice. I will try to convince you, through your own common sense and an objective reading of the facts around us, that silver is a better prospective investment today than ever. And that's considering that silver has already been among the very best of investments over the past 3 to 5 years. Obviously, since I can't turn back the clock and create $5, or $7, or $12 silver, I must present a case that convinces you that the value of silver today is priced at the equivalent of $5, as it was in 2003-04.

It's all about risk, value and reward. It has been my contention for the past year or so, that investment demand would be the driving force in the price of silver. I think silver investment demand is just starting to crank up. This will be what drives the price of silver sharply higher. Value and low risk and high reward is a potent brew for the intelligent investor. It isn't about the real facts in silver becoming bullish, as it is hard to imagine them becoming more bullish than they are now.

It's simply a matter of more people becoming aware of the facts. That's unavoidable and inevitable. Please take the time and closely examine all the real facts in silver. If you do, I'm sure you will come to appreciate the spectacular risk/reward that has just been created. We're back to the start of $5 silver. Don't let it get away from you. Ted Butler-Read more here-

http://www.investmentrarities.com/08-11-08.html

-The recent dip in silver prices is nothing to worry about, and is merely a normal fluctuation in the grand scheme of things, the grand return and re-emergence of silver as money, which is a process that may take many years to play out. For those who ask me what to do in terms of short term price movements, all I can say is that I bought more physical silver today. Jason Hommel-Read more here-http://news.silverseek.com/GoldIsMoney/1218400412.php

-Despite profitable 2Q08, Apex Silver warns of liquidity crisis. Apex Silver CEO Jeff Clevenger told analysts Tuesday that the major issue for his company is "getting through the rest of 2008 and 2009" to meet mounting cash obligations. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=59516&sn=Detail

PLATINUM-PALLADIUM

-Platinum metals report for July 2008. Read more here-http://www.platinum.matthey.com/uploaded_files/monthly%20reports/prices0708.pdf

-A platinum catalyst is being used in new technology that could reduce the risk of salmonella being carried on food. The infra red drying system combines air with a platinum catalyst to create an oxidation reaction. This means a controlled level of infra red energy and minimal carbon dioxide can be created to target the moisture and dry out food.

Researchers claim that using the infra red energy on the food can kill the bugs and their larvae and ensure that no disease is carried on the food. It can do this without heating or spoiling the produce because it operates at a higher-frequency wavelength than microwaves. Read more here-http://www.platinum.matthey.com/media_room/platinum_catalyst_used_in_new_drying_technology_18725391.html

DEFINITIONS-QUOTES-QUICK HITS

-Liquidity Squeeze. When concern about the short-term availability of money causes reluctance among financial institutions to lend out money from their reserves. This hold on reserves causes the interbank market rate to rise, making it more expensive for banks to borrow from each other. Ultimately, this causes credit standards to tighten, making it more difficult and expensive for consumers to receive loans.

In order to limit the impact of liquidity squeezes, central banks will often increase liquidity by injecting more money into the economy through lower interest rates. Doing so gives financial institutions a less expensive alternative to borrowing. This process also serves to alleviate the fear of insufficient liquidity in the short run and make bank loans more accessible to consumers and businesses. Investopedia.com

-"I don't set trends. I just find out what they are and exploit them." Dick Clark

-"It would be reasonable to expect that reckless behaviour begets negative consequences. But on Wall Street, the rules are different. Especially if you are CEO Richard Syron of Freddie Mac. Financial trouble turns to disaster under your irresponsible watch, and for your efforts, you get to keep your job and earn $38 million." Bill Fleckenstein Aug 11, 2008-Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CrybabyCapitalistsWhineForMore.aspx

-One thing you can take to the bank is that the dollar will trade at .72 , .62 and .52 USDX. Dollar fundamentals go from incredibly bad to incredibly worse, even just today. Although market quotes and value rarely meet, this dollar rally has a foundation in sand. Jim Sinclair

-The US dollar rallied fast and furious last week. The dollar rally was the biggest in 8 years vs. the Euro. This immediately brought out calls of Dollar Intervention. What the ESF did is simply sold about 10 billion Euros and bought dollars plain and simple massive intervention that virtually everyone has missed or ignored or pretended doesn't exist or whatever. Mike Shedlock-Read more and view chart here-http://globaleconomicanalysis.blogspot.com/2008/08/currency-intervention-and-other.html

-"Of course there will be corrections along the way. This is normal because no market goes straight up. That's what's happening now. But recognize that these down moves are corrections within the mega uptrends." Adens Sisters-Read more here-http://www.kitco.com/ind/nadler/aug142008a.html

-Gold will rise to $1,200 possibly 90 days later than anticipated. Gold will trade at $1,650 or more before the second week of January 2011. The US dollar will trade at .62 USDX and after great efforts to stop the decline trade at .52 USDX. Black Boxes are primarily momentum driven so keep an eye on that fact in terms of the US dollar versus the Euro. Jim Sinclair

-Jim Sinclair: European Central Bank intervention is out in the open. Read more here-http://www.gata.org/node/6487

-American Precious Metals Advisors Jeff Nichols said in an update to clients two weeks ago that gold should return to above $1000/oz later this year and could be trading in the range of $1500-$2000/oz in the next year or two. Although gold was volatile in the short term, in the long term he believed the deteriorating global economy and disruptions to supply from SA would support the price. Resource Investor

-In sum, I believe that in the next few years the returns from equities will be disappointing (short-term rallies aside), which could cause other asset classes (especially industrial commodities) also to come under pressure. When I look around, I find it hard to identify any asset that is particularly attractive at this point.

Therefore, in the absence of anything that promises far superior returns, I am still happy to accumulate physical gold. In democracies, where the leadership is afraid to ask for sacrifices from its citizens and with money printers at central banks, gold would seem to be the only sound currency. Marc Faber-Read more here-

http://www.dailyreckoning.com/Issues/2008/DR080608.html#esssay

-Nick Majendie, chief investment strategist and money manager at Canaccord Capital, noted in his report last week that the ratio between gold and oil has averaged 15 times over the past 38 years. "Any time the ratio has got down to 10 times or under, it has recovered to at least 15 times within a minimum of three years," with one exception, he said. The ratio at the time of the report was 7.4 times.

The ratio has been 7.5 times or less only three times since 1970. "What is so significant about the gold/oil ratio going below 7.5 times is the subsequent performance of gold and gold stocks over the ensuing 12 months," Mr. Majendie said. "If gold bullion rose by the same amount as in the previous two periods, the implied price per ounce would be $1,330." Globe and mail

-Oversold? Sure. Is the bottom in place? Not so sure. Will stormy sessions continue to unnerve? Absolutely sure. Liquidate core holdings out of fear? Not on your life. Holding on to 'life insurance' for your asset basket? Priceless. Jon Nadler Senior Analyst Kitco Bullion Dealers Montreal

-"Gold's fall is overdone," said Si Kannan, associate vice president at Kotak Commodity Services Ltd. "There is a good support for gold and crude around their current levels." "Global inflationary pressures are still pretty high, so one can't be bearish on gold," said an analyst at Motilal Oswal Commodities Broker Pvt Ltd. Reuters

-The percentage increases in gold from August to the end of each year for 2003 to 2007 are 17.72%, 12.78%, 18.31%, -1.02%, 25.48%. That makes an average gain from August to the end of the year, of 14.6%. Dominic Frisby

-There can be no disputing the fact that US financial assets have provided disappointing returns since the beginning of this decade. It is worth noting that even though the Dow Jones index is flat in nominal terms since 2000, it has lost more than half of its value against gold over the same period. At the turn of the millennium, the level of the Dow Jones could buy over 40 ounces of gold.

Eight years later, the level of the Dow Jones can only buy roughly 12 ounces of gold! Clearly, gold has been a much better investment than US stocks over the past 8 years. In the years ahead, I expect to see further underperformance of financial assets and maintain my position that hard, tangible assets will continue to provide superior returns. Puru Saxena-Read more here-http://www.321gold.com/editorials/saxena/saxena080808.html

-The opportunity to buy physical gold in the low $800s could very well end up being the bargain of the year. Physical interest continues to be very strong from both India and the Middle East. With no central bank sales in the offing that we are aware of, and both mine production and forward sales falling, there could be a delivery squeeze in the making. Peter A. Grant

-Kevin Kerr, editor of Global Resources Trader, thinks we may have reached bottom in gold. "The fact is that now we are getting way overdone on the downside and we could easily see this market snap back suddenly as more bad news filters in and if anymore geopolitical and currency uncertainty grows," Kerr said. Casey's Daily Resource Plus

-Gold has fallen from a high of $988 to below $810 in less than a month. The 20% sell off in less than 30 days has led to significant technical damage to gold. However, gold's fundamentals remain as sound as ever as investment demand will remain more than resilient on geopolitical risk, creeping stagflation and macroeconomic risk.

The vicious sell off has resulted in gold now being massively oversold. While bottom calling is a dangerous pursuit and the old market adage to never catch a falling knife remains appropriate, value investors and bargain hunters with longer term horizons are likely to be strong buyers at these very depressed levels. Gold.ie

-Since the start of the credit crisis, one year ago, gold remains up 27% (from $650 to $830). It has thus outperformed all major equity indices all of which are down some significantly since the start of the credit crisis. With no end in sight to the credit crisis indeed there are many indications that conditions could deteriorate even more in the coming months, investors should be mindful of gold's outperformance and continue to focus on the long term. Risk aversion and wealth preservation should continue to be pursued. Gold.ie

-Banks' Subprime Losses Top $500 Billion on Writedowns. Banks' losses from the U.S. subprime crisis and the ensuing credit crunch crossed the $500 billion mark as writedowns spread to more asset types.

The writedowns and credit losses at more than 100 of the world's biggest banks and securities firms rose after UBS AG reported second-quarter earnings today, which included $6 billion of charges on subprime-related assets.

The International Monetary Fund in an April report estimated banks' losses at $510 billion, about half its forecast of $1 trillion for all companies. Predictions have crept up since then, with New York University economist Nouriel Roubini predicting losses to reach $2 trillion. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a8sW0n1Cs1tY&refer=home

-Merrill Chief Investment Strategist Richard Bernstein said investors are ``significantly underestimating'' the extent of the credit crisis. Guy Moszkowski, Merrill's top-rated analyst for securities firms, downgraded Morgan Stanley, Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc., his firm's three biggest U.S. rivals.

"Conditions have deteriorated significantly from July,'' Moszkowski wrote in a note today. "The typical summer slowdown has been exacerbated by renewed fear over credit, the direction of the economy, and home-price depreciation, along with the sudden about-face in the oil price and hedge-fund losses.'' Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=adEH.n0OdYAU

-Indebted Ever After-Scared by National Deficit? You Should Be, Filmmakers Say. A private-equity billionaire, a former federal government official and a Baltimore newsletter editor have made a documentary film that they hope can do what an endless parade of policy papers has not: Persuade Americans that debt has created a looming economic crisis that would make the Great Depression look like a market correction.

The movie, "I.O.U.S.A.," debuting Aug. 21, is an 87-minute alarum on what it calls the tsunami of debt bearing down on the United States' future, caused by the rising national deficit, the trade imbalance and the pending costs of baby boomers cashing in on entitlements. Early reviewers have dubbed the film "An Inconvenient Truth" for the economy, meaning it's not exactly the feel-good movie of late summer 2008.

Except for budget wonks in love, it hardly counts as a date movie. The film's thrilling action sequence has a guy going to a refrigerator for a Tab. There are no car chases and nothing blows up. Except, possibly, for the entire economic future of the United States. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/08/06/AR2008080603569.html

WWW.RARECOLOREDDIAMONDS.COM

-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

-Why the commodities boom is not yet over. Continued population growth and rising incomes will continue to drive commodity demand and most of this economic growth will be driven by the rapidly expanding economies such as China. The mainland's demand for iron ore alone is expected to jump 380 percent from now until 2020.

The International Energy Agency predicts the global demand for oil products will grow by an average of 1.6 percent per annum to 2013, with China accounting for a third of the increase.

On the agricultural side, World Bank predictions are that grain production will have to rise by 50 percent to meet demand by 2030.

On oil, the IEA predicts that the world could be demanding an extra 30.5 million barrels of oil per day by 2030 over a third more than current levels. In conclusion: the commodities boom is not slowing down. It is actually gathering pace. Julian Galvin is an associate director at Tyche Group-Read more here-

http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art_id=69908&sid=20129989&con_type=1&d_str=&fc=1

-Commodities Still Well Shy of 2006 Correction. Read more here-http://seekingalpha.com/article/90181-commodities-still-well-shy-of-2006-correction

-Consumer Driven Commodity Bull Market. Read more here-http://hk.ibtimes.com/articles/20080811/bull-market.htm

-Is the Commodities Bull Market Over? In view of the basic fundamentals of supply and demand, the market is still very tight, inventories of agriculture products are historically low, the oil supply has stayed almost the same, and the mine supply of precious metals from South Africa is dropping because of a shortage in the electricity supply.

All this brings us to the conclusion that the recent decline in commodity prices is a healthy correction to the commodity bull market that is still going on. Read more here-http://seekingalpha.com/article/90333-is-the-commodities-bull-market-over

OIL

-Oil 'could hit $200 within years'. A serious oil supply crisis is looming, which could push prices above $200 a barrel, a think tank has warned. A "supply crunch" will affect the world market within the next five to 10 years, the Chatham House report said.

While there is plenty of oil in the ground, companies and governments were failing to invest enough to ensure production, it added. Only a collapse in demand can stave off the looming crisis, report author Professor Paul Stevens said.

"In reality, the only possibility of avoiding such a crunch appears to be if a major recession reduces demand - and even then such an outcome may only postpone the problem," he said in The Coming Oil Supply Crunch. Read more here-http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/business/7549044.stm

-Oil price forecast for '09 gets a trim. Government says it now expects crude to average $124 a barrel next year, down $9 from previous forecast. Home heating bills expected to weigh on consumers. Read more here-http://money.cnn.com/2008/08/12/news/economy/EIA_energy_outlook/index.htm

-Biggest drop in U.S. oil demand in 26 years. Read more here-http://news.yahoo.com/s/nm/20080812/us_nm/usa_oil_demand_dc_2&printer=1;_ylt=Ag3LxaLvoxNjd.rAPZTpgCIXIr0F

-Oil: What the drilling advocates say. Supporters saying there could be much more oil offshore than the government predicts as they fight for access to new supplies in order to lower the price of oil. Read more here-http://money.cnn.com/2008/08/13/news/economy/offshore_drilling/index.htm?postversion=2008081312

GASOLINE

-A big surprise on gas-You may not believe it, but fuel is more affordable than it was during the early '60s. Read more here-http://www.latimes.com/news/opinion/la-oe-goklany11-2008aug11,0,1107249.story

-Petro-Canada says some of its stations in Alberta and the B.C. Interior are running out of gasoline. The shortages are the result of unexpected problems at the company's refinery in Edmonton, which had to be shut down last week. Petro-Canada vice-president Dan Sorochan says the company regerets any inconvenience and that it is working hard to minimize the impact.

The company is repairing the gasoline processing unit as safely and quickly as possible and is adjusting its distribution channels so that as much gas is available in Western Canda as possible. Petro-Canada is also using trucks to move gasoline into the area and is trying to find additional gas supply from elsewhere. Making sure essential services get their fuel has also been made a priority. Drivers will know a gas station is short on gasoline if its price signs are zeroed out. CBC

INFLATION

-U.S. Consumer Prices Rise More Than Forecast. U.S. consumer prices jumped to a 17 year high in July, reducing the scope of the Federal Reserve to lower interest rates as economic growth slows.

The consumer price index climbed 0.8 percent, twice as much as anticipated, the Labor Department said today in Washington. The cost of living was up 5.6 percent in the year ended in July, the biggest rise since January 1991. So-called core prices, which exclude food and energy, also advanced more than projected.

The surge last month reflected energy prices that have since declined, signaling July may represent the peak in inflation. Still, increases went beyond food and fuel, including gains in clothing, airline fares and education, likely intensifying discussions among Fed policy makers about how quickly to shift toward raising rates. Read more here- http://www.bloomberg.com/apps/news?pid=20601087&sid=aoOKMz5QYK9w&refer=home

-U.K. Inflation Reaches 4.4%, More Than Double Target. U.K. inflation accelerated to more than double the central bank's 2 percent target in July, making it harder for policy makers to cut interest rates as the threat of a recession looms.

Consumer prices rose 4.4 percent from a year earlier, breaching the government's 3 percent upper limit for a third month and the most since comparable records began in 1997, the Office for National Statistics said today.

-UK inflation exceeds Bank interest rate for first time since 1981. Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/13/cncpi113.xml&CMP=ILC-mostviewedbox

-U.K. Producer Prices Rise by Most Since at Least 1986. U.K. producer prices increased in July at the fastest pace since records began in 1986, adding to pressure on the Bank of England to wait before cutting interest rates as the economy edges toward a recession.

Prices charged by factories rose 10.2 percent from a year earlier, compared with a 10 percent increase in June, the Office for National Statistics said in London this week. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=a3dCUQVglsew&refer=home

-India Inflation Accelerates to 16-Year High of 12.44%. India's inflation soared to a 16- year high and may accelerate further after the government approved wage increases for civil servants. Wholesale prices rose 12.44 percent in the week to Aug. 2, after increasing 12.01 percent in the previous week, the commerce ministry said in New Delhi today. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=afddBxL8e6gk

-China wholesale prices surge. July producer price index jumps 10% the highest rate since 1996. Read more here-http://money.cnn.com/2008/08/11/news/international/china_inflation.ap/index.htm

-Nestle, Kellogg Struggle to Pass on Rising Food Costs. Nestle SA, the world's largest food company, and Kellogg Co., the biggest U.S. cereal maker, can't raise prices fast enough to sustain earnings growth after the cost of grains, dairy products and meat surged to records. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aD7YNdPKw1g4

-Drug prices up 100% or higher Spikes bring legal, political scrutiny. Drug companies are quietly pushing through price hikes of 100% or even more than 1,000% for a very small but growing number of prescription drugs, helping to drive up costs for insurers, patients and government programs. Read more here-

http://www.usatoday.com/printedition/news/20080808/1a_bottomstrip08_dom.art.htm

-The world's worst inflation. How Zimbabwe's ruler ruined an entire economy and why it will finally bring him down. Read more here-

http://money.cnn.com/2008/08/13/news/international/worlds_worst_inflation_spiers.fortune/index.htm

INTEREST RATES

-Australia Central Bank Says Room to Cut Interest Rate. Australia's central bank says it will have more room to cut interest rates because a ``significant moderation'' in domestic demand will slow inflation, cut economic growth by half and drive up unemployment.

"Economic growth will be fairly slow in the period ahead,'' the Reserve Bank of Australia said in its quarterly policy statement released in Sydney today. Gross domestic product will probably expand 2 percent this year compared with 4.3 percent in 2007 and less than the 2.25 percent forecast in May. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=aOIPR8319JOI

U.S. DOLLAR

-Why the buck stops here. The dollar has had a nice run, but a soft economy is likely to cut the rally short. The dollar has sprung off its deathbed, but a swift return to ruddy good health looks like a long shot. Unfortunately, the dollar may not be much help there in coming months, because its run may be coming to an end.

Yes, it's true that European economies are struggling against a looming recession, which is bad for the euro. But the fact is that weak U.S. fundamentals particularly in the housing and finance sectors, as well as the nation's need to borrow overseas to finance current spending are likely to cap the dollar's gains.

"Nothing here is sunny," said CMC Markets currency strategist Ashraf Laidi. He likens the dollar's recent gains against the euro to a campaign between two unpopular politicians, one of whom "wins by default." Read more here-http://money.cnn.com/2008/08/13/news/buck_stops.fortune/index.htm?postversion=2008081310

-Mystery Solved. On July 15th the US Dollar Index closed at 71.87, the lowest close since reaching its record low in April. This index was in the process of breaking down, and in fact it had actually fallen out of its uptrend channel on the following chart. So what happened to cause the dollar to rally over the past three weeks? In a word, intervention. Central banks have propped up the dollar, and here's the proof.

In the final analysis, it is fundamental factors that determine the course of markets and the process of price discovery that results from them. Central bank intervention like fiat currency itself is ephemeral. In contrast, gold lasts throughout the ages. So what would you rather own? A sick dollar that it requires central bank intervention to prop it up? Or gold? James Turk-Read more here-http://goldmoney.com/en/commentary.php

-Guess who's buying the U.S. dollar. Read more here-http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=B42DCD7F-1871-E587-E18BDF002B0698FD

-Dollar Gain Signals Pain as Rally Prompts Exit From Bull Trade. Just because the dollar posted its biggest gain against the Euro in almost eight years doesn't mean the U.S. currency won't continue to be plagued by the nation's slowing economy, widening budget and trade deficits and negative inflation-adjusted interest rates. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=a9FT.fPxbjF0&refer=home

-The Case For and Against the Dollar. Read more here-http://www.merkfund.com/merk-perspective/insights/2008-08-13.html

U.S. DEBT

-Budget deficit soars to $102.8 billion in July. Deficit is nearly triple that of July 2007. Read more here-http://money.cnn.com/2008/08/12/news/economy/federal_budget.ap/index.htm

-29 states faced total budget shortfall of at least $48 billion in 2009. Read more here-http://www.cbpp.org/1-15-08sfp.htm

-The rich are not so different after all: Hamptons town struggles with $12M deficit. Read more here-http://www.newsday.com/news/nationworld/nation/wire/sns-ap-hamptons-deficit,0,4888135,print.story

-U.S. Economy: Trade Gap Narrows on Surge in Exports. The U.S. trade deficit unexpectedly narrowed in June as the biggest jump in exports in more than four years overwhelmed record imports of petroleum.

The gap shrank 4.1 percent to $56.8 billion from $59.2 billion in May, the Commerce Department said today in Washington. Shipments to Germany and the U.K. rose more than 4 percent, exports to Italy jumped 9.7 percent, and sales to Argentina and Brazil also climbed. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a0rWVG6wnNWY&refer=home

FINANCIAL-CREDIT CRISIS

-FDIC Fund Strained by Bank Failures May Have to Raise Premiums. The failure of IndyMac Bancorp Inc. and seven other banks this year may erase as much as 17 percent of a government insurance fund and raise premiums for all banks, from Franklin National of Minneapolis to Bank of America Corp.

The closing of IndyMac in July, the third-biggest U.S. bank failure, may cost the fund $4 billion to $8 billion, in addition to an estimated $1.16 billion for seven closures through Aug. 1. Premiums for deposit insurance will likely rise, FDIC Chairman Sheila Bair said in a July 30 interview. A decision on the increase is due by the fourth quarter.

"It's going to be a bloody, expensive mess for the banking industry,'' said Bert Ely, president of Ely & Co. Inc., a bank consulting firm based in Alexandria, Virginia. ``Healthy banks are paying for the mistakes made by failed banks.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=abahg9z7p4wU

-This credit crisis is like the plague and nobody is safe yet. Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/11/ccom111.xml

-Fed auctions another $25B to banks. The U.S. central bank, to provide liquidity to banks, held another auction and extended loan period to 84 days. Read more here-

http://money.cnn.com/2008/08/12/news/economy/bc.apfn.fed.creditcrisis.ap/index.htm

-ECB Lending to Spain Rises to Record 49 Billion Euros. The European Central Bank lent a record 49.4 billion euros ($73.6 billion) to Spain's banks as a worsening housing slump spurs the fastest pace of borrowing among the 15 nations sharing the euro.

ECB lending to Spain rose from 47.1 billion euros in June and 18 billion euros a year ago, according to data compiled by the Bank of Spain. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aua6yB8vGd_g

-Fed Says Banks Toughen Standards for All Loan Types. The Federal Reserve said more banks made it harder to borrow money as defaults and delinquencies on home loans soared and the economy faltered.

Most "domestic institutions reported having tightened their lending standards and terms on all major loan categories over the previous three months,'' the Fed said today in its quarterly Senior Loan Officer Survey.

Funds became scarcer for home purchases, credit card loans became tougher to get and even banks' best customers were subject to stricter scrutiny. Tighter credit may delay any recovery in economic growth, which economists forecast will slow well into next year. Read more here-

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

-Outside U.S., Credit Cards Tighten Grip. Read more here-http://www.nytimes.com/2008/08/10/business/worldbusiness/10card.html?_r=2&adxnnl=1&oref=slogin&partner=rssyahoo&emc=rss&adxnnlx=1218503024-WXVDny1glptZZOl4anXDDQ&oref=slogin

-Michael Price Shorts Citigroup, Sees Few Banks to Buy. Billionaire investor Michael Price is betting that Citigroup Inc. and Wachovia Corp. will keep tumbling and says he found few banks to invest in after total losses from subprime mortgages increased to almost half a trillion dollars.

"Citigroup's got more pain coming,'' said Price, who runs New York-based MFP Investors LLC and was chairman and chief executive officer of Franklin Mutual Advisers LLC in Short Hills, New Jersey.

Price, 57, is selling short both stocks even after Citigroup, the biggest U.S. bank by assets, tumbled 33 percent this year and Wachovia, the fourth-largest, lost 52 percent. In a short sale, investors borrow shares and sell them on the expectation they can be purchased at a lower price before paying back the loan. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=a57Gqx3lxcc4&refer=home

-Auction-Rate Costs May Rival Spitzer, Mutual Fund Settlements. Wall Street's costs to end federal and state investigations of the auction-rate bond market's collapse may wind up exceeding the sanctions from abuses of mutual funds and analyst research in the past decade.

UBS AG and Citigroup Inc. agreed last week to buy about $26 billion of auction-rate bonds from clients and pay $250 million in fines after regulators said the firms marketed the securities as safe alternatives to money-market investments. Merrill Lynch & Co. announced a plan to purchase $10 billion. Investigations of other firms that sold the debt continue, New York Attorney General Andrew Cuomo said Aug. 8.

Banks may have to write down the debt they buy from customers by $4 billion, Bank of America Corp. analyst Jeffrey Rosenberg said in a report last week. The probe of mutual-fund abuses from 2003 yielded more than $5 billion in penalties and agreements to reduce fees, while Cuomo's predecessor, Eliot Spitzer, and regulators including the U.S. Securities and Exchange Commission won $1.4 billion from 10 firms accused of using tainted research to win investment-banking deals.

"These are developments of gigantic, historic proportions,'' James Cox, a securities law professor at Duke University in Durham, North Carolina, said of the auction-rate agreements. "Never have we witnessed defendants, who created a product that isn't inherently illegal, being required to buy back such a large market.'' Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=ap0gMzoTuptc

-Wachovia boosts loss to $9.11 bln, cuts more jobs. Read more here-http://www.reuters.com/article/ousiv/idUSN1139894220080811

-UBS AG, one of the hardest hit banks in the subprime mortgage crisis, said Tuesday that it had further losses and writedowns of $5.1 billion during the second quarter of 2008. Read more here-http://money.cnn.com/2008/08/12/news/international/ubs.ap/index.htm?postversion=2008081206

-RBS Posts First Loss in 40 Years on Credit Writedowns. Royal Bank of Scotland Group Plc, the U.K.'s second-biggest bank, posted a smaller loss than analysts estimated and said the 5.9 billion pounds ($11.4 billion) of writedowns it announced in April may be sufficient for the year. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aRGu6AENJFoc

-JPMorgan Loses $1.5 Billion Since July on Debt Prices. JPMorgan Chase & Co. has had losses of $1.5 billion on mortgage-backed assets so far this quarter as the U.S. housing slump deepened amid turmoil in credit markets. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a9Mby5jLaO8s&refer=home

-Radian Loses $393 Million, Will Tap Bond Guarantor. Radian Group Inc., the third-largest U.S. mortgage insurer, lost $392.5 million as the company increased expectations for future claims. Radian will fold its bond insurance unit into the mortgage guarantor to increase capital in the primary business. Read more here-

http://www.bloomberg.com/apps/news?pid=20601208&sid=aSx4YcAx1bjg&refer=finance

BRINGING DOWN BEAR

-Bringing Down Bear Began as $1.7 Million of Options. On March 11, the day the Federal Reserve attempted to shore up confidence in the credit markets with a $200 billion lending program that for the first time monetized Wall Street's devalued collateral, somebody else decided Bear Stearns Cos. was going to collapse.

In a gambit with such low odds of success that traders question its legitimacy, someone wagered $1.7 million that Bear Stearns shares would suffer an unprecedented decline within days. Options specialists are convinced that the buyer, or buyers, made a concerted effort to drive the fifth-biggest U.S. securities firm out of business and, in the process, reap a profit of more than $270 million.

Whoever placed the bet used so-called put options that gave purchasers the right to sell 5.7 million Bear Stearns shares for $30 each and 165,000 shares for $25 apiece just nine days later, data compiled by Bloomberg show. That was less than half the $62.97 closing price in New York Stock Exchange composite trading on March 11. The buyers were confident the stock would crash.

"Even if I were the most bearish man on Earth, I can't imagine buying puts 50 percent below the price with just over a week to expiration,'' said Thomas Haugh, general partner of Chicago-based options trading firm PTI Securities & Futures LP. ``It's not even on the page of rational behavior, unless you know something.'' Read more here-

http://www.bloomberg.com/apps/news?pid=20601109&sid=aGmG_eOp5TjE&refer=home

FREDDIE-FANNIE

-Fannie Mae fears for future after posting $2.3bn loss. Read more here-http://www.guardian.co.uk/business/2008/aug/08/subprimecrisis.useconomy1

-Fannie Mae Posts Fourth Straight Loss, Cuts Dividend. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aYPqJhQUd2Wg&refer=home

-Freddie Mac's negative net worth raises questions. By Freddie Mac's own admission, it has a negative net worth the latest reported net market value of the mortgage giant's assets is negative $5.6 billion.

To some investors, that means its shares should be trading closer to zero. Bears argue that the company's bonds are a reasonable investment given the U.S. government's increasingly explicit support, but its shares are a more questionable investment. Read more here-http://www.reuters.com/article/newsOne/idUSN0625680320080807

-Paulson Says He Doesn't Plan to Add Cash to Fannie, Freddie. U.S. Treasury Secretary Henry Paulson said there are no plans to inject capital into Fannie Mae and Freddie Mac after the two mortgage companies posted combined losses of $3.12 billion last week.

"We have no plans to insert money into either of those two institutions,'' Paulson said in an interview with NBC's "Meet the Press'' broadcast yesterday from Beijing. He added that their results were "not a surprise'' and that the housing slump will last beyond this year. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aS_vDAAKi6uY

-Odds of Fannie and Freddie Bailout Better-Than-Even, Economists Say. Read more here-http://online.wsj.com/article/SB121864245359137157.html?mod=hpp_europe_whats_news

-Fannie Mae and Freddie Mac have helped defang laws that might have prevented the subprime mess. Read more here-http://www.newsweek.com/id/151722

-Freddie to Stop Buying Subprime Loans in N.Y. State. Freddie Mac, the second-largest U.S. mortgage finance company, will stop buying subprime loans issued in New York state as a new law takes effect that holds investors accountable for mortgage fraud. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a2BlE0hgjpIw

GLOBAL SLOWDOWN

-Europe Economy Shrinks as Spending, Investment Falter. Europe's economy contracted for the first time since the introduction of the euro almost a decade ago as faltering sales undermined investment by companies and soaring costs eroded consumer spending power.

Gross domestic product fell 0.2 percent in the second quarter from the first, when it increased 0.7 percent, the European Union statistics office in Luxembourg said today. The year-on-year growth rate slowed for a third straight quarter, to 1.5 percent. Separate figures showed inflation held at 4 percent in July, less than initially estimated. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=aLSjrZ4BIkTU

-UK economy 'worse than thought'. The CBI, the UK's largest employers' organization, has warned that the UK economy is deteriorating faster than it previously thought. There was "no doubt that the mood has darkened in the last two or three months," its director general Richard Lambert warned members in a letter.

Forecasters, including the CBI, had been "over-optimistic" about the economic outlook, he added. High inflation and slowing growth have prompted fears of a possible recession. Read more here-http://news.bbc.co.uk/2/hi/business/7552336.stm

-Bank of England Cuts Growth Forecasts, Jobless Climbs. The Bank of England cut its forecast for U.K. economic growth and held out the prospect of lower interest rates as unemployment rose the most in almost 16 years.

Governor Mervyn King said the inflation rate will fall below the 2 percent target in two years if policy makers keep the benchmark interest rate at 5 percent. Claims for jobless benefits climbed 20,100 in July to 864,700, the biggest increase since December 1992, a government report showed.

"It may still be summer but there is a feeling of chill in the economic air,'' King said at a press conference in London today. ``The British economy is going through a difficult and painful adjustment'' that "cannot be avoided,'' he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=arJeov9NjtzY

-Japan Economy Shrinks 2.4%, Signaling Recession Looms. Japan's economy contracted last quarter, bringing the country to the brink of its first recession in six years, as exports fell and consumers spent less.

Gross domestic product shrank an annualized 2.4 percent in the three months ended June 30 after expanding 3.2 percent in the first quarter, the Cabinet Office said today in Tokyo. The Nikkei 225 Stock Average fell the most in a month. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aKMCAnzivUD8&refer=home

-Slump in U.S. to Worsen as Consumers Get `Squeezed'. The U.S. economic slump will extend into 2009 as the longest expansion in consumer spending on record comes to an end, according to a Bloomberg News survey.

The world's largest economy will grow at an average 0.7 percent annual pace from July through December, half the gain in the first six months of the year, according to the median forecast of 50 economists surveyed from Aug. 1 to Aug. 8. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aJCMITFqrGJA

S.U.V. TRAFFIC JAM

-The market for sport utility vehicles is starting to look a lot like the housing market, spreading pain to consumers, automakers and dealers. Even the vocabulary is sadly familiar. Bloated inventories? Days spent on the market?

Well, in July, General Motors dealers had a 174-day supply of the Yukon XL/Suburban on hand, on average, up from a 92-day supply a year earlier. Inventory of the Chevrolet C/K Suburban nearly doubled over the same period, to 116 days from 63 days.

Just like hapless homeowners, countless car owners are now "underwater," driving vehicles that are worth less than the balance on their car loans. And just like desperate homeowners, the sellers of S.U.V.'s are having to painfully cut asking prices. Read more here-http://www.nytimes.com/2008/08/13/business/13auto.html?_r=1&oref=slogin&partner=rssyahoo&emc=rss&adxnnlx=1218647066-QVI9jhuyAzcu6%2029oYHOaA&pagewanted=print

REAL ESTATE

-One Third of New Owners Owe More Than House Is Worth. Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.

Second-quarter home prices fell 9.9 percent from a year earlier, giving 29 percent of owners negative equity, said Zillow, the Seattle-based service that offers values for more than 80 million homes. For those who bought at the 2006 peak of the housing market, 45 percent are now underwater, Zillow said. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=a3rsglZgqmTs&refer=home

-U.S. Home Sales Fall to 10-Year Low as Prices Tumble. Existing U.S. home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent as the real estate recession deepened.

The median tumbled to $206,500 from $223,500 a year earlier, the Chicago-based National Association of Realtors said today. Sales of single-family houses and condominiums fell 16 percent to 4.913 million at an annualized pace.

Prices declined in 115 of the 150 metropolitan areas surveyed as foreclosures and ``short sales,'' in which lenders agree to take a loss on a property, accounted for a third of all sales in the quarter. Bank repossessions of property almost tripled in July from a year earlier, RealtyTrac Inc., a seller of foreclosure data, said today in a separate report. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aouNA67vnvBE&refer=home

-US housing slump 'worst since 1930s'. Prices to fall 20%, says Freddie Mac chief. Mortgage group expects $2.5bn bad loan costs. Read more here-

http://www.guardian.co.uk/business/2008/aug/07/subprimecrisis.useconomy

-Housing Rebound in Cleveland Signals Bad News for U.S. Market. The good news in the worst housing slump since the Great Depression is that the market in Cleveland is recovering. That's also the bad news. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=axAqNUHb9pLI&refer=home

-25% of U.S. home sales result in loss. Values have fallen so far in many cities that sale prices don't cover what sellers originally paid. That means more hard times before markets recover. Read more here-http://money.cnn.com/2008/08/13/real_estate/sellers_suffering_huge_losses/index.htm?postversion=2008081313

-House Prices Have Crashed By 35% in Spain. Read more here-http://www.fool.co.uk/news/property-home/2008/08/11/house-prices-have-crashed-by-35-here.aspx

-U.K. Property market grinds to a halt amid mortgage drought. Read more here-http://www.timesonline.co.uk/tol/money/property_and_mortgages/article4509303.ece

-Canadian Home Resale Prices Declined for Second Month. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aZP8P4T6ffjo

-Lost sovereignty, oil rich fund eyeing foreclosed U.S. homes. Read more here-http://www.nypost.com/seven/08102008/business/lost_sovereignity_123879.htm

-Russian oligarch 'invader' pays record £392m for Riviera villa. A mysterious Russian billionaire has trumped his big-spending rivals and broken a world record by splashing out €500 million (£392 million) on one of the most sumptuous villas on the French Riviera. Read more here-http://property.timesonline.co.uk/tol/life_and_style/property/overseas/article4499716.ece

FORECLOSURES-MORTGAGES

-U.S. Foreclosures Rise 55%, Bank Seizures Reach High. Banks repossessed almost three times as many U.S. homes in July as a year earlier and the number of properties at risk of foreclosure jumped 55 percent as falling prices made it harder to sell or refinance. Bank seizures rose 184 percent to 77,295, the steepest increase since reporting began in January 2005, RealtyTrac Inc., an Irvine, California-based seller of foreclosure data, said today in a statement.

More than 272,000 properties, or one in 464 U.S. households, got a default notice, were warned of a pending auction or foreclosed on. "It's getting worse,'' Rick Sharga, RealtyTrac's executive vice president for marketing, said in an interview. "The number of properties that have been foreclosed on by the banks and still haven't sold is the highest we've ever seen.'' Nevada, California and Florida had the highest rates.

Total foreclosure filings rose 8 percent from the previous month to 272,171, just shy of the record 273,001 set in May, said RealtyTrac, which has a database of more than 1.5 million properties. Through July, 775,244 properties were owned by banks, compared with about 445,000 for all of 2007 and about 224,000 in 2006, Sharga said. Read more here

http://www.bloomberg.com/apps/news?pid=20601110&sid=afkIubh8tT8k

-Estimate: 1,300 foreclosures every business day in California. Read more here-http://latimesblogs.latimes.com/laland/2008/08/estimate-1300-f.html

-Foreclosure fallout: Houses go for a $1 in Detroit. Read more here-http://www.detnews.com/apps/pbcs.dll/article?AID=/20080813/METRO/808130360/&imw=Y

-Foreclosures leave California's Lathrop west side deserted. Read more here-http://sunpost.net/content/view/2089/190/

-U.K. House repossessions soar to 12-year-high. Read more here-http://www.independent.co.uk/money/mortgages/house-repossessions-soar-to-12yearhigh-888726.html

GEOPOLITICAL

-Ahmadinejad in new Israel tirade before Turkey trip. Read more here-http://www.reuters.com/article/topNews/idUSLD51432420080813?feedType=RSS&feedName=topNews&rpc=22&sp=true

-Israel ready to attack Iran without USA's permission. Read more here-http://english.pravda.ru/world/asia/01-08-2008/105968-israel-0

-US against any Israeli strike on Iran: defence minister. Read more here-http://www.breitbart.com/article.php?id=080813131833.y0fgoes4&show_article=1

-Kuwait Readying for War in Gulf? Read more here-http://www.metimes.com/International/2008/08/11/special_report_kuwait_readying_for_war_in_gulf/7724/1352~1218474001~1/

-U.S. spending on contractors in Iraq reported to reach $85 billion. The United States has reached the $85 billion mark in spending on contractors in Iraq since the invasion in 2003, according to a new government report released Tuesday, a milestone that reflects the Bush administration's unprecedented level of dependence on private companies for help in the war. Read more here-http://www.iht.com/articles/2008/08/12/america/contractor.php?WT.mc_id=newsalert

-U.S., Poland Reach Agreement on Missile Defense. The U.S. and Poland signed a preliminary accord today that will allow for 10 U.S. interceptor missiles to be based in the eastern European country, completing a defense system that Russia opposes. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aakWCWAS_u34&refer=worldwide

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The GoldBugg Report - August 20, 2008
Posted by Worldwide Precious Metals on Wednesday, August 20, 2008