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The GoldBugg Report - September 10, 2008

September 10, 2008

-Gold demand soars. Price falls. What's going wrong? Physical demand for gold is surging but the price keeps taking serious knocks. What's happening. Sooner or later gold will react positively. The dollar will stabilize or fall back again as perception of the true state of the U.S. economy returns.

-4 reasons why this may be the worst crisis since the 1930s and 4 projections for what's going to happen.

-GLOBAL SLUMP JUST STARTING

-SUPER RICH MOVING INTO CASH-BANKS MOVE FUNDS FROM U.S. TO EUROPE

GOLD

-Gold demand soars. Price falls. What's going wrong? Physical demand for gold is surging but the price keeps taking serious knocks. What's happening. Sooner or later gold will react positively. The dollar will stabilize or fall back again as perception of the true state of the U.S. economy returns.

There will be more serious fallouts from the ongoing credit crisis with more bank failures on the horizon, while growing global sabre rattling suggests some uncomfortable political times ahead. All positive for gold. At some stage the big money which drives all investment will recognise this and precious metals will benefit. It is only the timeframe which seems to be in doubt. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=61431&sn=Detail

-Eric Hommelberg-Gold fundamentals still Pointing Towards $2000+. Read more here-http://news.goldseek.com/EricHommelberg/1220359803.php

-Jeff Clark-What I Tell Myself When Gold Sells Off. What do I tell myself? "The dollar's ills haven't been cured. In fact, we haven't seen the worst of the currency's decline." I interviewed Doug Casey earlier this month and heard the textbook description of a contrarian investor. Doug was reminiscing about how hard it was to get clients to buy gold and gold stocks in the mid-'70s, how a client even refused to pay for gold stocks he'd just bought, and how the prospects for gold looked bleak to nearly everyone.

What did one of the greatest speculators of all time advise? "You don't make money buying when you're optimistic. You have to actually run completely counter to your own emotional psychology. It's easy to talk about being smart in theory, but extremely tough to apply in practice when it's real money and you're scared. But what am I doing now? I'm buying." What do I tell myself? "$800 gold is nothing but a buying opportunity. Read more here-http://www.321gold.com/editorials/casey/casey090108.html

-Gold Production and Reserves. After weathering the PM summer doldrums, the smart investors aware of gold's fundamentals know to look past the hype and avoid the capitulation that is inflicting their comrades. Though the word bubble has been loosely tossed around in the same sentence as gold, this commodity is nowhere near bubble status.

And when gold does eventually inflate into a bubble, it will be accompanied by uncontrollable greed and a popular mania. Gold has not been popular yet. It is still a contrarian play and should greatly reward those faithful that stick with it. Read more here-http://www.321gold.com/editorials/wright/wright082908.html

-Gold at $1,000/ounce soon, but downside risk in 2 year timeframe Walker. GFMS CEO Paul Walker says there are different signs that the broader economic backdrop is starting to turn away from gold. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=61219&sn=Detail

-Will gold now move separately from the US dollar and euro? For the past six months gold has risen in value when the dollar has weakened and vice-versa, while the relationship with the euro has been the reverse.

But increasingly precious metals are being regarded as a currency in their own right, and that should mean a decoupling from the dollar and euro as gold is not governed by inflationary central banks. Read more here-http://news.goldseek.com/GoldSeek/1220021744.php

-Demand for bullion in Dubai is soaring, with imports showing signs of revival on the back of falling gold prices, rising inflation and the start of the wedding season, traders and industry experts said on Tuesday.

A surge in gold prices to multi-year highs earlier this year put off buyers in many parts of the world and pulled down the Gulf Arab emirate's first-half imports by 4.7 per cent to 265 tonnes. The precious metal dropped to a nine-month low of about $773 an ounce in mid-August before bouncing back, but it is still trading far below its all-time high of $1,030.80 an ounce, hit in March.

"Many here jumped into the market because either they believe gold will rise further later and want to make profit or they are concerned about inflation and they want to hedge their risk," said Pradeep Unni, a senior analyst at Richcomm Global Services. Read more here-

http://www.gulfinthemedia.com/index.php?m=economics&id=426849&lang=en&PHPSESSID=29a5f70fa1fa810ccdcd9e62fc215ec4

-Gold output in Australia sank to an 18-year low last financial year and not even a better fourth quarter could avert the poor result. Read more here-

http://www.theaustralian.news.com.au/story/0,25197,24271507-643,00.html

-South African gold production still well down on a year ago. South African gold production declined 10.4% year-on-year in the second quarter compared to a 16.8% drop in the first quarter. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=61600&sn=Detail

-Dark Times are a Good Omen for Gold. Joanne Nova-Read more here-http://www.321gold.com/editorials/nova/nova090308.html

-Peter Brimelow: Radical gold bugs say manipulation will fail. Read more here-http://www.gata.org/node/6547

SILVER

-Years ago Warren Buffett asked an amusing question in one of his annual letters to the shareholders of Berkshire Hathaway. He noted that he was perplexed by people's mood swings in relation to stock prices. He wondered why people were happy when the stock market was high and somber when it was low because he believes it should be the other way around.

To explain his point he asked the following question. If you ate only hamburgers your entire life, would you want the price of hamburgers to be high or low? Clearly, you would want the price to be low because in that way you would obviously maximize the purchasing power of your dollars. So too with stocks. When their price is low, you get more stocks for your dollars.

I believe that this insight also applies to gold and silver. When their price is low, you are able to exchange more overvalued dollars for undervalued gold and silver. Consequently, my approach to the precious metal markets over the past several years has been based on one simple premise. Namely, continue to accumulate the precious metals month after month after month. Some months the price will be high; some months the price will be low. But consistently take that portion of your income you save every month and save sound money. Don't save dollars; save gold and silver instead.

Then by the time this bull market finally ends, you will have accumulated a meaningful amount of physical metal because gold bull markets span decades. Importantly, with this simple strategy you will have avoided the emotional roller-coaster ride that can come from looking at the market day-to-day and from reading newspaper headlines. Leave the daily, weekly and monthly price swings for the professional traders to worry about, and instead be a wealth accumulator, buying the precious metals month-in and month-out.

I mention this point purposefully because we all know from the newspapers and watching TV that gold and silver were 'trashed' in August, with gold dropping -9.3% in the month while the ever volatile silver fell -23.3%. However, these news accounts ignore that gold is up 23.2% over the past twelve months while silver has climbed 12.8% during this same period. The charts appended below show that the major uptrend of the precious metals remains intact against the world's major currencies.

In short, in spite of what happened in August, gold and silver continue to be among the world's best performing asset classes. It is a distinction the precious metals have held throughout this decade, regardless of the occasional bumps along the road like the one this past month - and interestingly, like the one just a year ago. My alert on August 17, 2007 referred to and quoted an alert I had written back on October 5, 2003 recommending to "stay the course. Continue to accumulate gold, as declines like the one seen on [October 3, 2003] enable you to get more metal for your dollars. And given the growing uncertainty about the dollar and its bleak prospects, gold is still the place to be."

Only time will tell whether August 2008 will mark an important turning point for gold this year just as August 2007 did last year. But regardless, the problems with fiat currency are getting worse. Inflation, banking problems, trade imbalances, etc. are symptoms of a global monetary system on the brink, which is a reality that makes gold and silver ever more important. So continue to accumulate the precious metals because saving sound money makes good sense. James Turk-Read more here-http://goldmoney.com/en/commentary.php

-Ted Butler silver commentary, Fact versus Speculation. Read more here-http://news.silverseek.com/TedButler/1220376924.php

-Silver Stats that Will Make You Salivate from Richard Daughty. Read more here-http://news.silverseek.com/SilverSeek/1220357161.php

-Got Gold Report Firestorm Erupts Over U.S. Banks' Gold, Silver Shorting. A very few and very large banks seemed to have positioned very well ahead of the plunge in prices for gold and silver, but in the process they may have bought more than they bargained for possible class-action lawsuits.

As silver and gold investors lick their wounds from the recent harsh plunges in the prices of precious metals, one focus is tuned to the extraordinarily large price drops which seemed to ignore a growing scarcity of physical supplies.

By almost all accounts available on the web as of this week, the paper futures contract dominated spot price has disconnected from the popular physical silver and gold bullion markets. To most investors it seems odd indeed that the spot price has moved so far down that bullion dealers are forced to charge double digit percentage premiums for some silver bullion products and up to 5% premiums for gold bullion items. That's if customers can actually find a dealer that has any products in stock to sell.

Bullion dealers also report a very dramatic drop in scrap purchases over the past several weeks. "I'm only buying about $50,000 a week in scrap now," says one Houston dealer. "Last month I was buying more than $150,000 of scrap per week and more," he added. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=45789

-UBS says metals commodities could see high prices over next several quarters. The UBS team's outlook for gold, silver and PGMs were all positive. "With a solid floor around $800-820/oz we believe gold will trade towards $900/0z over the next month or two and could trade much higher still."

The team suggested that "silver has sharply underperformed gold over the past two months, evident when looking at the gold: silver ratio which increased to the highest seen since late 2006 at about 62. We believe speculative and investor selling was behind this move and silver is likely to outperform gold on any rally in precious metals. But this is only due to speculative buying."

"We have seen much less fundamental demand in silver than gold so our review that silver will out-perform gold is not a high conviction call. Silver is a more volatile metal than gold, especially during corrections and investors should be aware of this," they added.

Now that the disinvestment pressure has eased for PGM, UBS expects platinum and rhodium to recover some lost ground, "although neither is likely to capture the euphoric highs of about $2300 and $10,000/oz, at least not this year. Palladium will probably trade higher in sympathy, although the metal is less supported by supply and demand fundamentals and more by investment demand." Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=61168&sn=Detail

QUOTES-QUICK HITS

-"All truth passes through three stages: First, it is ridiculed; second it is violently opposed; and third, it is accepted as self-evident." Arthur Schopenhauer (1788-1860)

-"Once a government is committed to the principle of silencing the voice of opposition, it has only one way to go, and that is down the path of increasingly repressive measures, until it becomes a source of terror to all its citizens and creates a country where everyone lives in fear." Harry S. Truman, 33rd US President (1884-1972)

-Concerns regarding the outlook for corporate profits internationally and for the health of the global economy are weighing on stock markets and should lead to safe haven demand for gold as it did in the first year of the credit crisis. Also, soaring inflation internationally and particularly in the Middle East and India is leading to the surge in international. Gold.ie

-Gold has been in a range and consolidating between $775 and $845 for more than 3 weeks. A daily and weekly close above $845-$850 will be needed in order to rectify some of the serious technical damage done in recent weeks and to confirm the gold bull market remains in full effect. Gold.ie

-Gold Fell Some 50% in Middle of 1970s Bull Market, Prior to Rising 800%. Gold would have to fall by some 50% to massive long term support at $550 in order to signal the end of the bull market. In 1974, gold had risen from $35 in 1971 to some $200 (December 1974) prior to sharp falls to nearly $100 (August 1976).

Given the extent of international demand it is extremely unlikely that gold could fall a similar amount today. Indeed, it is estimated that the average production cost for gold mining companies to produce one ounce of gold has now surged to over $750 per ounce. Which will lead to a floor being put under the gold price at these levels.

Many heralded the falls in the mid 1970s as the end of the bull market when in fact it was just a long correction. Subsequently gold rallied from some $100 (August 1976) to over $800 in January 1980. While an eight fold increase in gold from today's prices seems outlandish it is not beyond the realms of possibility and the inflation adjusted high of $2,400/oz looks increasingly likely in the coming months. Gold.ie

-4 reasons why this may be the worst crisis since the 1930s and 4 projections for what's going to happen. Bud Conrad-Read more here-

http://www.321gold.com/editorials/casey/casey090408.html

-In the Eye of the Storm. Don't be lulled into a false sense of security and start buying U.S. equities at seemingly knockdown prices. We are in the eye of the hurricane. Beware of the second leg! John Browne-Read more here-http://www.321gold.com/editorials/browne/browne090408.html

-Technical Update on Broader Market. Roy Martens-Read more here-http://news.goldseek.com/GoldSeek/1220540400.php

RARE COLORED DIAMONDS

-Rio Tinto Launches Annual Argyle Pink Diamond Tender. Rio Tinto launched its 24th annual Argyle Pink Diamond Tender this past week in Perth, Australia, the company confirmed Monday. The Perth event, which took place August 21-22, was the first of six to be held around the world featuring "65 of the world's rarest pink diamonds from the Argyle mine in Australia."

The remaining five showings include in New York from September 2-5, London (September 9- 11,) Hong Kong (September 15 -20,) Tokyo (September 24-26,) and finally in Sydney (October 1-2.) Successful bidders will be notified in October. "The pink diamond jewelry market has grown in popularity and is now worth hundreds of millions of dollars as the desire to own the rarest has sent prices skyrocketing," said Raj Kandiah, general manager Argyle Pink Diamonds.

"Pink diamonds are worth approximately 20 times the cost of the same size white diamond. However, the sky is the limit when it comes to Rio Tinto's Argyle Signature Stones each diamond is so unique that it warrants an individual price tag." Rio Tinto said the exclusivity of the Argyle diamonds was enhanced by the limited life span of the Argyle mine, which is expected to be depleted by 2018.

The first pink diamonds were recovered from Argyle in 1985. Among this year's collection, Rio Tinto is presenting "a captivating heart shaped pink diamond" for the first time in seven years. There are also a number of highly sought after purplish reds, intense and vivid pinks and three rare violets that add to the vibrancy of this collection. Rio Tinto has named two "hero" stones from the collection for the first time this year: ‘Aphrodite,' a 1.01 carat round purplish red, which takes its name from the Greek Goddess of love and passion; and ‘Ocean Seer,' a 1.41 rare violet stone, which symbolizes ancient wisdom and serenity.

In total, the collection showcases 62.46 carats of diamonds with 30 diamonds more than one carat in size. Attendance to the Pink Diamond Tender will be restricted to approximately 100 key clients, who will view the diamonds in secret locations in Sydney, Tokyo, London, Hong Kong, New York or Perth, the company explained. Due to the high security required for the tender, the exact location is not revealed to bidders until the very last minute. Bids are confidential and the names of successful bidders and the values achieved are not disclosed, Rio Tinto added. Diamonds.net

-Diversified mining group Rio Tinto mined a total of 7.853 million carats of diamonds in the first half of 2008, down 31 percent from 11.446 million carats in 2007. Despite the drop in production volume, diamond revenues were up, a result of rising rough diamond prices. Read more here-

http://www.idexonline.com/portal_FullNews.asp?id=31035

-Sotheby's Hong Kong will conduct its Magnificent Jewels and Jadeite 2008 Autumn Sale at the Hong Kong Convention and Exhibition Centre on October 7, 2008. Some 320 lots will be offered with an estimated total value of HKD500 million ($64 million.) The highlight of the sale is a fancy vivid yellow diamond necklace with an estimated value of $7.4 million to $9.5 million, featuring a 102.56-carat fancy vivid yellow diamond (pictured.)

It has a flower pendant that can be detached from the necklace and worn as a brooch. Quek Chin Yeow, deputy chairman and head of jewelry at Sotheby's Asia, said, "The diamond is the largest fancy vivid yellow diamond ever to be offered at auction anywhere in the world; this extraordinary diamond, with its impressive size and auspicious golden yellow color, will be a major attraction." Another highlight of the sale will be a colored diamond butterfly brooch by Carvin French.

The center of the brooch is set with one fancy vivid blue diamond and two fancy intense blue diamonds, weighing 5.53 carats in total. Complementing the blue hues are the vibrant yellow and pink diamonds mounted on the wings of the butterfly. (Estimated value $3.8 million to $4.6 million.) With strong demand for top quality diamonds weighing more than 15 carats, an impressive 34.07 carat cushion-shaped D, IF, diamond ring will undoubtedly attract much attention. (Estimated value $6 million to $7 million.)

Sotheby's Hong Kong will present a pair of ruby and diamond earrings (pictured) by James de Givenchy for Taffin. The two unheated, natural rubies, weighing 10.02 and 10.91 carats respectively, are well-matched in both color and shape. Each surrounded by eight rose-cut pink and eight colorless round diamonds, these rubies show a fiery red hue with dazzling brilliance fascinating all connoisseurs. (Estimated value $3.8 million to $4.5 million.)

Also featured among the colored stones is a pair of star rubies, alexandrite and diamond earrings. The rubies, weighing 19.45cts and 22.13cts each, are remarkably matched in both color and shape, and boast intense hues and fine clarity. (Estimated value $666,000 to $871,000.) A further highlight is a Colombian emerald and diamond ring without any oil treatment. This natural 10.09 carat emerald boasts high clarity and a saturated color. It is embellished by 10 round diamonds, emphasizing the magnificence of the noble green color. Diamonds.net

OIL-GASOLINE

-OPEC to Pump Record Amounts as $109 Oil Stunts Growth. OPEC, the supplier of 40 percent of the world's oil, will probably keep producing at a record pace as $109-a-barrel crude squeezes the global economy. The 13-nation Organization of Petroleum Exporting Countries will reject calls from Venezuela and Iran to trim supplies at its Sept. 9 meeting in Vienna, according to 29 of the 32 energy analysts surveyed by Bloomberg.

"They want to prevent a build-up of crude stocks, which rules out an increase, but don't want to send prices skyrocketing by announcing a cut,'' said Mike Wittner, head of oil research at Societe Generale SA in London. "OPEC won't take any formal action.''

Oil plunged $38 a barrel, or 26 percent, from its record $147.27 on July 11 as economies slowed, the dollar halted a three-year slide against the euro and Hurricane Gustav caused almost no damage to drilling platforms and refineries in the Gulf of Mexico. Demand for crude will increase 1 percent in 2009, the slowest growth in seven years, according to an Aug. 15 OPEC forecast.

Record oil prices spurred European inflation to 4 percent in July and contributed to the first quarterly contraction in the region's economy since the euro was introduced almost a decade ago. In the U.S., gasoline demand fell for 19 consecutive weeks, according to MasterCard Inc., with fuel now near $3.70 a gallon. The world economy is "precariously close'' to a recession in 2009, UBS AG said last month as it cut next year's global growth forecast to 2.9 percent. It considers a 2.5 percent rate as one that is consistent with a recession. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aKiA9hHBv7yY&refer=home

-Marc Mobius, sees oil higher, commodities. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T=Mobius%20Recommends%20S.%20African%2C%20Turkish%20Stocks%2C%20Palladium&clipSRC=mms://media2.bloomberg.com/cache/v5sYzsK2FgB8.asf

-Iran calls for production cuts as oil price plummets. Read more here-http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4663676.ece

-Winter heat crisis looms, little relief seen. High fuel prices and the weak economy could make heating a luxury this winter. And the government's low-income assistance plan may not suffice. Read more here-http://money.cnn.com/2008/08/29/news/economy/LIHEAP/index.htm?postversion=2008090205

-Why cheaper oil signals trouble. Inflation appears less menacing, but the U.S. export boom could soon face strong headwinds. Read more here-

http://money.cnn.com/2008/09/03/news/exports_commodities.fortune/index.htm

-Gas guzzling temptation as prices fall. With prices at the pump continuing to slip, will memories of the summer's gas crunch fade, tempting drivers to fall off the conservation wagon? Read more here-http://money.cnn.com/2008/09/03/news/economy/gas_price_prediction/index.htm?postversion=2008090412

GLOBAL SLUMP JUST STARTING-ECONOMIC NEWS

-Morgan Stanley's Roach Says Economic Slump Has Only Just Begun. The global economic downturn has only just begun, with the U.S. near a "recession trajectory'' and the impact of the credit crunch still to be fully felt, said Stephen Roach, Morgan Stanley's Asia chairman. "There's more to this macro event than just the credit- market contagion itself,'' Roach said in an interview with Bloomberg Television in New York today.

"Maybe two thirds of that is behind us, but the impacts on the real side of the U.S. economy and the global economy are at an early stage.'' Expansion in the U.S., the world's largest economy, is likely to weaken in the in the second half after a stronger-than-expected second quarter as consumers rein in spending. That will slow European and Asian exports and hamper global growth, Roach said. "We're in the early stages of the downturn in the U.S. and global business cycle,'' he said.

"As the U.S. consumer goes into post-bubble funk, Asian exporters will feel it. That's certainly evident now in China and its spreading through developing Asia.'' As the world economy cools, the dollar may continue to rise and commodities such as oil and base metals may decline, he said. Equity markets will trade "sideways to lower'' until at least early 2009. "Investors, especially in equities, have to be wary about being too optimistic on the earnings implications of what could be a long and drawn out multi-year adjustment for the U.S. consumer,'' Roach said. Bloomberg

-Fed: Economy struggles, prices remain high. Federal Reserve expects economic troubles to persist into 2009. Read more here-

http://money.cnn.com/2008/09/03/news/economy/beige_book.ap/index.htm?postversion=2008090315

-Fed's Yellen Sees 'Substantial' Risks to U.S. Growth. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a0854s35XhGE

-Fed official sees 'anemic' growth. Dallas Federal Reserve president says housing and credit market troubles could linger for the next few quarters. Read more here-

http://money.cnn.com/2008/09/04/news/economy/fed_fisher.ap/index.htm

-Gustav hits U.S. economy. Storm is weaker than Katrina three years ago. But it hits an economy that is at greater risk. Read more here-

http://money.cnn.com/2008/09/01/news/economy/gustav_economy/index.htm?postversion=2008090115

-Britain is facing "arguably the worst" economic downturn in 60 years which will be "more profound and long-lasting" than people had expected, Alistair Darling, the chancellor, tells the Guardian today.

In the government's gravest assessment of the economy, which follows a warning from a Bank of England policymaker that 2 million people could be out of work by Christmas, Darling admits he had no idea how serious the credit crunch would become. Read more here-http://www.guardian.co.uk/politics/2008/aug/30/economy.alistairdarling

-Bank of England Gives Lenders Estimated $354 Billion. U.K. banks probably have tapped the Bank of England for more than 200 billion pounds ($354 billion) less than two months before its emergency funding plan is scheduled to end, according to UBS AG analysts. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aRgxCzc4X_lg

-Barclays May Face 7.5 Billion-Pound Capital Shortfall. Barclays Plc, the U.K.'s third- biggest bank, may need to raise as much as 7.5 billion pounds ($13.3 billion) to bring its capital ratio in line with investment banking peers, Royal Bank of Scotland Group Plc said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=afJCfp9K68Zw

-Money Market Disruption to "Continue,'' BIS Says. The strains in the global money markets that pushed relative borrowing costs higher will probably persist "for some time'' as financial institutions struggle to raise cash, according to the Bank for International Settlements. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=az9BUc2nrqMM

-ECB Will Tighten Lending Rules to Stop Bank Abuse. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=asOWb76COKPY

-Personal income in largest drop in 3 years. Consumers are spending more even though they have less cash in their pockets as the stimulus wave passes, according to a government report. Read more here-http://money.cnn.com/2008/08/29/news/economy/consumer_spending/index.htm

U.S. NEEDS TO PREVENT FINANCIAL TSUNAMI

-U.S. Must Buy Assets to Prevent 'Tsunami,' Gross Says. The U.S. government needs to start buying assets to stem a burgeoning "financial tsunami,'' according to Bill Gross, manager of the world's biggest bond fund. A process of delevering, where banks are shrinking and cutting off lending, is sapping demand for bonds, real estate, stocks and commodities, driving down assets of even "impeccable quality,'' Gross said.

"Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami,'' Gross of Newport Beach, California-based Pacific Investment Management Co. said in commentary posted on the firm's Web site today. "If we are to prevent a continuing asset and debt liquidation of near historic proportions, we will require policies that open up the balance sheet of the U.S. Treasury.''

The government needs to replace private investors who either don't have the money to buy new assets or have been burned by losses, Gross said. Pimco, sovereign wealth funds and central banks are now reluctant to fund financial firms after losing money on more than $400 billion in capital raisings, Gross said. Banks and brokerages are retreating after more than $500 billion in writedowns and credit losses since the credit seizure began last year.

Treasury should support not only mortgage finance providers Fannie Mae and Freddie Mac, but also "Mom and Pop on Main Street U.S.A.," through subsidized home loans guaranteed by the Federal Housing Administration and other government institutions, Gross said. A new version of the Resolution Trust Corp., which bought assets from failing institutions during the savings-and-loan crisis of the 1980s, may also work, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a73wGszFuxtA&refer=home

BANK FAILURE-MUST BE ALLOWED TO FAIL

-Integrity Bank Becomes 10th U.S. Failure This Year. Integrity Bank of Alpharetta, Georgia, was closed by U.S. regulators today, the 10th bank to collapse this year amid a surge in soured real-estate loans stemming from the worst housing slump since the Great Depression. Integrity Bank, with $1.1 billion in assets and $974 million in deposits, was shuttered by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp. Regions Financial Corp., Alabama's biggest bank, will assume all deposits from Integrity, which was run by Integrity Bancshares Inc.

The failed bank's five offices will open on Sept. 2 as branches of Regions, the FDIC said. "Depositors will continue to be insured with Regions Bank so there is no need for customers to change their banking relationship to retain their deposit insurance,'' the FDIC said. Banks are being closed at the fastest pace in 14 years as financial companies report more than $505 billion in writedowns and credit losses since 2007.

California lender IndyMac Bancorp Inc., which had $32 billion in assets, was closed July 11 in the third-largest bank seizure, contributing to a 14 percent drop in the U.S. deposit insurance fund that had $45.2 billion at the end of the in the second quarter. Regions will buy about $34.4 million in assets and will pay the FDIC a premium of 1.01 percent to assume the failed bank's deposits, the FDIC said. The FDIC estimates the cost of the Integrity failure to its deposit-insurance fund will be $250 million to $300 million. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a7dn3iRmUDCQ&refer=home

-Fed's Hoenig Says Institutions Must Be Allowed to 'Fail'. Federal Reserve Bank of Kansas City President Thomas Hoenig said for economies to work best, institutions must be allowed to 'fail.' Economies must "find a balance between financial stability and a stable price environment and in doing so must be able to allow individual institutions to fail,'' Hoenig said in a speech today in Buenos Aires.

Turmoil in financial markets has persisted, even after the Fed started and expanded emergency programs to lend to commercial and investment banks. Changes in financial markets combined with the subprime-mortgage crisis have "raised anew questions about the role of central banks in maintaining financial stability,'' he said.

The subprime-mortgage collapse has taken a toll on banks and other financial companies, which have reported $514 billion of writedowns since the start of 2007. The Fed rescued Bear Stearns Cos. from bankruptcy in March, facilitating the firm's merger with JPMorgan Chase & Co. by lending against $29 billion of Bear securities.

"Financial crises will occur despite our best efforts to prevent them,'' Hoenig said in prepared remarks at an event hosted by Argentina's central bank. "The 'Too Big to Fail" issue will only grow in importance as the consolidation of the financial industry grows in both size and scope in future decades.'' Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=aPUUANG5h4G0

SUPER RICH MOVING INTO CASH-BANKS MOVE FUNDS FROM U.S. TO EUROPE

-HSBC says super-rich clients moving into cash. Many of the world's wealthiest people have moved their money out of stocks and bonds and into cash, the head of HSBC's (HSBA.L) Swiss private banking unit said on Monday. "The first half of 2008 has seen a notable change in client expectations and investment choices," said Peter Braunwalder, chief executive of HSBC Private Bank (Suisse), the British-based bank's main affiliate catering to the ultra-rich.

"Faced with inflation worries, volatile asset prices and sudden changes in exchange rates, a majority of investors have reduced their transaction volumes in equities, bonds, and structured products," he told a news briefing in Geneva. This was particularly true for clients from Asia, whose demand for complex investment tools such as equity derivatives has "drastically decreased" in response to recent financial market upheaval, said Braunwalder.

Concurrently, most clients increased their cash allocation and, for some, their leverage," he added. Investors worldwide have been scrambling to find a safe place for their savings this year in the face of a global economic slowdown, a credit crisis that has spooked markets, and an energy price spike spurring concerns about inflation. Alexandre Zeller, who will replace Braunwalder as HSBC Private Bank (Suisse) chief on October 1, said that concerns about inflation would dominate many investing decisions ahead.

"My worry is that a lot of liquidity has been injected in the markets by central banks to solve the (credit) crisis," the former head of Banque Cantonale Vaudoise said, raising concerns about how that liquidity will be removed from the market, and whether interest rates would have to rise as a result. Read more here-http://news.yahoo.com/s/nm/20080901/bs_nm/hsbc_swiss_dc_1&printer=1;_ylt=AomtFKM534CyjW.AOoXdcSGb.HQA

-Banks shift funds out of U.S. to Europe: BIS. Read more here-http://www.reuters.com/article/businessNews/idUSWEL25769220080901?feedType=RSS&feedName=businessNews&rpc=23&sp=true

HUGE STOCK DECLINE AHEAD

-Tice: Huge Stock Decline Ahead. David Tice has made himself famous for successfully shorting stocks. Now the investment manager sees a bear market for the next five years, with share prices dropping 50 percent to 70 percent over the next 18 months. That would put the Dow Jones Industrial Average somewhere between 3,425 and 5,708.

"We believe stocks have benefited from an unbelievable credit bubble" that is now bursting, Tice told Bloomberg TV. "Policymakers and central bankers have perpetuated a bubble like we've never seen before, with mortgage financing that has put government sponsored enterprises (Fannie Mae and Freddie Mac) in trouble," he says.

"The whole structure of the financing mechanism, where foreigners bought all these [mortgage] securities, has broken down. Institutions and foreigners no long trust our structure, insurance, ratings, etc." As a result, Tice says, "We're in big trouble."

Tice says it's difficult to predict when the market's plunge will begin. "Who knows what will happen to the market until the end of the year?" he asks rhetorically. "The market is like boiled frog. You drop a frog into pot of boiling water, and it jumps out. In this environment, he's staying in because the heat is gradually rising."

Tice's Prudent Bear Fund returned 9.9 percent in the year ended July 31, compared to an 11.09 percent drop by the S&P 500 over that period. Technology stocks represent the next sector ready to plunge, according to Tice. "Tech is very dependent on the economy," he says. Story here-http://moneynews.newsmax.com/streettalk/stocks/2008/09/02/126965.html

-U.S. Stocks at 25.8 Times Profit Means Rally May End. The best already may be over for the U.S. stock market this year. The Standard & Poor's 500 Index, which had the worst first half since 2002, added 0.2 percent this quarter, the only gain among the world's 10 biggest markets in dollar terms. Shares in the benchmark index for American equity climbed to an average 25.8 times reported profits, the highest valuation in five years. The last time that happened, the S&P 500 fell 38 percent.

Money managers at Federated Investors Inc., Russell Investments and Morgan Asset Management, which oversee a combined $600 billion, said the gains won't last because corporate profits will fail to meet analysts' estimates. Wall Street forecasters, who were too optimistic about earnings for the past four quarters, predict income at America's biggest companies will grow by a record 62 percent in the final three months of 2008, according to data compiled by S&P.

"The market is pricing in the expectation of a good quarter, but we just don't see it,'' said Philip Orlando, who helps manage $350 billion as chief equity market strategist at Federated in New York. "The fundamentals are going to be poor, earnings are going to be bad, and there are going to be more huge writedowns. We think stocks probably need to work 5 to 10 percent lower over the next month or two.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid=aBgaQ4tuM8Xo&refer=home

U.S. DOLLAR-FOREIGN CURRENCY

-U.S. Dollar: Misery Finds Company. Many analysts predict a recovery in the U.S. dollar based more on a disbelief in how far the greenback has fallen than on fundamentals. But other currencies are now showing the same signs of stress and a change in direction could be close. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=45841

-Iran considers lopping zeros off currency. Iran is considering lopping three to four zeros off its currency, a top official said Monday, in an apparent effort to fight out-of-control inflation that many critics blame on the country's hardline president.

The governor of the Central Bank of Iran, Tahmasb Mazaheri, told state run radio that monetary experts are studying three options: Cutting three zeros off the rial, cutting four zeros, or boosting each rial's value to one-hundredth of a gram of gold, or about 2,500 rials at current rates.

"We are studying all these three options," Mazaheri said on state-run radio. The Iranian rial is now traded at 9,600 rials to one US dollar. That compares to 70 rials against the dollar in 1979, the year an Islamic revolution toppled the pro-Western Shah Mohammad Reza Pahlavi. Jpost.com

INTEREST RATES

-Canada Keeps Key Rate at 3%, Says It's "Appropriate." The Bank of Canada left its key lending rate unchanged, saying it remains "appropriately accommodative" amid slower-than-expected economic growth. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aO2C_g5mGzc0

-Sweden Raises Key Rate to 4.75% as Prices Accelerate. Sweden's central bank raised its benchmark interest rate to a 12-year high to head off faster inflation and said it expects to keep rates steady for the remainder of the year as the economy slows. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aiYj7KOnuB8g

-ECB, Bank of England Keep Rates Unchanged on Inflation Concern. The European Central Bank and the Bank of England kept interest rates unchanged to fight inflation as their economies teetered on the brink of a recession.

ECB policy makers meeting in Frankfurt kept the benchmark lending rate at 4.25 percent, a seven-year high. The U.K. central bank's Monetary Policy Committee left the bank rate at 5 percent today in London.

The euro-region economy contracted in the second quarter. Growth stalled in Britain, which may face the worst conditions since World War II, according to U.K. Chancellor of the Exchequer Alistair Darling. The Bank of England has still refrained from cutting borrowing costs and the ECB raised its rate in July on concern higher pay demands may entrench faster inflation.

"They're both inflation-fighting central banks and inflation is well above their targets,'' said Stewart Robertson, an economist at Morley Fund Management in London, which manages the equivalent of $271 billion. "Growth has weakened a lot and is likely to stay weak. The Bank of England seems to have owned up to this but the ECB hasn't quite yet.'' Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid=aP6CeFzRiB8Q&refer=home

-Why the Fed cuts haven't worked. One of the Federal Reserve's staunchest proponents of its rate-cutting spree explains why lower rates haven't helped boost the economy. Read more here-http://money.cnn.com/2008/09/04/markets/thebuzz/index.htm

FANNIE-FREDDIE

-Fannie Mae and Freddie Mac: A Damage Report. Amid the buzz surrounding a potential bailout, BusinessWeek asks how much the mortgage giants' fall from grace has cost market players and what losses lie ahead. Read more here-http://www.businessweek.com/investor/content/aug2008/pi20080828_330540.htm

HEDGE FUND TROUBLES

-New York-based hedge fund Atticus Capital has lost over $5 billion so far this year, as its funds have been hit by plummeting financial stocks, a person familiar with the situation told Dow Jones Newswires Monday. The activist investor saw its Atticus European fund fall 32.9% in value from the start of the year to the end of August, while its Atticus Global fund was down by around 25%. Read more here-http://www.marketwatch.com/news/story/atticus-capital-said-have-lost/story.aspx?guid={45A0D0A4-F8C7-4620-8B4E-29A434DAB933}&siteid=yahoomy

-Ospraie to Close Flagship Hedge Fund After 38% Loss. Ospraie Management LLC, the investment firm run by Dwight Anderson, will close its biggest hedge fund after slumping 38.6 percent this year because of bad bets on commodity stocks.

The New York-based Ospraie Fund fell 26.7 percent in August after a "substantial sell-off'' in energy, mining and resource equity investments, Anderson said in a letter to investors this week. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aIVvdfesmczQ

AUTO MAKERS-AIRLINES

-Big Three bailout may be around corner. Automakers seek $50 billion in low-interest loans to convert plants from trucks to fuel efficient cars; presidential election could help their chances. Read more here-http://money.cnn.com/2008/09/04/news/economy/automakers_Congress/index.htm?postversion=2008090411

-Auto lenders feel squeezed. Rising loan delinquencies and declining car and truck sales have many lenders feeling the pinch. Read more here-

http://money.cnn.com/2008/09/04/news/companies/auto_finance/index.htm?postversion=2008090410

-Auto sales plunge. Despite a slide in gas prices, sales fall 15.5% from a year ago for the worst August in 10 years, led by lower demand for pickups and SUVs. Read more here-

http://money.cnn.com/2008/09/03/news/companies/autosales/index.htm?postversion=2008090318

-Airline Industry May Suffer $5.2 Billion Annual Loss. Airlines may report combined losses of about $5.2 billion this year, almost $3 billion higher than forecast in June, as economies slow and fuel costs erode earnings, the International Air Transport Association said.

The net loss will fall short of the $6.1 billion worst-case- scenario the industry body envisaged in the last forecast because of a recent drop in oil prices, Chief Executive Officer Giovanni Bisignani said today in Montreal. Traffic growth will be lower than predicted as an economic slowdown spreads, he said.

IATA lifted the annual loss estimate for a fifth time in 12 months after passenger growth slumped to a five-year low in July and the number of carriers grounding planes or going bankrupt this year passed two dozen. Airlines had a profit of $5.6 billion in 2007, the first since the 2001 attacks on the U.S. The industry has lost more than $36 billion since 2001.

"We're still in a perfect storm of rising costs and falling demand,'' Bisignani said on a conference call. "When we made our last forecast we knew the situation was bad, but we didn't know how bad it would get. Profitability deteriorated dramatically in the first half.'' The group, whose members account for 93 percent of international air traffic, based its loss estimate on an average oil price this year of $113 dollar a barrel, it said in a statement. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=ancsHQ47sXpE

REAL ESTATE

-Let's Get Real about Real Estate from Peter Schiff. Once again, real estate market watchers have pounced on a shred of seemingly positive news to proclaim that the long sought "bottom" is in sight. The routine is becoming extremely stale, but somehow the media never seems to tire of it.

This time the "good" news was that the percentage declines in national home prices (according to Case Shiller) in July were not as large as they were in June. Although the report contained many other negative data points, including increased inventories and a spike in foreclosure sales, it was the slowing declines that got spotlight.

Talk about grasping at straws. The truth is that real estate has been grossly overvalued for years, and the adjustment process back to realistic pricing has only just begun. The problem is few among us seem to appreciate the magnitude of this adjustment and its implication for an economy dependant on inflated assets values. Read more here-http://www.321gold.com/editorials/schiff/schiff082908.html

-House price crash goes global. The property crash that began in the US is spreading across the globe, according to international estate agents Knight Frank, which said today that steep declines are now taking place across Europe and into Asia.

The country recording the sharpest fall is Latvia, where house prices have plummeted 24.1% over the past year. New Zealand, Denmark and Lithuania have all seen falling prices, along with Malta, Germany, Ireland, Estonia, Britain and the US. Even countries where prices have not fallen are witnessing a rapid deceleration in price growth. Read more here-

http://www.guardian.co.uk/money/2008/sep/02/houseprices.property?gusrc=rss&feed=networkfront

-House prices in double digit fall. UK house prices recorded an annual fall of 10.9% in August - the first double digit drop since 1983 says the Halifax. The lender said that property prices dropped 1.8% in August compared with July, leaving the cost of an average home in the UK at £174,178.

It said market conditions would remain "challenging" in the months ahead, despite government help for buyers. House prices dropped across the UK, but some surveys have shown the Scottish market to be the most resilient. The figures show that the average price of a home in the UK was at the same level in August 2008 as it was in February 2006. Read more here-

http://news.bbc.co.uk/1/hi/business/7597520.stm

-U.K. Suspends Homebuyer Tax in Moves to Reverse Slump. Prime Minister Gordon Brown suspended a tax on buying some homes for the first time since 1991 and brought forward 1 billion pounds ($1.8 billion) of spending in an effort to revive the U.K. economy.

Residential properties costing less than 175,000 pounds will be exempt from stamp duty for a year under plans announced by the Treasury today. The government also will help 16,000 people struggling to meet mortgage payments and another 10,000 to buy their first home. Banks approved 33,000 mortgages in July, a quarter of the level of a year ago, after a worldwide credit crunch dried up funding for loans.

"Until more funding is available we are still some way from restoring long-term stability to the housing and mortgage markets,'' said Michael Coogan, director general of the Council of Mortgage Lenders, which represents banks making home loans. "There are no easy solutions to some of these problems." Read more here-

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

-London Luxury-Home Prices Post First Drop Since 2003. Luxury-home prices in central London, the world's most expensive location for prime real estate, had their first annual decline in five years as buyers were deterred by the prospect of a recession.

The average price of houses and apartments in London's nine most expensive neighborhoods fell 1.6 percent in August from a year earlier, according to an index compiled by Knight Frank LLP. Property values declined 1.3 percent from July, the fourth straight drop, the property broker said. The index includes homes valued at about 1 million pounds ($2 million) or more.

Homebuyers were affected by "pessimism in the financial- services sector, particularly relating to the size of this year's bonuses,'' Liam Bailey, Knight Frank's head of residential research, said in a statement.

Demand from the 300,000 bankers and others employed in financial services, which has underpinned the luxury London housing market, has dropped because of job cuts triggered by the collapse of the subprime mortgage market. Knight Frank said prime residential sales in London are down 46 percent from last year. Read more here-

http://www.bloomberg.com/apps/news?pid=20601213&sid=a77Zr2.dxrGE&refer=home

-Mansion Price Drops $7 Million; Bentley Offered on Luxury Homes. The U.S. housing crisis arrived on July 14 at Stonebrook Court, the 26,000-square-foot Tudor-style home of California venture capitalist Kelly Porter. On that day, four months after putting the house on the market, he cut the price by $7 million.

The mansion sits on 7.5 acres in Los Altos Hills, a Silicon Valley town where Yahoo! Inc. co-founder and Chief Executive Officer Jerry Yang also lives. It boasts a wine cellar, Venetian- inspired ballroom, Italian statuary and swimming pool. At the reduced price of $38 million, the property is a bargain, the owner says.

"It's worth every bit of $45 million, and I reduced it reluctantly,'' said Porter, 45, a partner at Woodside Capital Partners LLC in Palo Alto, in an interview. "We touched up every square inch.''

The pain of the worst housing slump in a quarter century is reaching the highest end of the market as owners of luxury homes from California to Florida, New York and Connecticut slash list prices by millions. In the broader market, home sales plunged to a 10-year low in the second quarter and median house prices fell 7.6 percent, according to the National Association of Realtors.

"The upper end is not immune to this decline,'' said Kenneth Rosen, chairman of the University of California's Fisher Center for Real Estate and Urban Economics in Berkeley. A worsening economy means "these people will have less wealth and they will spend less.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=alVIa8zYKQPQ&refer=home

-Homebuyers turn screws on desperate sellers. It's a buyer's market, and many are trying to take full advantage of it by demanding major home repairs, warranties on home appliances, and even tax rebates. Read more here-http://money.cnn.com/2008/08/29/real_estate/sellers_concessions_in_buyers_market/index.htm?postversion=2008082903

FORECLOSURES-MORTGAGES

-U.K. Mortgage Approvals Decline to Lowest Since 1999. U.K. mortgage approvals fell for a 12th month to the lowest since at least 1999 in July as financial institutions curbed lending and the property slump deepened.

Banks granted 33,000 loans for house purchase, compared with 35,000 in June and the fewest since comparable data began nine years ago, the Bank of England said in London today. Economists predicted 35,000, according to the median of 27 estimates in a Bloomberg News survey.

Home-loan approvals are at less than a third of the level a year ago as Britain teeters on the brink of a recession. Bank of England policy makers will probably keep the key interest rate at 5 percent this week as they battle the fastest inflation in more than a decade while Prime Minister Gordon Brown announces a package of measures to shore up the economy.

"The data are still showing a very gloomy picture,'' said Matthew Sharratt, an economist at Bank of America Corp. in London. "There's no signs of a bottoming out in the housing market.'' The value of home loans rose to 3.23 billion pounds ($5.83 billion) in July from 3.14 billion pounds in June. The figure is down from 9.35 billion pounds in July 2007.

Hometrack Ltd. said today the average cost of a residential property in England and Wales slipped 5.3 percent from a year earlier in August. A recovery in prices is "still some way off,'' said Richard Donnell, director of research. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a5bsLwIqjY7Y

-GMAC Mortgage Unit to Dismiss 5,000, Shut 200 Offices. GMAC LLC and its Residential Capital LLC home loan unit plan to dismiss 5,000 employees, or 60 percent of the unit's staff, and close all 200 GMAC Mortgage retail offices because of weak real estate markets. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=abppYTSY8r.A&refer=home

GEOPOLITICAL NEWS

-Dutch intel: US to strike Iran in coming weeks. The Dutch intelligence service, the AIVD, has called off an operation aimed at infiltrating and sabotaging Iran's weapons industry due to an assessment that a US attack on the Islamic Republic's nuclear program is imminent, according to a report in the country's De Telegraaf newspaper on Friday.

The report claimed that the Dutch operation had been "extremely successful," and had been stopped because the US military was planning to hit targets that were "connected with the Dutch espionage action." The impending air-strike on Iran was to be carried out by unmanned aircraft "within weeks," the report claimed, quoting "well placed" sources. Read more here-http://www.jpost.com/servlet/Satellite?cid=1220186494776&pagename=JPost%2FJPArticle%2FShowFull

-Report: Israel won't allow a nuclear Iran. Israel will not allow Iran to attain nuclear capability and if time begins to run out, Jerusalem will not hesitate to take whatever means necessary to prevent Iran from achieving its nuclear goals, the government has recently decided in a special discussion. Read more here-

http://www.jpost.com/servlet/Satellite?cid=1219913194872&pagename=JPost%2FJPArticle%2FShowFull

-Iran warns any attack would start 'world war'. A senior Iranian military commander has warned that any US or Israeli attack on the Islamic republic would start a new world war, the state news agency IRNA reported on Saturday.

"Any aggression against Iran will start a world war," deputy chief of staff for defence publicity, Brigadier General Masoud Jazayeri, said in a statement carried by the agency.

Iran is under international pressure to halt uranium enrichment, a process which lies at the core of fears about Iran's nuclear programme as it can make nuclear fuel as well as the fissile core of an atom bomb.

"The unrestrained greed of the US leadership and global Zionism... is gradually leading the world to the edge of a precipice," Jazayeri said, citing the unrest in Afghanistan, Iraq, Sudan and Georgia. Read more here-http://www.breitbart.com/article.php?id=080830094819.pcrrm00f&show_article=1

-Sarkozy Says Iran May Provoke Israeli Attack, Causing Disaster. French President Nicolas Sarkozy said Iran's nuclear program may provoke an attack by Israel, urging the Islamic republic to accept international inspections. "Iran is taking a major risk in continuing its process of obtaining nuclear weapons, which we are certain is happening,'' Sarkozy said today in Damascus, Syria.

"One day, whatever the Israeli government is, we can imagine ourselves one morning with an Israel that would have attacked. That would be a disaster.'' Sarkozy is using the meeting with Syrian President Bashar al-Assad, an Iranian ally, to press efforts to convince Tehran that it should cease its uranium-enrichment program and give full access to international inspectors. The French president is trying to deepen France's political influence in the Middle East and renewed Europe's ties with Syria after Assad's help in ending an 18-month-long political deadlock in Lebanon in May.

The "fallout would be disastrous'' from any military strike against Iran, Assad said last night in a press conference with Sarkozy. Iran denies seeking nuclear weapons and says it's only developing civil nuclear energy. Israel had no immediate reaction to Sarkozy's statement, Andy David, a Foreign Ministry spokesman, said by phone from Jerusalem. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=avJBlYVxrO5Y

-Cheney Condemns Russian 'Invasion,' Supports Georgia. U.S. Vice President Dick Cheney condemned Russia's "invasion'' of Georgia and delivered a message of "solidarity'' with the Black Sea country. Cheney, the highest-level U.S. official to visit Georgia since its armed conflict with Russia over South Ossetia, called Russia's incursion last month "an invasion of your sovereign territory and an illegitimate, unilateral attempt to change your country's borders by force.''

The vice president said he assured Georgian President Mikheil Saakashvili of U.S. support for the country's territorial integrity after Russia recognized the independence of South Ossetia and another breakaway region, Abkhazia. He spoke to reporters after meeting with Saakashvili in the capital Tbilisi.

Under Saakashvili, Georgia has become a staunch U.S. ally in Russia's backyard. It's the third-largest member of the allied coalition in Iraq and a vital link in a U.S.-backed "southern energy corridor'' that connects the Caspian Sea region with world markets, bypassing Russia.

Georgia's economy incurred more than $1 billion in economic damage as a result of Russia's military incursion, Prime Minister Lado Gurgenidze said yesterday. President George W. Bush responded with a pledge of $1 billion to help Georgia recover from the fighting. The International Monetary Fund agreed to a U.S.-backed proposal to lend Georgia $750 million to replenish its foreign-currency reserves. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=acg5nmddUURU

-US confirms ground assault inside Pakistan. American forces launched a raid inside Pakistan on Wednesday, a senior U.S. military official said, in the first known US ground assault in Pakistan against a suspected Taliban haven. The government condemned the attack, saying it killed at least 15 people.

The American official, speaking on condition of anonymity because of the sensitivity of cross border operations, told The Associated Press that the raid occurred on Pakistani soil about one mile from the Afghan border. The official didn't provide any other details. Read more here-http://sify.com/news/fullstory.php?id=14751849

-Pakistan reacts with fury after up to 20 die in 'American' attack on its soil. Read more here-http://www.guardian.co.uk/world/2008/sep/04/pakistan

-Power cuts fuel Pakistan's power struggle. The assassination attempt on the Prime Minister is the latest twist in a complex battle for influence. Read more here-

http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article4669574.ece

-The perils of Pakistan. Read more here-http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/09/04/dl0402.xml

© 2008, Worldwide Precious Metals.
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The GoldBugg Report - September 10, 2008
Posted by Worldwide Precious Metals on Wednesday, September 10, 2008