Newsroom

The GoldBugg Report – October 07, 2008

October 7, 2008

WORLD FINANCIAL REPORT ON RADIO OCT 3 2008 SHOW

-”We are currently positioned the best I have ever witnessed for risk and reward in silver. The downside looks extremely limited and the upside looks explosive. Yes, volatility is great, but everything is lined up perfectly.” Ted Butler writes in “An Exceptional Opportunity”: http://news.silverseek.com/TedButler/1223353403.php

-CNBC today gave a few minutes to Swiss Asia Capital CEO Jurg Kiener to talk about gold, and he noted the disparity between the explosive physical market price and the sluggish paper market price, blamed the speculation of Wall Street banks for the latter, and predicted the failure of the paper market and the quick doubling of the gold price. You can watch the interview here: http://www.cnbc.com//id/15840232?video=880574352&play;=1

-Gold up for second day as safety buying resumes. http://www.marketwatch.com/news/story/gold-rises-second-day-up/story.aspx?guid={CD68DBF8-32B4-42FA-B6A8-B7DCE698BAF6}&dist;=msr_3

GOLD

-Gold up for second day as safety buying resumes. http://www.marketwatch.com/news/story/gold-rises-second-day-up/story.aspx?guid={CD68DBF8-32B4-42FA-B6A8-B7DCE698BAF6}&dist;=msr_3

-David Tice, founder of David W. Tice & Associates and manager of the $1.08 billion Prudent Bear Fund says Dow May Fall Below 5,000; Gold Rise to $2,000. Watch video here-

http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/v5TY6R2aZM6M.asf

-Analyst: Dollar May Sink, So Look to $1,500 Gold. Aaron Smith, managing director at Superfund Financial, sees gold as a good bet as he believes it will rise to $1000 an ounce by year-end, and $1500 in two to three years’ time.

“We think the prognosis is quite bearish for stocks and actually if you are buying stocks long-only at this point it’s in my view sort of a sophisticated form of gambling,” Smith told CNBC. “But there’s no reason to be too too nervous. Investors could take advantage of cheap prices in commodity markets and benefit substantially from that in the next two to three years.” Watch more here-http://www.cnbc.com/id/26970932

-James Turk gold commentary, we are in the sixth inning. As we begin this year’s fourth quarter, it may be useful to step back from the trees and take a look at the forest. The big picture is shaping up pretty much as expected. In my February 1st alert I laid out my expectations for this year, specifically that “2008 is shaping up much like 1974.

There are many similarities. These include rapidly rising inflation and growing monetary problems not only in the States, but across the globe. In fact, the last serious global credit crisis before the present one occurred in 1974. If history is any guide and I really do believe that it is then the current banking and credit crisis is going to get much worse before it gets better.

Years of imprudent reckless lending are taking its toll on the global banking system.” Six weeks later in my March 16th alert I re-emphasized this point noting that the events then unfolding “adds more support to my view that 2008 is shaping up like 1974″. Read more here-http://goldmoney.com/en/commentary.php

-Gold and Silver Dealer Reports ‘Unprecedented’ Shortage of Metals. A surge for demand in gold and silver has resulted in an unprecedented shortage of the metals for retail investors in recent days, according to Gold and Silver Investments, a Dublin-based firm that allows retail investors to speculate on movements in the value of precious metals.

Gold and Silver Investments director Mark O’Byrne said the supply of gold and silver available for small retail investors suffered a dramatic deterioration within hours on Friday, as wholesalers reported that government mints and refiners, the primary suppliers of the metals, had stopped offering new supplies.

“It’s absolutely unprecedented,” said O’Byrne, who said the shortages were likely to drive up the costs of gold and silver in the secondary market. “This did not happen even in the 1930s and the 1970s, and will result in markedly higher prices in the coming months.”

According to O’Byrne, gold and silver were now easily accessible only in the primary market, which consisted of central banks and other major traders of the precious metals. However, he said that minimum transaction sizes in this market were out of reach for most retail investors at approximately $350,000 for gold and $135,000 for silver. Read more here-

http://www.gata.org/node/6686

-Wealthy Investors Hoard Bullion. Investors in gold are demanding “unprecedented” physical amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen. Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.

“There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career,” said Jeremy Charles, chairman of the LBMA. “The gold refineries cannot produce enough bars.” The move comes as fears grow among investors over the losses at investment vehicles previously considered almost risk-free, such as money funds. Philip Clewes-Garner, associate director of precious metals at HSBC, added that investors were not flying into gold simply because they saw it as a haven amid Wall Street’s woes.

“It is a flight into gold because it is a physical asset,” he said. “Vault staff are also doing overtime,” another banker at the LBMA meeting said, adding that investors in some countries were paying premiums of up to $25 an ounce above the London spot price to secure scarce gold bars. Spot gold prices in London on Tuesday traded at about $900 an ounce, more than 25 per cent above the level before Lehman Brothers’ collapse.

Although some traders said the rush into physical gold could boost prices, others cautioned that prices were depressing jewellery demand, capping any price gain. Industry executives said gold refineries and government mints were working at full throttle to keep up with investor demand, but acknowledged they were suffering from shortages, particularly on coins. Johan Botha, a spokesman for the Rand Refinery in South Africa, which manufactures the Krugerrand, the world’s most popular gold coin, said the plant was now running at full capacity seven days a week.

“Even so, now and then we have shortages,” he said. The Austrian mint, which manufactures the Vienna Philharmonic, a popular gold coin in Europe, said it had extended work to the weekends to accommodate soaring demand. Last week the US mint suspended the sale of its American Buffalo coin after it ran out of stocks. Full story here-http://www.gata.org/node/6699

-Private banks rethinking gold, could be next big buyers. Private banks could be the next big buyers in the global gold market, helping drive prices higher as they consider restocking bullion bars that were sold off in calmer times, the top HSBC gold trader said on Monday.

Jeremy Charles, chairman of the London Bullion Market Association and global head of precious metals trade at HSBC Bank, also said he expected central banks around the world to put the brakes on their plans to sell down gold reserves as they see other assets deteriorate, lending further support to prices.

“I think the institutional investors and private banks in particular will all be reconsidering their strategy. My belief is they are likely to want to own some gold again “he told Reuters on the sidelines of the LBMA’s annual conference. The current generation of private bankers destocked their gold holdings in the 1980s and 1990s to pursue higher-return investments in recent years, but are now seeing the wisdom of the previous generation’s gold holdings, he said.

The deepening world financial crisis as the burden of toxic housing debt pushed U.S. and European banks to the brink of collapse has roiled investors globally, causing many to rethink their approaches and potentially putting a new shine on gold. Read more here-http://www.gata.org/node/6689

-Marc Faber says US bailout won’t stop recession, buy gold. “I think gold will be a relatively good investment under any kind of scenario until the US government bans the ownership of Gold in the United States. “They are very good at changing the rules of the game now banning short sales [of financial and other US equities].

“So yes physical gold, you should own. Not derivatives with Citigroup, J.P.Morgan, UBS and investment banks, but physical and outside the US.” Read more here-

http://www.bi-me.com/main.php?id=25070&t;=1&c;=35&cg;=4&mset;=1011

Bailout Could Spur a New Gold Rush. A James Bond villain who would be overjoyed today if he hadn’t met the fate of all 007 adversaries is Goldfinger. The words vary, but that’s essentially the message from several market watchers who say they see sizable market risk in Uncle Sam’s bailout a $700 billion rescue package they call heavily flawed, strongly indicating the prospects of further dollar weakness and higher inflation. That, in turn, could trigger a new gold rush.

One money manager critical of the rescue package, Leonard Mohr, a principal of Los Angeles-based MCR Associates, tells me he expects it to set the stage soon for the dollar to drop to below 1/1,000th an ounce of gold. The dollar, which wrapped up 2007 at 1/833rd an ounce of gold, plummeted to an all-time low last March of 1/1,033th an ounce of gold and is currently hovering at around 1/880th an ounce of gold.

The tracker of precious metals and natural resources at Florida-based Weiss Research, Larry Edelson, also casts his ballot for a sharply lower dollar resulting from the bailout translating into a higher gold price. “The government is printing money like crazy to clean up the financial mess and prop up the economy, but at the same time it’s devaluing the dollar and creating hyperinflation, which is great for gold,” he says.

Mr. Edelson says he’s seeing a lot of the same symptoms that were visible in the 1920s, such as a collapsing dollar and rising unemployment. Given his expectations, he insists “no ifs, ands, or buts, gold is definitely on the ascendancy. It’s no longer just an inflation play, but a crisis hedge.” Read more here-

http://www.nysun.com/business/bailout-could-spur-a-new-gold-rush/86693/

-BarCap sees “perfect storm” for fresh gold spike. A near “perfect storm” has reformed in the gold market that should drive bullion to new record highs within the next six months, fuelled by a mix of anxious uncertainty and a weaker dollar outlook, a Barclays Capital official said on Monday.

While gold prices may weaken briefly if other markets rally in relief once U.S. legislators gave the greenlight to a $700 billion bailout of the financial system, a reconsideration of gold’s merits should propel it beyond the March record of $1,030.80 an ounce, says Jonathan Spall, a director in BarCap’s commodities division.

“I think we should make new highs within the next six months, I would’ve thought,” he told journalists at the London Bullion Market Association’s annual conference in Kyoto. “We should be in a perfect storm for gold.” Read more here-http://in.reuters.com/article/domesticNews/idINSP31119620080929

-GFMS’ Walker looking for $1,000 gold soon. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=63442&sn;=Detail or

http://www.bloomberg.com/apps/news?pid=20601012&sid;=a2KyQepx5PDw&refer;=commodities

-Investors return to gold “in a major way”: LBMA Chairman. Read more here-http://www.platts.com/Metals/News/8058055.xml?sub=Metals&p;=Metals/News&?undefined&undefined;

or http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=63514&sn;=Detail

-In Albuquerque and other cities around the country, some gold dealers said they have more business than they’ve ever seen. One New Mexico gold dealer said people are buying and selling gold in record numbers, but he said now is not the time to sell. In fact, he said he’s running out of gold to sell and put people on a wait list. He said he’s never seen anything like it before. David Castle owns a gold trading shop in Albuquerque and said when the economy becomes unstable, the price of gold rises and that means more business for him.

He said he has had a steady flow of customers buying and selling, but he said that now isn’t necessarily a good time to hawk pieces from your jewelry box. If you bought a necklace or a ring at a jewelry store, the price you paid probably includes the cost of design and manufacture, so you could actually lose money by selling now.

“The people that are selling gold, I think, should think about it twice. I always advise people, ‘If you don’t need the money don’t sell.’ But unfortunately we have a lot of people that need money for just gas.” Those are the times when things can get really depressing, Castle said. He said people are parting ways with sentimental items, like wedding rings because they are desperate for money to pay the bills. Read more here-http://www.wmtw.com/save-money/17589216/detail.html

-European central banks have cut their sales of gold to the lowest level in almost a decade, reversing the practice of recent years when hefty sales helped depress prices. Institutions bound by the Central Bank Gold Agreement the banks of the eurozone plus Sweden and Switzerland — sold about 343 tonnes of gold in the year that expired on Friday, the lowest amount since the first CBGA was signed in 1999.

This compares with 475.8 tonnes in the year to the end of September 2007. Under the agreement, the banks are allowed to sell up to 500 tonnes of gold each year. The European trend is part of a global movement of reduced central bank selling and increased investor buying that is helping to underpin high prices at a time of turmoil in financial markets.

GFMS, the precious metals consultancy, estimates global central banks will sell 269 tonnes of bullion in 2008, the lowest since 1995. Much of the selling by European banks took place between October and December last year. Read more here-http://www.gata.org/node/6684

-Germany, Switzerland are done selling gold. Read more here-http://eos.gata.org/node/6692

SILVER

-Best outlook for silver since the days of the Hunt brothers. Investors who think the silver price is due for a major increase, and at current prices it is cheaper than it was 28 years ago the only commodity to be in that position should be buying these companies for maximum price leverage against the rising price of the underlying metal.

How high could silver prices go? Well, just to recover their inflation adjusted average price in 1980 silver would top $125 an ounce, and if markets overshoot then $200 is possible. When you consider that the price at the time of writing is $11.10 that could prove to be the investment opportunity of the decade, and far more exciting than following Warren Buffet and waiting for the US financial sector to recover.

Incidentally he successfully played the silver market a decade ago and doubled his money in a short period, so do not rule out his also getting in on silver again. Read more here-http://news.silverseek.com/SilverSeek/1222408200.php

-Why is silver so cheap when there are shortages of physical silver? In the 70’s through to the culmination price highs gold increased 24x and silver nearly 40x. Silver can’t be mined by many of the world’s mines much lower than 15-17 bucks and most people want to make a profit so add some and you should have $20 at a minimum. Add the stupid ratio we have and it should be more like $50 plus, then there wouldn’t be a shortage and it would be mined to meet all demand.

Such is the law of wacky races this one will correct way to the upside and then find a new level. I like David Morgan’s saying re silver. “If it doesn’t scare you out it will wear you out” so go get some nappies, be patient and enjoy the ride! Read more here-http://www.rapidtrends.com/blog/2008/10/01/why-is-silver-so-cheap-when-there-are-shortages-of-physical-silver/

-Inflation will push precious metal prices much higher. Real assets hold value. In investment terms that means you hold something perhaps one of the few real assets that will retain its value as inflation devalues everything else around you. This is why I remain confident that as economists and markets digest the true cost of the bailouts in terms of inflation in the future that the value of gold and silver will rise.

Once this obvious truth becomes generally accepted then we can expect a sudden shift by retail investors into gold and silver for protection against inflation. Both are very small markets by comparison to global equities, real estate or bonds particularly silver, so the price movements will be very large.

Therefore, I would comfortably expect gold and silver to pass their March highs of $1,030 and $20 within a couple of weeks, and head on to $1,200 and $30 an ounce by the end of the year. Next year could be an anus mirabilis for precious metals with a doubling of gold and trebling of silver prices. Peter J. Cooper-Read more here-

http://news.goldseek.com/GoldSeek/1222864826.php

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1222712899.php

-Got Gold Report, Gold, Silver Demand White Hot. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=46521

COUNTERPARTY RISK WITH ETF’S

-Don’t buy gold and silver ETF’s. ETF Securities products plummet up to 50% on AIG fear. Shares in ETF Securities products, which are backed by AIG, were down as much as 50% this week after US insurer was downgraded by credit agencies S&P; and Moody’s. ETFS Precious Metals dropped 50.68%, ETFS All Commodities dropped 54.7%.

On its website ETF Securities says it has assets of $7.65bn under management in exchange traded commodities. These products track commodity prices using financial instruments mainly provided by AIG-FP which are backed by AIG. Read more here-http://www.investegate.co.uk/invarticle.aspx?id=58393

-ETF providers fear contagion risk. Exchange traded fund providers are scrambling to draw a line between themselves and other exchange traded products, amid fears that the counterparty risk in certain exchange traded notes and commodities is too great for investor comfort. Read more here-

http://www.ft.com/cms/s/0/bbafe6a4-8694-11dd-959e-0000779fd18c.html

DEFINITIONS-QUOTES-QUICK HITS

-Counterparty Risk. The risk to each party of a contract that the counterparty will not live up to its contractual obligations. In most financial contracts, counterparty risk is known as “default risk”. Investopedia.com

-Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies. Groucho Marx

-”The American consumer is toast, done, finished.” Stephen Roach, Morgan Stanley

-”We’ll see big write-downs all the way through next year that won’t abate until 2010.” Bank of America CEO Ken Lewis

-”I’ve never lived through something like that,” Stephen Jarislowsky, the 83-year-old chairman of Montreal-based money manager Jarislowsky Fraser Ltd., said this week after Wachovia Corp. joined Fannie Mae, American International Group Inc. and Washington Mutual Inc. on the list of financial companies to fail in the past month.

“I don’t even think the ’30s were like that,” he said in a telephone interview. ”At least they had a bank holiday and they closed all the banks. These idiots in Washington didn’t do that.”

“I’m more than worried,” said Jarislowsky, who co-founded his firm in 1955 and oversees C$51 billion ($49 billion). ”In a market like this, I’m not looking at opportunity. I am looking at preservation of capital. If governments aren’t careful and this mess isn’t solved fast, capitalism as we know it will be wiped out.” Read more here-

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

-Gold of between $3,000 and $5,000 is not impossible; the gold price should be well over $2,000 now. Bill Murphy GATA-Read more here-

http://www.miningmx.com/gold_silver/771756.htm

-I have never felt more sure about gold and the investments therein. I am not concerned about anything. Jim Sinclair

-’It is imperative you own some gold, some real gold, gold you can bite down on, gold that clanks.’ Dan Ferris, DailyWealth

-The bailout of Wall Street is being done with total disregard of the secondary and tertiary consequences. If you own paper assets instead of Gold, be prepared for the value of your wealth to deteriorate. Ned W. Schmidt-Read more here-http://news.goldseek.com/NedSchmidt/1222440239.php

-Jeffrey Christian, a managing director at CPM Group in New York, concurs, saying that, “Gold and silver will probably rise because they will be seen as a safe haven and as a portfolio diversifier. Investors around the world are turning to gold and silver as a means of protecting their assets from the financial maelstrom that we are in the middle of.” Casey Daily Resource

-James Moore, of TheBullionDesk.com, wrote that, “Given the volatility in the equities market and the likely downgrading of U.S. financial assets by the bailout deal, we again expect investors to diversify their portfolios and look favorably upon gold.” Casey Daily Resource

-Capital is also flowing into gold and we are now witnessing increased demand. The price of gold, after hitting a low of $740 only two weeks ago, has recovered to $882. While this is still well short of the record $1,014 seen in March 2008 we fully expect that level to fall before year end. Quite simply, gold that has no liability is a safer vehicle than US Treasury Bills that are merely debt obligations of the US Government. David Chapman-Read more here-http://news.goldseek.com/UnionSecurities/1222669080.php

-In the titanic battle between the gold bulls and the gold bears, the gold bears and powerful selling entities have again won the short term battle this week. But this looks set to be another pyrrhic victory as the shorts are likely to get their heads handed to them on a plate when gold’s supply/demand fundamentals which become more bullish by the day, ultimately overwhelm the short sellers.

Gold would appear to be well supported at the $850/oz to $860/oz level but anything is possible given the unprecedented nature of the volatility in global money markets. However, with interbank rates continuing to rise to new record levels, systemic risk remains elevated which will support gold.

Gold, unlike all other asset classes, is up some 17% in the last 3 weeks (since its recent September 11th lows it has gone from $750/oz to $878/oz Wednesday) and may need to consolidate between $850 and $910 prior to rechallenging $1,000/oz in the coming weeks. Gold.ie

-Both technically and fundamentally gold is looking as good as it has ever done and prices are set to surge in the coming months. Informed speculation is that once the election is over on November 4th we will see fireworks in these markets and a price surge akin to that seen in the late 1970s. In the four years after the election of Jimmy Carter, gold surged by more than 700% and given the confluence of even more bullish factors in this election year, we are likely to see a similar price surge.

It appears we are witnessing a broad based flight to safety internationally with increasing retail, hedge fund, institutional and even central bank buying of gold. The price would appear to be artificially capped at the $900/oz level for the moment but given the extent of the growing demand, any short term manipulations will be just that as the long term fundamentals will see markedly higher prices. Gold.ie

-Despite the wildly bullish fundamentals, gold remains taboo in most of the financial press. It is rarely covered and when it is covered, it is done superficially and more often than not negatively and sometimes even inaccurately. Some stockbrokers and purveyors of other financial products (most of whom never predicted any of the recent financial and economic developments whatsoever and never warned of possible macroeconomic and systemic risk) have lost much of their clients’ wealth and yet continue to spout nonsense about gold.

They will be found out in the coming months and many questions will rightly be asked regarding what purported to be personal finance and wealth management advice in the coming months. Questions will especially be asked of those of who failed to inform the investment community of the very bullish fundamentals driving the gold market.

Some have deterred investors from making an essential diversification into gold, one of the few asset classes that will protect and even increase wealth in the coming months. It appears we are witnessing a broad based flight to safety internationally with retail, hedge fund, institutional and even central bank buying of gold having increased in recent days. Gold.ie

-The global financial crisis will support gold prices at near-record levels, according to the chairman of the London Bullion Market Association. Speaking at the LBMA’s annual conference on Monday, Jeremy Charles told delegates that gold’s important role as a haven had returned.

Mr. Charles, who also acts as head of precious metals at HSBC in London, said “High bullion prices are here to stay. Those who traditionally have shied away from gold as part of an investment portfolio can no longer afford to ignore this unique asset. “It is my opinion that, even when the crisis draws to an end as it inevitably will at some point, that gold will be looked at in a very different light going forward.” Gold.ie

RARE COLORED DIAMONDS

-For centuries, jewellery has been a symbol of wealth and riches. In today’s world of high-interest deposit accounts, shares, listed property trusts and managed funds, however, does it stand up as a legitimate long-term investment? The answer depends upon who you speak to, but the overall theme is that you need to invest in the quality end of the market.

Jeweller and Shiels managing director Albert Bensimon says he has dealt with many jewellery investors over the years and “some have done extremely well.” “They’re usually people with some money to start off with,” he said. Bensimon said one client bought a $250,000 Mercedes-Benz several years ago and recently sold it for $80,000, while the $80,000 pink Argyle diamond he bought at the same time now was worth $600,000.

Another client has watched the value of his $200,000 16-carat diamond increase to $1.3 million. “But that’s an extreme case. People should not think ‘I will buy a diamond and double my money quickly’,” Bensimon said.

So is jewellery a good investment? “I would like to say yes but always with some caution,” Bensimon said. “If you are going to treat it as an investment, go for the quality end.” Supply and demand issues affect jewellery prices like they do the overall investment market. “Any diamond over 10 carats is in huge demand by the Russians they have gone mad on size,” Bensimon said.

“This is the first time in 30 years that there is a supply-and-demand issue with diamonds.” Bensimon said that unlike the $100,000 luxury car that would eventually turn to rust, quality jewellery would go up in price. “You get no enjoyment out of seeing shares in the market but you can see and wear a $10,000 ring for 10 years and still get something for it,” he said.

“Every one-carat diamond I have sold 10 years ago, I would buy it back tomorrow for substantially more than it was then.” When investing in quality jewellery, people need to spend thousands, not hundreds of dollars, Bensimon said. The minimum investment period is three to five years. “If you are not looking five years ahead, forget it.” Read full story here-

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23489

-Diamonds are safe haven, Harry Winston says. Demand for safe-haven investments and a dearth of significant new mines will lift diamond prices after the world’s financial markets stabilize, Harry Winston Diamond Corp. chief executive Robert Gannicott said.

Global supplies of rough diamonds are unlikely to meet expected demand as purchases rise with wealth in Russia, the Middle East and elsewhere in Asia. “There’s a lot more upside in diamond prices than the public market appreciates,” Mr. Gannicott said Tuesday in an interview in New York. “I don’t think the supply-demand gap is understood very well.”

Since early 2007, the price of some 3-carat diamonds have risen fourfold on speculation demand would outstrip supply. “If you bought good quality stones five years ago, you’re looking at a much bigger win than anything in the stock market,” Mr. Gannicott said.

“Rough diamond supply is likely to fall short of expected demand within the next three to five years,” London-based RBC Capital Markets analyst Des Kilalea said in an Aug. 27 note to clients. “Production growth will be limited as older mines become deeper and production is scaled back, while new production is not expected to fill the gap.”

A slow regulatory process in some countries will delay the startup of new mines, Mr. Gannicott said. Significant new diamond discoveries will probably await development of the industry’s next “magic wand,” or some breakthrough technology that improves the odds of explorers finding diamonds, said Mr. Gannicott, a geologist by training.

On the demand side, Mr. Gannicott expects sales to rise in China, India, the Middle East and Russia, partly for cultural reasons that are not well understood in Western countries. As sales in the U.S. have slowed, women in Russia and the Middle East have been increasing purchases of diamonds as security against the possibility of divorce, he said.

“The ladies that become owners of these things don’t have the benefit of divorce laws that we’re used to,” said Mr. Gannicott. “The ownership of a very expensive piece of jewellery that is clearly theirs and is clearly portable means a lot more than it would in our society.” Read more here-http://www.nationalpost.com/news/story.html?id=850003

-Harry Winston Says Asian Diamond Demand May Resist U.S. Turmoil. Harry Winston Diamond Corp. Chief Executive Officer Robert Gannicott says Russian, Chinese and Indian buyers may prop up demand for luxury jewelry as sales to U.S. customers decline amid financial turmoil.

Sales at Harry Winston’s flagship jewelry shop on New York’s Fifth Avenue have risen 15 percent this year, helped by demand from clients in Asia and the Persian Gulf, Gannicott said today in an interview. Increasing jewelry sales to buyers from beyond U.S. borders have Gannicott optimistic the industry may escape the worst of the widening U.S. financial crisis. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aJOLxLz5lLrE&refer;=canada

COMMODITIES-OIL

-Despite severe commodities correction, Citigroup insists mining supercycle will survive. Citigroup metals analysts say they regard current mining/metals conditions “to be a severe correction amid a secular bull market” that possibly may come back even stronger. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=63674&sn;=Detail

-Credit Crisis May Affect 2009 Harvest, Schafer Says. The credit crisis roiling financial markets may affect next year’s corn, wheat and soybean output as farmers find themselves unable to get loans to buy seeds and fertilizer, according to U.S. Agriculture Secretary Ed Schafer.

“We certainly could see tight credit having an effect on agricultural production” in the U.S., Schafer told reporters after speaking to Department of Agriculture employees in Washington. “The costs of farming operations today are huge, and that backs up to the banks that have balance sheets that are tight, it backs up to elevators that have credit stretched out.”

Farmers, who may reap record profits of $95.7 billion this year according to the USDA, are also experiencing the highest costs ever. Farm expenses are projected to rise 16 percent this year to $294.8 billion, with higher fertilizer, fuel and seed prices biting into profits, the department said in an August report. Adjusted for inflation, costs will be the highest since 1980, before falling crop prices pushed farmers into the biggest agricultural crisis since the Great Depression. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aQfDSBXUXOo0

-Time to bet on an oil crunch. Oil prices will keep rising, says billionaire investor Richard Rainwater and he’s putting money on it. Back in May, when oil was at $129 per barrel and rising, billionaire investor Richard Rainwater did something as prescient as it was shocking: He sold off all the energy stocks he owned. Now he’s making another bold move: He’s betting on oil again. Read more here-http://money.cnn.com/2008/10/01/news/economy/rainwater_okeefe.fortune/index.htm

FINANCIAL CRISIS

-Buffett: Bailout may not be big enough. Investment guru says $700 billion bailout is crucial, but that it may not be large enough to solve the credit crisis. Warren Buffett said Thursday that it is crucial to the global economy that the controversial $700 billion Wall Street bailout passes, but warned that the pricetag may have to rise. Buffett also proposed that the U.S. Treasury Department and private investors team up to buy the troubled mortgage assets behind the crisis gripping markets worldwide.

“If we don’t get [this] solved next week, I may go back to delivering papers,” said Buffett during an appearance at Fortune’s Most Powerful Women Summit in Aviara, Calif. Buffett, the chairman and CEO of Berkshire Hathaway (BRK.A), likened the recent turmoil in the markets to an “economic Pearl Harbor” and said that a quick response is needed.

“We’ve never seen anything like this where perfectly credit-worthy companies can’t get funds,” he said. Read more here-

http://money.cnn.com/2008/10/02/news/newsmakers/buffett.fortune/index.htm

-U.S. ‘Casino’ Mentality Blamed for Planet’s Meltdown. Astounded by the U.S. government’s failure to resolve the financial crisis threatening the foundations of the global free market, fingers of blame are pointing at America from around the planet. Latin American leaders say the U.S. must quickly fix the financial crisis it created before the rest of the world’s hard-won economic gains are lost.

“The managers of big business took huge risks out of greed,” said President Oscar Arias of Costa Rica, whose economy is highly dependent on U.S. trade. “What happens in the United States will affect the entire world and, above all, small countries like ours.”

In Europe, where some blame a phenomenon of “casino capitalism” that has become deeply engrained from New York to London to Moscow, there is more of a sense of shared responsibility. But Europeans also blame the U.S. government for letting things get out of hand.

Amid harsh criticism is a growing consensus that stricter financial regulation is needed to prevent unfettered capitalism from destroying economies around the globe. And leaders of developing nations that kept spending tight and opened their economies in response to American demands are warning of other consequences a loss of U.S. influence globally and the likelihood that the world’s poor will suffer the most from greed by the biggest players in global finance. Read more here-http://www.gata.org/node/6702

-Cash-Starved Companies Scrap Dividends, Tap Credit to Survive. Carmike Cinemas Inc., the third- largest U.S. theater chain by screens, suspended its dividend, while Duke Energy Corp., owner of utilities in five U.S. states, tapped $1 billion from a credit agreement and RC2 Corp., the maker of infant and preschool products, canceled an acquisition.

The paralysis in credit markets is changing how U.S. companies do business as banks pull back on loans or make them prohibitively expensive. Some companies are closing plants and stores, postponing takeovers and grabbing any available credit in a fight for survival.

“If businesses don’t have access to capital, smaller companies in particular, they might get wiped out,” said Alec Young, a New York-based equity strategist at Standard & Poor’s. ”It’s impossible to quantify how expensive this crisis is going to be for Corporate America; there’s unlimited downside.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aa28qIGme_R8&refer;=home

-Bank Limits Fund Access by Colleges, Inciting Fears. In a move suggesting how the credit crisis could disrupt American higher education, Wachovia Bank has limited the access of nearly 1,000 colleges to $9.3 billion the bank has held for them in a short-term investment fund, raising worries on some campuses about meeting payrolls and other obligations. Read more here-

http://www.nytimes.com/2008/10/02/education/02college.html?_r=3&ref;=us&oref;=slogin&oref;=slogin&oref;=slogin

-Fed May Lose Out on Bear Assets, Bank of America Says. The U.S. Federal Reserve may lose as much as $6 billion on a portfolio of mortgage-backed assets it took over from Bear Stearns Cos., according to Bank of America Corp. analysts. Read more here-http://www.bloomberg.com/apps/news?pid=20601206&sid;=akRlc4ks5mDc&refer;=realestate

-’The Golden Age for financial services is over’. The new most powerful man in finance, Bank of America CEO Ken Lewis, talks about the future of Wall Street and the economy. Read more here-http://money.cnn.com/2008/09/28/news/companies/tully_lewis.fortune/index.htm

-Financial Crisis: So much for tirades against American greed. Ambrose Evans-Pritchard says it is ironic that European banks have turned out to be deeper in debt than their US counterparts. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3118994/Financial-Crisis-So-much-for-tirades-against-American-greed.html

-Financial Crisis: The next decade could be our very own Great Depression. Read more here-http://www.telegraph.co.uk/finance/comment/edmundconway/3090601/Financial-Crisis-The-next-decade-could-be-our-very-own-Great-Depression.html

-Chinese regulator calls US lending ‘ridiculous’. Read more here-http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/09/27/financial/f040132D61.DTL&type;=printable

-Credit crunch banker leaps to his death in front of express train. Read more here-http://www.dailymail.co.uk/news/article-1063356/Credit-crunch-banker-leaps-death-express-train.html

WAMU IN BIGGEST BANK FAILURE

-WaMu Assets Sold to JPMorgan in Record Bank Failure. Washington Mutual Inc. was seized by government regulators and its branches and assets sold to JPMorgan Chase & Co. in the biggest U.S. bank failure in history.

WaMu became “unsound” after customers withdrew $16.7 billion since Sept. 16, the Office of Thrift Supervision said yesterday. Branches are open and depositors have full access to their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVA8ErWOAjmI&refer;=worldwide

FORTIS BANK RESCUED

-Fortis Forced Into Rescue as Banking Crisis Worsens. Fortis became the largest European financial-services firm forced into a government rescue after the worsening global crisis shattered investor confidence.

Belgium, the Netherlands and Luxembourg will inject 11.2 billion euros ($16.3 billion) by taking minority stakes in Fortis’s banking units in each country, the governments said in a statement late yesterday. Fortis will also sell the Dutch banking operations of ABN Amro Holding NV purchased just last year. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=a9fhOKGrJQPg or http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVu.cl23xFhk&refer;=home

ICELAND SEIZES BANK

-Iceland seizes troubled Glitnir bank. Glitnir, threatened by collapse, is nationalized by Iceland’s government, which buys a 75% stake for $878M. Read more here-

http://money.cnn.com/2008/09/29/news/international/Iceland_glitnir.ap/index.htm

U.K. MORTGAGE LENDER NATIONALIZED

-UK mortgage lender nationalized. British Treasury confirms it is taking over Bradford & Bingley in effort to preserve stability. Read more here-

http://money.cnn.com/2008/09/29/news/international/bradford.ap/index.htm

U.S. RECESSION COMING

-IMF Says U.S. Faces ‘Sharp Downturn’ as Market Crisis Worsens. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aNeRYv3hytE0

-U.S. Heading for Slump, With or Without Bailout. The U.S. may face its longest recession in a quarter century no matter what action Congress takes on Treasury Secretary Henry Paulson’s $700 billion plan to rescue the battered banking industry. Economists including Joseph Lavorgna of Deutsche Bank Securities and David Greenlaw of Morgan Stanley said it now appears the economy shrank in the third quarter as credit- crimped consumers cut spending for the first time since 1991.

A further contraction is likely in the next two quarters, some economists predicted, which would make the recession the longest since 1981-82. “This has been a body blow to consumer and business confidence,” said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania. ”The next six months are going to be very difficult.”

How bad it gets depends on whether Congress passes some form of assistance for the banks. The Standard & Poor’s 500 index plunged 8.8 percent Monday, its biggest fall since 1987, after the House of Representatives rejected the rescue package. The stock-market rout wiped out a record $1.3 trillion of wealth. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=ayyjXs25Y7oE&refer;=home

-U.S. Factories Contracted at Faster Pace in September. Manufacturing in the U.S. contracted in September at the fastest pace since the last recession as sales slowed, signalling the credit crisis is spreading beyond Wall Street.

The Institute for Supply Management’s factory index dropped to 43.5, less than forecast and the lowest since October 2001, the Tempe, Arizona-based group reported today. A reading of 50 is the dividing line between expansion and contraction.

The housing slump has already spread to autos, and other industries may soon follow, as mounting foreclosures, tougher lending rules and rising unemployment choke off consumer spending. While exports have so far kept manufacturing from slipping much more, weakening economies around the globe are also causing overseas sales to slow.

“Manufacturing could be on the brink of a collapse,” said Lindsey Piegza, a market analyst at FTN Financial in New York. ‘There are no orders, no jobs and there is really no incentive for businesses to invest. The credit crisis is compounding the problem.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=asVxx.6YtnmU

-U.S. September Job Cuts Rise 33% From Year Ago, Challenger Says. Job cuts announced by U.S. employers climbed 33 percent in September from a year earlier, led by reductions at computer- and automakers, according to a private placement firm. Firing announcements rose to 95,094 last month from 71,739 in September 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today.

Hewlett-Packard Co., the world’s largest computer-maker, said last month it would eliminate 24,600 jobs, accounting for much of September’s increase, Challenger said. A slowdown in consumer spending and the ongoing housing recession are forcing businesses to trim payrolls to preserve profits. Firings may continue to rise as banks make credit more difficult to obtain. “It may take several weeks or months for the fallout from September’s Wall Street turmoil to hit the unemployment numbers,” John A. Challenger, chief executive officer of the placement company, said in a statement.

“Companies are cutting costs, and investments in new technology may be put on hold.” The Labor Department may report on Oct. 3 that the economy lost jobs in September for a ninth consecutive month. Economists surveyed by Bloomberg News forecast payrolls dropped by 105,000 in September after declining by 84,000 in August. Companies have announced a total of 763,090 cuts so far this year, up 30 percent from the first nine months of 2007, according to Challenger’s survey. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aM7LINS06Ewo

-Buffett Says Economy ‘on Floor’ After Cardiac Arrest. Billionaire Warren Buffett, the world’s preeminent stock picker, said the U.S. economy is ”flat on the floor” after a cardiac arrest as companies struggle to secure funding and unemployment increases.

“In my adult lifetime I don’t think I’ve ever seen people as fearful, economically, as they are now,” Buffett said today in an interview with Charlie Rose to be broadcast tonight on PBS. “The economy is going to be getting worse for a while.”

The biggest housing slump since the Depression has spurred a wave of defaults and a yearlong contraction in global credit markets, squeezing companies’ capacity for investment. Buffett’s Berkshire Hathaway Inc., based in Omaha, Nebraska, agreed in the past two weeks to buy $8 billion in preferred shares from General Electric Co. and Goldman Sachs Group Inc. to help the companies fund their businesses. The credit freeze is “sucking blood” from the U.S. economy, Buffett said. Read more here-

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

MORE U.S. DEBT

-Budgetary Consequences of the Financial Crisis. Once one begins to take a look at the staggering problem at hand, the deficit that was previously projected by the Congressional Budget Office of -$438 billion could easily double. Our first cut estimate now expects that the deficit could reach as high as -$585 billion in fiscal year 2009. Read more here-

http://news.goldseek.com/GoldSeek/1222434620.php

-Giant U.S. debt a crisis waiting to happen. Crunch will come by 2020, lobbyist warns. Soon very soon the national debt of the United States will reach a staggering $10 trillion. If Fed Chairman Ben Bernanke dropped by and scribbled you a cheque for that amount of dough, it would look like this: $10,000,000,000,000.

Count ‘em up. That’s 13 zeroes. Kind of makes your head spin, doesn’t it? By any measure, that’s a massive pile of greenbacks. It’s roughly equivalent to seven times Canada’s annual GDP, or more than 14 times the size of the $700-billion-US Wall Street bailout er, “financial system rescue package” the U.S. Senate voted on last night.

With annual U.S. economic output of $14.3 trillion, the national debt-to-GDP ratio for the world’s biggest economy now hovers near 70 per cent. It’s certain to get a lot worse as the economy weakens, tax revenues slide and bailout costs mount, although no economist can provide a credible estimate, given the profound uncertainties now facing the U.S. economy.

Some say the U.S. budget deficit for fiscal 2009 could hit $1 trillion, or more than double the expected deficit for fiscal 2008, as Washington absorbs the costs of the bailout, the government takeover of residential mortgage giants Fannie Mae and Freddie Mac, the rescue of insurance behemoth AIG, and of course the ongoing wars in Iraq and Afghanistan.

That’s why the bailout plan calls for the U.S. to raise the statutory ceiling on government debt to more than $11.3 trillion from $10.6 trillion. Once OK’d, it would mark the seventh such hike since early 2004, and the second since July 30, when the ceiling rose by $800 billion. Since President George W. Bush took office, the U.S. national debt has grown by more than $4 trillion, to more than $9.9 trillion. Read more here-http://www.canada.com/edmontonjournal/news/story.html?id=075556bc-511b-4699-a500-5503714b9b85

INTEREST RATES

-ECB Keeps Rate at 4.25% Even as Recession Looms. The European Central Bank kept interest rates at a seven-year high today to curb inflation, even after the credit crunch forced governments to bail out banks and increased the likelihood of a recession. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aQjn7jKU1eoU

U.S. DOLLAR TO WEAKEN IN THE LONG RUN

-Chinese Banker Predicts Weakened U.S. Dollar in Long Term. The U.S. dollar will face short-term fluctuations and weaken in the long run, a leading Chinese banker predicted here on Sunday. Speaking at the Summer Davos forum in this north China port city, Bank of China Vice President Zhu Min said he believed it would be less likely for the United States to sell more treasury bonds to other countries to obtain the funds needed to bail out the turmoil-beleagued financial market, which would only accelerate inflation in other countries.

Instead, the U.S. could only issue other bonds to finance the rescue plan, which Zhu said would definitely cause the dollar depreciation in the long term. The bailout fund will have topped $1 trillion U.S. dollars if the U.S. Congress passes the Fed’s $700 billion financial rescue plan.

Zhu said market confidence could not be recovered simply with the help of the $700 billion, saying the U.S. dollar is a currency with turbulent fluctuations. “It takes a long time to solve the current liquidity strains and investment crisis,” Zhu said. Zhu also saw short-term fluctuations for the dollar since investment demand for the dollar is dropping and there could be “more bad news” in the coming few weeks. Read more here-http://www.gata.org/node/6682

U.S. STOCKS HAVE FURTHER TO FALL ACCORDING TO DOW THEORY

-U.S. Stocks Have Further to Fall, Dow Theory Says. Transportation stocks are signaling the market is poised for more losses after the Dow Jones Industrial Average posted its biggest-ever point decline.

Dow Theory, created by Wall Street Journal co-founder Charles Dow in 1884, holds that the 30-stock industrial average takes cues from the Dow Jones Transportation Average. The gauge of companies such as FedEx Corp. and Ryder Systems Inc. slid yesterday to the lowest since March 17, suggesting the industrials’ biggest point decline ever won’t mark its bottom, some investors say.

“When the Dow transports are making new lows, that generally signals more trouble for the markets,” said Frederic Dickson, who manages $17 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. ”The transports are really a signal of what Wall Street thinks of overall economic prospects.”

According to Dow Theory, weakness or strength in manufacturing will last only if matched in the shipping of products. Until Monday, when the transports joined the industrials in giving up gains since mid-July, that trend was bullish. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aqB2tptFv8zg

-Dow to fall to 7,000, FTSE to 3,300. We will eventually hit a real bottom in global stock markets perhaps around the levels I have indicated or a little lower. By then gold will be $2,000 an ounce or more and silver $60-70. Precious metals will be the best performing asset class by far in a sea of red ink. I think this will all take 18-24 months. But it could come very much quicker with a stock market crash as early as next month. Peter J. Cooper-Read more here-http://news.goldseek.com/GoldSeek/1222696980.php

BUFFETT BUYS INTO GE

-GE Raises $15 Billion; Buffett Gets Preferred Stake. General Electric Co. plans to offer $12 billion in common shares and billionaire investor Warren Buffett’s Berkshire Hathaway Inc. will buy $3 billion in preferred shares as GE bolsters its cash cushion amid volatile markets.

Buffett’s stake will pay an annual 10 percent dividend and is callable after three years at a 10 percent premium, Fairfield, Connecticut-based GE said today in a statement. Buffett also gets warrants to buy $3 billion of common stock with a strike price of $22.25 a share for five years.

The offering and stake will let GE accelerate the plan Chief Executive Officer Jeffrey Immelt announced last week to bolster its finances amid volatile financial markets. Buffett, 78, last month bought $5 billion in Goldman Sachs Group Inc. preferred shares to show faith in the investment banking company. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=a38DBL6ufMgw&refer;=home

LEHMANS 100% PRINCIPAL PROTECTIONS MEANS PENNIES ON THE DOLLAR

-Lehman’s ‘100% Principal Protection’ Means Pennies for Notes. A brochure pitching $1.84 million of notes sold by Lehman Brothers Holdings Inc. in August, a month before the firm filed for bankruptcy, promised “100 percent principal protection.”

Buyers had “uncapped appreciation potential” pegged to gains in the Standard & Poor’s 500 Index, the brochure said. In the worst case, they would get back their $1,000-per-note investment in three years. Only the last in a list of 15 risk factors mentioned the biggest danger: “An investment in the notes will be subject to the credit risk of Lehman Brothers.”

Lehman’s Sept. 15 bankruptcy leaves holders of the notes waiting in line with other unsecured creditors for what’s left of their money. The collapse has rattled Wall Street’s $114 billion structured-notes business, which Lehman, Merrill Lynch & Co., Morgan Stanley and Goldman Sachs Group Inc., all based in New York, used to raise cheaper funding as the credit crisis drove bond yields higher. About three-fifths of the $68.1 billion sold this year were bought by individual investors, according to data compiled by mtn-i, a London-based firm that tracks the market.

“Investors are going to be a lot more concerned about the credit of the issuers of these notes,” said James Angel, an associate professor of finance at Georgetown University in Washington. Until recently, “the buyers may have been mesmerized by the bells and the whistles,” he said.

The market for structured notes constructed by Wall Street firms from a combination of bonds, stocks, commodities, currencies and derivatives has mostly avoided fallout from the slump in sales of mortgage-backed collateralized debt obligations and auction-market preferred securities. Read more here-

http://www.bloomberg.com/apps/news?pid=20601109&sid;=aPQXoCH.fIa0&refer;=home

CREDIT DEFAULT SWAPS THE NEXT DISASTER?

-The $55 trillion question. The financial crisis has put a spotlight on the obscure world of credit default swaps which trade in a vast, unregulated market that most people haven’t heard of and even fewer understand. Will this be the next disaster?

In just over a decade these privately traded derivatives contracts have ballooned from nothing into a $54.6 trillion market. CDS are the fastest-growing major type of financial derivatives. More important, they’ve played a critical role in the unfolding financial crisis. First, by ostensibly providing “insurance” on risky mortgage bonds, they encouraged and enabled reckless behavior during the housing bubble.

“If CDS had been taken out of play, companies would’ve said, ‘I can’t get this [risk] off my books,’” says Michael Greenberger, a University of Maryland law professor and former director of trading and markets at the Commodity Futures Trading Commission. “If they couldn’t keep passing the risk down the line, those guys would’ve been stopped in their tracks. The ultimate assurance for issuing all this stuff was, ‘It’s insured.” Read more here-http://money.cnn.com/2008/09/30/magazines/fortune/varchaver_derivatives_short.fortune/index.htm

CREDIT CARDS TO IMPLODE

-A hurricane of bad credit card debt will start crashing ashore in the United States in the first quarter of next year, even as the mortgage crisis continues, analysts at New York research firm Innovest Strategic Value Advisors warned Monday.

“A combination of a 10-year steady drip of deteriorating personal finances and a tidal wave brought on by the mortgage and credit crisis leads us to believe that credit cards are going to implode in the near term,” Gregory Larkin, Innovest’s senior banking analysts said during an online seminar on the topic.

So far, credit-card “charge-offs” debts declared irrecoverable by card issuers have been “defying gravity,” with losses lower than in both 2001 and 2005, Mr. Larkin said. But, historically, after a time lag, irrecoverable credit-card debt has followed mortgage charge-offs up or down, and U.S. mortgage charge-offs have rocketed up eight-fold since the last quarter of 2007.

“If history is any indicator, there should be an equivalent surge in credit-card charge-offs very soon,” he said. “We forecast first quarter credit-card charge-offs will be $18.6-billion (U.S.) and that the total 2009 charge-off bill will add up to $96-billion.” Read more here-http://www.globeinvestor.com/servlet/story/RTGAM.20080929.wcreditcards0929/GIStory/

MORE CAR DEALERSHIP CLOSURES COMING-CAR SALES DOWN

-Dealership Closures May Accelerate This Year as Car Sales Slump. U.S. new-vehicle dealership closures may rise as much as 40 percent this year as slumping sales and surging borrowing costs cut into profits, the National Automobile Dealers Association said today.

As many as 600 may shut down or consolidate with other dealers, equal to about 3 percent of the total, said Paul Taylor, an economist at the McLean, Virginia-based group. That compares with 430 a year ago. Dealers that sell cars from General Motors Corp., Ford Motor Co. and Chrysler LLC probably will account for the bulk of the closings, Taylor said. Americans have tightened spending as gasoline prices hover at record levels. At the same time, dealers are paying higher interest rates to get cars on their lots, shrinking profit margins.

”There are more dealerships out there than there are cars to sell,” Taylor said in a telephone interview. The U.S. had 20,770 new car dealerships at the start of 2008. Two days ago, Bill Heard Enterprises Inc., operator of the largest Chevrolet dealership in the U.S., filed for bankruptcy protection as financing conditions worsened. Credit markets have frozen amid the worst U.S. financial crisis since the Great Depression, triggered by losses on mortgage-backed securities. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=au0IdtYdyw1s

-Ford, Honda U.S. Sales Plummet as Credit Tightens. Ford Motor Co. and Honda Motor Co.’s U.S. sales of cars and trucks tumbled in September as tighter credit scared off consumers.

Sales at Ford, the second-largest U.S. automaker, fell 35 percent from a year earlier, the Dearborn, Michigan-based company said in a statement today. Honda reported a 24 percent drop.

Industrywide sales probably will fall for the 11th month in a row, the longest slide in 17 years, as the financial crisis caused lenders to toughen loan standards and consumers curbed spending. Sales already had dropped 11 percent through August, in part because of high gasoline prices.

Ford’s decline ”is an indicator of the state of the industry, with the credit problem hitting all segments, all types of vehicles,” said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. ”People of all economic backgrounds are going to be impacted.”

The annual sales rate for September may drop to 13 million cars and light trucks, the average estimate in a Bloomberg survey of 36 analysts and economists. The rate was 16.2 million in September 2007, according to data compiled by Bloomberg. U.S. yearly sales reached a record 17.4 million in 2000 and averaged 16.8 million this decade. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aA5.92WRqrHQ&refer;=home

REAL ESTATE

-Home Prices in 20 U.S. Cities Declined 16.3% in July. House prices in 20 U.S. cities declined in July at the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month’s credit crisis. The S&P;/Case-Shiller home-price index dropped 16.3 percent from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

The housing slump is at the center of the meltdown in financial markets as declining demand pushes down property values and causes foreclosures to mount. Banks will probably stiffen lending rules even more in coming months to limit losses, indicating residential real estate will keep contracting and consumer spending will continue to falter.

“The fact that house prices quickened their slide before the worst point in credit markets hit this month does not bode well,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto. Home prices decreased 0.9 percent in July from the prior month after declining 0.5 percent in June, the report showed. The figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month-to-month. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aEyKpTpk90C0&refer;=home

-Singapore Home Prices Post First Drop in Four Years. Read more here-http://www.bloomberg.com/apps/news?pid=20601080&sid;=aeZ7pZbL2B6I&refer;=asia

-Canadian housing shows bubble traits: economist. U.S. economist Robert Shiller says Canada’s housing market has been following a similar boom-and-bust path as that seen in the United States, but fundamental differences between the two leave Canada less exposed to the U.S.-style fallout.

“There have been booms in some Canadian cities Edmonton, Calgary, Vancouver but maybe [prices] are weakening or actually falling, at least in those boom cities,” he said, noting that the pattern somewhat resembles that seen in many U.S. and foreign markets over the past few years.

“To me, it would be surprising if Canada didn’t involve itself somewhat in the U.S. real estate bubble, and subsequent bust,” the famed author and Yale University professor told the Ontario Economic Summit. However, he suggested that the relatively small use of subprime mortgages in Canada should mean the damage in this country will be much less severe. “There’s a difference. We [in the United States] have had a subprime revolution that I don’t think took place, to the same extent at least, in Canada.” Read more here-

http://www.reportonbusiness.com/servlet/story/RTGAM.20081001.wshiller1001/BNStory/Business/home

or http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=825f956c-2742-4de3-8972-da0b07708ecc

FORECLOSURES

-Metro U.S. Home Prices Fall on Higher Foreclosures. Home prices dropped in 24 of 25 U.S. metropolitan areas in July from a year earlier, led by declines in Las Vegas and the coastal cities of California, as foreclosures depressed property prices.

Las Vegas had the biggest drop on a per-square foot basis, falling 33 percent, New York-based real estate data company Radar Logic Inc. said in a report today. Los Angeles, Phoenix, Sacramento and San Francisco each dropped about 28 percent. Three of the five worst-performing markets were in California. “Buyers are increasingly reluctant,” Radar Logic Chief Executive Officer Michael Feder said in an interview. ”There has been an awful lot of talk about the declining of the housing markets.”

U.S. foreclosures rose to a record 2.75 percent of all mortgages in the second quarter, according to the Washington- based Mortgage Bankers Association. Foreclosed houses tend to sell at a discount of about 20 percent, according to research by Lehman Brothers Holdings Inc. Those discounts are weighing on prices throughout the country, Radar Logic said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aTiVFv29og1s&refer;=home

-U.S. foreclosure filings soar. Wyatt Kenoly doesn’t have a lot of time to watch politicians haggle over the $700-billion (U.S.) rescue package for Wall Street or follow the stock market gyrations. He’s too busy trying to stave off foreclosure of his home in Stockton, Calif. The monthly payment on his $425,000 mortgage is about to double to slightly more than $4,000. He and his wife bought the house in 2004, taking an interest-only loan that has been resetting at higher rates for the past couple of years.

While the loan payments have soared, the value of the house has sunk and it’s now worth about $240,000. The couple just can’t pay the mortgage any more. “It is grim,” Mr. Kenoly said Tuesday after spending the morning negotiating with his bank, HSBC Bank. “We can only hope and pray.” Read more here-http://www.globeinvestor.com/servlet/story/RTGAM.20080930.wmeltdownsubprime01/GIStory/

GEOPOLITICAL NEWS

-Israel asked US for green light to bomb nuclear sites in Iran. US president told Israeli prime minister he would not back attack on Iran, senior European diplomatic sources tell Guardian. Read more here-http://www.guardian.co.uk/world/2008/sep/25/iran.israelandthepalestinians1

-Bet on Israel bombing Iran. Are we going to have an October surprise, an attack on Iran by either the Bush administration or by Israel to stop the regime from becoming a nuclear power?

It could happen and alter the dynamics of the presidential race in the blink of an eye but only if Israel pulls the trigger.

Don’t expect the United States to drop bombs anytime soon. The reason: Iran has us over a barrel. According to Britain’s Guardian newspaper, Bush earlier this year nixed an Israeli plan to attack Iran’s nuclear facilities. Reportedly, the President said no because we couldn’t afford Iranian retaliation against our troops in Iraq and Afghanistan or Iran closing down Persian Gulf shipping.

Nonetheless, cynical speculation is now swirling in some quarters that with the financial collapse working against McCain and Bush’s legacy coming into focus the President might reconsider. Could that tail really wag the dog? Read more here-http://www.nydailynews.com/opinions/2008/09/27/2008-09-27_bet_on_israel_bombing_iran.html

-Pentagon Seeks $57 Billion More in 2010, Jonas Says. The U.S. military wants an increase of $57 billion in fiscal 2010, about 13.5 percent more than this year’s budget of $514.3 billion, according to the Pentagon’s outgoing comptroller. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aWrLKUxMFUYA

-Russia sees in credit crisis end of U.S. domination. Read more here-http://www.iht.com/articles/2008/10/02/europe/russia.php

-China report urges missile shield. The United States needs new weapon systems, including missile defenses and other advanced military capabilities, to deter and counter China’s steady buildup of nuclear and conventional arms, according to a draft internal report by a State Department advisory board. Read more here-

http://www.washingtontimes.com/news/2008/oct/01/new-us-defenses-sought-to-counter-beijing-buildup/

-Nuclear Terrorism Is No. 1 Threat, ElBaradei Says. The likelihood that terrorists will detonate a nuclear weapon poses the greatest risk to world security, surpassing proliferation threats from Iran and North Korea, United Nations atomic chief Mohamed ElBaradei said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ae.wPfK0oXfM&refer;=home

The GoldBugg Report – October 07, 2008
Posted by Worldwide Precious Metals on Tuesday, October 7, 2008

01/31/12 view
01/24/12 view
01/17/12 view
01/10/12 view
01/03/12 view
12/28/11 view
12/20/11 view
12/13/11 view
12/06/11 view
11/29/11 view

01/31/12 view
01/27/12 view
01/20/12 view
01/13/12 view
01/06/12 view
12/30/11 view
12/16/11 view
12/09/11 view
12/02/11 view
11/18/11 view

a

Fill Prices may vary based on actual time orders are placed and confirmed. All orders are Final and Subject to Terms and Conditions of the Customer's Account Agreement with Precious Metals International, Ltd. All Fabricated Products for Home Delivery are quoted, basis specific product, quantity and delivery destination at Time Orders are placed and confirmed. Retail Dealer Prices may vary.