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The GoldBugg Report – November 25, 2008

November 25, 2008

WORLD FINANCIAL REPORT ON RADIO NOV 21 2008 SHOW

-What does the $3.5bn Saudi gold rush in two weeks mean?

-Silver ETF for Dubai as they fly in bullion for the Hunts of Arabia.

-Gold at $1200 then $1650. The US dollar at .72, .62 and then .52. It cannot be averted. Jim Sinclair

GOLD

-$3.5bn Saudi gold deal huge against $6.5bn consumer record. The revelation of the purchase of $3.5 billion worth of gold by a group of Saudi Arabian investors over the past month is a huge gold deal when you consider that total record third quarter spending on gold by consumers was $6.5 billion. Read more here-http://news.goldseek.com/PeterCooper/1227191136.php

-What does the $3.5bn Saudi gold rush in two weeks mean? Read more here-http://news.goldseek.com/PeterCooper/1226868993.php

-Iran says its reserves have been put into gold. Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July. Read more here-http://www.gata.org/node/6877

-Cabinet minister contradicts Iranian gold claim. Iran is not converting reserves into gold, a cabinet minister said in remarks published on Wednesday, contradicting comments by an aide to the country’s president. “It is not correct that Iran is transferring its reserves to gold,” Economy Minister Shamseddin Hosseini was quoted as saying by the business daily Poul. Read more here-http://www.gata.org/node/6895

-Governments can’t handle global run on gold coins. There’s a worldwide run on gold coins. Even as the price of the precious metal itself comes under pressure along with commodities like oil and copper, people around the world are demanding so many of the valuable coins that government mints are having difficulty filling orders. A spokesperson for the US Mint tells me that gold coins in this country, for the past month, “are being allocated because of an increased demand.”

And the price that the government charges coin dealers has recently been increased by as much as 10 percent for a 10-ounce coin. Robert Mish, a coin dealer in Menlo Park, Calif., says customers who want to purchase 200 gold coins often have to wait up to two weeks. Six months ago, he said, a purchase that size could have been filled immediately.

Someone who recently tried to purchase 100 one-ounce American Eagle gold coins in the New York City area was turned away, even though he’d uneventfully made purchases before through the same dealer. And even when gold coins are available, dealers report that customers are paying a bigger premium than they would have just a few months ago.

Previously, American Eagle coins were going for 5 percent over the market price of gold on the Commodity Exchange (Comex). Now the premium can be anywhere from 10 percent to 15 percent, even though the US Mint raised its price to dealers by just 3 percent for an ounce coin. Read more here-http://www.gata.org/node/6886

-World Gold Council says gold remains a safe haven amid volatility. Gold will remain a safe haven for investors while other markets fluctuate, although gold bullion prices have fallen nearly 20% since October. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=73166&sn;=Detail

-Safe haven buying produces record dollar demand for gold. Buying up by 45% over the previous dollar record as ‘identifiable investment demand’ which includes ETFs, bars and coins, showing a 56% gain year-on-year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=73404&sn;=Detail

-Gold Demand Rose 18% in Quarter as Price Lured Buyers, WGC Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=aTyN07fDbZYw&refer;=commodities

-Why Gold Is Down, But You Can’t Get Your Hands on Any. Read more here-http://www.foxbusiness.com/story/markets/commodities/gold-hands/ or

http://www.gata.org/node/6888

-Gold ETF holdings remain robust and silver could outshine gold ScotiaMocatta. Despite the flood of asset liquidations, ScotiaMocatta notes that long-term investors are holding on to their gold holdings and the long term remains bullish for the precious metal, while silver and platinum are also favored. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=73233&sn;=Detail

-Got Gold Report Gold, Silver Premiums Highest in Years. A lack of physical bullion supply at the same time of extremely strong demand for popular small bullion items coupled with artificially low futures dominated spot prices for gold and silver resulted in extraordinarily high premiums for virtually all bullion products in October. The very high premiums continue and availability remains tight. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=47994

-Gold a safe haven despite volatility. Gold bullion has dropped nearly 20 percent since October after a recent wave of fund selling, but still offers the diversity and value which investors will be looking for in a climate of high risk, said Rozanna Wozniak, investment research manager with industry body the World Gold Council.

“Even at around $700 gold is higher than it was about two years ago,” Wozniak said. “Gold has been keenly sought after, reflecting its perception as a safe haven and store of value. There is no risk of it being affected by defaults.” Wozniak added that the strong buying by investors in gold as a safe haven had been offset by speculative investors taking profits.

“A significant proportion of this selling has reflected gold’s better performance relative to other assets,” Wozniak said. “These investors bought gold as their insurance policy and, during times of significant market turmoil and large falls in asset prices, have been able to make a claim against that policy.” Read more here-http://services.inquirer.net/print/print.php?article_id=20081116-172577

-Gold market update from Clive Maund. Read more here-http://news.goldseek.com/CliveMaund/1227197920.php

-The Six Biggest Myths about Gold. Read more here-http://news.goldseek.com/GoldSeek/1227164640.php

-Gold: Is there a valid bearish argument? The superficial signs of an inflation problem will almost certainly subside over the next 12 months, but this should not create a significant headwind for gold as long as the rate of monetary inflation continues to rise.

As discussed in the past, the reason is that savvy speculators will likely accumulate positions in gold in anticipation of the eventual/inevitable effects of the monetary inflation. We only have to go back to 2001 for a historical example of what we are referring to. Gold’s long-term bull market began in April of 2001 a time when the FIG was at a multi-year low and in freefall. Steve Saville-Read more here-http://www.321gold.com/editorials/saville/saville111808.html

-Russian Officials Weighing Gold-Backed Ruble. Read more here-http://chinaconfidential.blogspot.com/2008/11/russian-officials-weighing-gold-backed.html

-For gold, a tussle between two groups of investors. Retail-based demand jumps even as institutions undergo a massive exodus. Read more here-http://www.gata.org/node/6894 or

http://www.marketwatch.com/news/story/Demand-gold-hits-a-record/story.aspx?guid={215A671B-98AE-4094-A87C-A782BB2B3F49}&print;=true&dist;=printMidSection

-Gold ETF Impact. The bottom line is GLD has been a smashing success. By excelling in its mission of tracking gold and providing an easy and efficient way to grant gold exposure to mainstream stock investors, it has grown into the 3rd largest ETF on the planet.

And this is even more impressive considering the heavy scepticism and withering attacks on GLD launched from fringe factions within the traditionally pro-gold community. Whether you or I would own GLD personally or not is irrelevant. The point is many nontraditional gold investors have flocked to GLD and this trend should only accelerate.

Broader participation in this gold bull, more capital from more origins bidding up gold, greatly benefits all gold investors. And as 2008 has shown, GLD owners aren’t anywhere near as skittish in a gold selloff as many assumed they would be. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton111408.html

-Noted gold strategist tells Ticker Trax he is still ‘wildly bullish’. Read more here-http://www.stockhouse.com/Columnists/2008/November/17/Issue-No-1-To-adopt-or-adapt-Ticker-TraX

or http://www.gata.org/node/6885

-Lack of funding decimates Zimbabwe gold sector. Zimbabwe’s financial crisis deepens as gold production, an important export earner, declines to a trickle with gold miners owed big sums by Central Bank. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=73472&sn;=Detail

-Richard Russell: I’m starting to think gold is manipulated. Read more here-http://www.gata.org/node/6876

-Chris Powell: Gold and silver market manipulation update. Read more here-http://www.gata.org/node/6871

-Every which way for gold. Wherever one turned at this weeks RBCCM gold meeting in London there was little optimism in the gold sector at least in the short and medium term. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=73062&sn;=Detail

-Central banks around the world are indeed doing everything but dumping money out of helicopters. That inflationary rush has been led by Federal Reserve. Ignoring the fact that easy money has been a failed policy twice in recent years, to wit the technology stock bubble and the housing bubble, FOMC is pursuing most inflationary policy in that organization’s dismal 95-year history. Federal Reserve’s balance sheet is now 90+% larger than it was a year ago.

Never in peace time has a major central bank acted in such an inflationary manner. Economists at the Federal Reserve are committed to not making same mistakes of 1920s and 1930s. Be assured, they will not. Economists have an uncanny and totally reliable ability to create new mistakes. This weeks graph portrays the monetary consequences of the Federal Reserve’s actions, and the beginning of their new mistakes.

Yes, no one can make banks lend money, as so many emails have noted. For that reason, Federal Reserve is going around the banks, lending directly to borrowers. At same time, U.S. government is running a deficit of almost $1.5 trillion, financed by selling debt to banks and investors.

These two activities have the same first round impact as that of bank lending. While in short run U.S. money supply numbers are volatile, those money supply numbers are starting to show some fairly dramatic growth. A central bank expanding its asset base by more than 90% will have an impact on the money supply.

Thus far, a desperate need for dollars to meet redemptions and liquidations by hedge funds has increased the value of the U.S. dollar and decreased the value of $Gold. However, the rate of monetary expansion shown in chart will ultimately come to dominate U.S. dollar’s value, sending it down by as much as 50%. Gold should rally nicely in such an environment. Talk of dollar deflation is fun and amusing, but do not let such musings keep you from buying Gold! Ned W. Schmidt

SILVER

-Silver ETF for Dubai as they fly in bullion for the Hunts of Arabia. The Dubai Multi Commodities Center is understood to be putting the finishing touches to an exchange traded fund for silver with a launch likely next month as demand for silver has surged in the past six months.

Local bullion dealers are having to fly heavy silver bullion bars in from around the globe to meet demand as traditional sources closer to Dubai have been exhausted. The DMCC has successfully established itself as a regional hub for commodities trading over the past few years, and has its own swanky new business park with its gold, silver and diamond towers.

Will the new Dubai silver ETF have a big enough impact on the tiny global silver market to send prices higher like the Hunt Brothers did in the late 1970s when they cornered the market? Well, nothing succeeds like success and a silver ETF in Dubai looks like being the right product in the right place at the right time. Read more here-

http://news.silverseek.com/SilverSeek/1227016174.php

-At some point, it seems reasonable that some investors currently rushing into government paper might begin to have doubts about holding all their money in government debt. For now, the immediate issue is to pump money into the system to save it from imploding. But at some point, a certain number of investors may seek safety beyond government guarantees. The only assets promising greater safety than government guarantees are tangibles, because they are liability-free.

Given the rarity and scarcity of silver, even a relatively small movement of investment flows into silver can have a profound influence on price. Throw in these additional factors. There’s still the likelihood of a major short squeeze. New uses for silver are being introduced every day. The above-ground supply has never been smaller or held in such strong and diversified hands. More potential investors become aware of this bullish silver story every day.

No matter what future economic conditions may be, good or bad, it is hard to see how silver will not fare spectacularly well. At this juncture, it’s hard not to conclude that silver is a sure thing. For safety and peace of mind and for unusually high profit potential, silver looks better than ever. Ted Butler-Read more here-http://news.silverseek.com/TedButler/1227032447.php

-Silver market update from Clive Maund. Read more here-http://news.silverseek.com/CliveMaund/1227197713.php

-PanAm Silver says physical silver investment market remains strong. Pan American Silver President and CEO Geoff Burns predicted that the common investors buying physical gold and silver during the current global financial crisis “will be handsomely rewarded for their foresight.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=73052&sn;=Detail

-Where are the silver bulls? Few listed resources subsectors are more reviled than that mining, developing and exploring for silver bullion. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=73294&sn;=Detail

-Extra! Extra! Feds Bail Big Silver Short, CFTC Sees No Evil. Read more here-http://www.financialsense.com/fsu/editorials/2008/1117.html

-Silver and its importance to printed electronics. The market for silver conductive inks will almost triple during the next eight years to reach $2.4 billion by 2015 claim industry experts. Read more here-http://printedelectronics.idtechex.com/printedelectronicsworld/articles/silver_and_its_importance_to_printed_electronics_00001135.asp

-Silver finally comes back to the silver screen. Baby boomer filmgoers may remember CinemaScope, Cinerama, Todd AO, and other attempts to lure the public back to movie theaters. Now the 3D digital revolution is hoping to revitalize the industry. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=73051&sn;=Detail

PLATINUM-PALLADIUM

-Johnson Matthey forecasts 240,000 ounce platinum supply deficit this year. Johnson Matthey says there are a number of positives for next year’s platinum production from South Africa, but warns against too high expectations for price increases. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=73283&sn;=Detail

-In spite of Stillwater cutbacks, McAllister says PGMs have a healthy future. Stillwater Mining CEO Frank McAllister believes that long-term demand for PGMs should be robust, as the current low metals prices cause production to dwindle. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=73447&sn;=Detail

-Platinum, Palladium ETF investors’ different behaviours. Johnson Matthey says investors in platinum and palladium exchange traded funds are fundamentally different people who treat their investments differently. Palladium ETFs are now a significant demand sector of the metal. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page43?oid=73405&sn;=Detail

-Palladium prices could plummet to $125/oz. Palladium prices could fall as low as $125 an ounce, nearly a 12-year low, according to an interim review from Johnson Matthey. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page43?oid=73285&sn;=Detail

DEFINITIONS-QUOTES-QUICK HITS

-Deflation. A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression.

Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals.

To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind. Investopedia.com

Abandon all hope once you enter deflation-Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3448664/Abandon-all-hope-once-you-enter-deflation.html

or http://www.gata.org/node/6866

-Reflation. An economic policy whereby a government uses fiscal or monetary stimulus in order to expand a country’s output. Possibilities include reducing tax, changing the money supply, or even adjusting interest rates. Investopedia.com-Reflation Challenge & Gold-Read more here-http://news.goldseek.com/GoldenJackass/1227165000.php

-Suppose you were an idiot. And suppose you were a member of Congress but then I repeat myself. Mark Twain

-No man’s life, liberty, or property is safe while the legislature is in session. Mark Twain

-Gold at $1200 then $1650. The US dollar at .72, .62 and then .52. It cannot be averted. Jim Sinclair

-Gold May Spike to $2000 in Medium Term-Gold can easily go up to $1500-$2000 in the medium-term, says Johann Santer, MD at Superfund Financial Hong Kong. As such, he tells CNBC’s Martin Soong that gold at $740 is a good entry point. Watch video here-http://www.cnbc.com/id/15840232?video=927012634

-China’s central bank is considering raising its gold reserve by 4,000 metric tons from 600 tons to diversify risks brought by the country’s huge foreign exchange reserves, the Guangzhou Daily reported, citing unnamed industry people in Hong Kong.

China’s forex reserves, at $1.9056 trillion at the end of September, are the world’s largest. U.S. dollar-denominated assets, including U.S. treasury bonds and mortgage agency bonds, account for a big proportion of the forex reserves. Read more here-http://www.gata.org/node/6870 or http://www.gata.org/node/6892

-China, the second-biggest overseas holder of U.S. Treasuries, should increase its bullion holding to diversify its reserves because the dollar may decline, the country’s gold association said. “China should have at least several thousand tons of gold in its reserves, five to six times the officially announced 600 tons,” Hou Huimin, vice chairman of the China Gold Association said by phone from Beijing. The group represents producers, traders, and retailers. Read more here-http://www.gata.org/node/6872

-The buck is definitely running out of steam, so gold bulls will soon do plenty of dollar bashing.” Ralph Preston, an analyst at Heritage West Futures in San Diego

-While dollar spreads are continuing to be unwound, giving the dollar some support, upside momentum has waned. Once the short-covering is out of the way, I believe we shall witness a significant fall in the dollar. Peter Grandich

-In a World Gold Council report released this week, the WGC said there were massive outflows of gold from institutional investors in the third quarter, as they struggled to raise cash to cover losses elsewhere.

But there were correspondingly massive inflows to retail investors, as they bought bars and coins to the tune of 232 metric tons (7.46 million ounces) in the third quarter. That compares to only 105 tons in the same period a year ago. Casey Daily Resource

-”Going forward, the US Dollar is in its final mid-term leg higher, nearing the end of its massive short-covering rally while other short-term driving forces diminish. True long-term fundamentals do not support a strong US Dollar and as it begins to once again return back to its long-term secular bear market the gold price will accelerate its appeal among dollar, euro and other paper currency holders. We are just entering into the next stage of the global currency crisis which will ultimately drive gold prices significantly higher over the coming months and years.” Peter Spina of Goldforecaster.com

-”We believe that the fall in the PPI adds to the likelihood of further interest rate” cuts by the Fed, and adds “to the influences that will weaken the dollar soon.” Julian Phillips, editor of Gold Forecaster-Read more here-http://news.goldseek.com/GoldForecaster/1226822640.php

-”Russian banking major Sberbank said on Wednesday (that) sales of precious metals have surged this year as its clients seek safe investments in the face of turbulent financial markets clients had bought around 6 tonnes of silver ingots in the first 10 months of the year three times as much as during the whole of 2007. Gold purchases for the period totalled 10 tonnes, or 50% more than all of 2007.” Ed Steer-Read more here-http://www.reuters.com/article/rbssBanks/idUSLJ47489420081119

-”Wachovia Securities this month alerted its brokers and clients that it no longer would purchase precious metals for brokerage accounts, only shares in precious metals exchange-traded funds. In an explanation given to its brokers, Wachovia said the precious metals markets ‘are illiquid with wide bid/ask spreads and minimal transparency.’ This implies that real metal is awfully hard to get these days, and maybe that some brokerages would prefer that their clients not get it.” Ed Steer-Read more here-http://www.gata.org/node/6896

-Auto bailout: Not now, maybe later. Democratic leaders say they will return week of Dec. 8 if companies can show they have a ‘viable’ turnaround plan. Read more here-

http://money.cnn.com/2008/11/20/news/economy/auto_industry_bailout/index.htm?postversion=2008112017

-’I.O.U.S.A.’: Tackling the national debt. A former U.S. comptroller wants to scare America straight about its ballooning national debt. Read more here-

http://money.cnn.com/2008/11/17/pf/scared_straight.moneymag/index.htm

-In this economy, even sex doesn’t sell. Read more here-http://www.latimes.com/news/nationworld/nation/la-na-brothel4-2008nov04,0,7844981.story

-Spam Turns Serious and Hormel Turns Out More. The economy is in tatters and, for millions of people, the future is uncertain. But for some employees at the Hormel Foods Corporation plant here, times have never been better. They are working at a furious pace and piling up all the overtime they want. Read more here-http://www.nytimes.com/2008/11/15/business/15spam.html?_r=2&adxnnl;=1&oref;=slogin&pagewanted;=print&adxnnlx;=1227211891-9ttVUOctbSgFD6VcqYR9nA

RARE COLORED DIAMONDS

-Sotheby’s sale of Magnificent Jewels in Geneva was held Wednesday. The top seller at the auction was a ring set with an 8.02 carat fancy pink SI2 clarity diamond that sold for CHF 1,594,500 ($1.32 million). Idexonline.com

-Laurence Graff, chairman and founder of Graff Diamonds, which bought a 4.5 per cent stake in Gem Diamonds this month, is confident about the future of the diamond market. The billionaire, who has a necklace called the Lesotho Promise on sale for $75 million, said: “Top-quality gems are rare, hard to find and polish.

There will always be a demand for these high and top-quality diamonds, both to be worn and in which to invest. In the short term, their prices may fluctuate, but in the long term they retain their quality, unlike other commodities.” Business.timesonline.co.uk

-French experts said on Tuesday they had proof that the Hope Diamond, a star exhibit in Washington’s Smithsonian Institution, is a legendary gem once owned by King Louis XIV that was looted in the French Revolution. New evidence unearthed in France’s National Museum of Natural History shows beyond reasonable doubt that the Hope Diamond is the same steely-blue stone once sported by the Sun King, they said.

Mineralogist Francois Farges, heading an investigation published in a peer-reviewed French journal, told AFP he was now “99 percent sure” that the Hope and the mythical Blue Diamond of the Crown were one and the same. “The evidence corroborates a scenario under which the diamond, after being stolen in Paris in 1792, was swiftly smuggled to London, where it was recut,” he said.

The Blue Diamond came from a massive, 115.6-carat blue-tinged stone mined in the kingdom of Golconda, in India’s Hyderabad state. In the mid-17th century, a French adventurer by the name of Jean-Baptiste Tavernier purchased the stone from Golconda’s ruler and then sold it on to Louis XIV. The Sun King then ordered the court jeweller, Sieur Pitau, to make him a piece to remember.

After two years’ work, Pitau presented his sovereign with a triangular-shaped 69-carat gem the size of a pigeon’s egg that took the breath away as it snared the light, reflecting it back in bluish-grey rays. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=24150 or http://www.canada.com/topics/news/world/story.html?id=1f5933e7-add6-4bd8-a98a-b7edc1819129

-Diamonds prove to be an asset manager’s best investment friend. “I’ve liked diamonds since I was young” was the first sentence that Jotika Savanananda, CEO of TMB Asset Management, told The Nation when asked about her personal investment style.

Jotika, who manages more than a Bt100 billion of other people’s assets, has made the “women’s best friend” her best investment tool. “My grandmother and our family often took me to diamond shops. So, I saw them buying diamonds since I was a kid. The first diamond ring I bought was during my studies at Sasin [Graduate Institute of Business Administration of Chulalongkorn University],” she said.

She has spent altogether Bt10 million on her diamond collection but its value has risen significantly over time. She declined to say how much her diamonds were worth at present, just that she would sell them only in time of need. Read more here-http://www.nationmultimedia.com/2008/11/17/business/business_30088623.php

COMMODITIES-OIL

-Dollar’s Days Numbered; Buy Commodities: Jim Rogers. Read more here-http://www.cnbc.com/id/27717135/

-Sugar prices will rise next year as a credit shortage drives some mills out of business and reduces output, the head of the world’s second-biggest cane processor said. Brazilian mills, which are low on cash after a two-year spending spree to expand capacity, will fail to keep pace with demand, helping widen a global deficit of the sweetener, Cosan SA Industria &

Comercio Chief Executive Officer Rubens Ometto said yesterday in an interview. “The trend is for a rise,” said Ometto, who also controls the company. “Production is already lower than demand,” he said, without providing specific forecasts. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=adoJfUORZ0s8

-Fu Chengyu, the head of China National Offshore Oil Corporation said that oil companies expect oil prices to fall due to decreasing demand and will cancel most planned investment projects. A meeting in Beijing predicted that oil could fall to $40 a barrel. Read more here-

http://www.ft.com/cms/s/0/a7aae3a0-b5ad-11dd-ab71-0000779fd18c.html?nclick_check=1

-How low can oil go? A lot lower, but it’ll recover. World oil prices could easily fall below $50 a barrel and might even slip toward $40 or perhaps $35, but they will recover and could do so fairly quickly, analysts and economists say. Read more here-http://www.reuters.com/article/newsOne/idUSTRE4AC5OY20081113

-Iran wants big OPEC production cut. Big oil producing nation says cartel must respond to falling demand by slashing output. OPEC is set to meet Nov. 29. Read more here-

http://money.cnn.com/2008/11/15/news/international/opec.ap/index.htm

-What Caused the Big Slide in Oil Prices. On July 11, when the price of crude oil peaked at $147.27 per barrel, SemGroup, a major oil distributor based in Tulsa, Okla., was only a week or so away from a potential $5 billion payoff. Instead, the company imploded. And soon afterward, so did the price of oil, dropping some 60% in the subsequent months to a recent price below $60. Clearly, demand for oil didn’t fall that much, but the price of oil isn’t set by demand alone.

It’s the product of an extremely volatile mixture of speculation, oil production, weather, government policies, the global economy, the number of miles the average American is driving in any given week, and so on. But the daily price is actually set or discovered, in economic parlance on the futures exchange. In late June and early July, speculators in oil futures battled each other, suspecting that a top was near.

In the ensuing weeks, oil would come crashing down to earth as traders everywhere including hedge funds, banks, and pension funds unwound their positions. And as SemGroup demonstrated, getting the timing wrong on this great unwind can have catastrophic results. SemGroup was short oil. Massively. That is, it had bet the price was going down by contracting to sell millions of barrels of oil it did not own at a future date, on the assumption that the price would fall and SemGroup could supply the barrels at a lower price and pocket the difference.

Three days after oil peaked, as it still threatened new all-time highs, the New York Mercantile Exchange (NYMEX) called margin on SemGroup, forcing the firm to put up more cash collateral to back its losing positions. Unable to raise the capital, SemGroup sold its entire crude oil futures position the very next day to the Barclays investment bank. SemGroup posted a $2.4 billion loss in the process, forcing it into bankruptcy. Read more here-http://www.time.com/time/printout/0,8816,1859380,00.html

-Oil Supertankers May Avoid Suez on Somalia Piracy. Shippers controlling almost a quarter the global fleet of crude-oil supertankers may avoid Egypt’s Suez Canal after an increase in piracy off east Africa, potentially raising the cost of delivering the commodity. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aHbiuomk7e.Y&refer;=home

GLOBAL RECESSION

-The economy faces a slump deeper than the Great Depression and a growing deficit threatens the credit of the United States itself, former Goldman Sachs chairman John Whitehead, said at the Reuters Global Finance Summit on Wednesday. Whitehead, 86, said the prospect of worsening consumer credit woes combined with an overtaxed federal government make him fear that the current slump is far from over.

“I think it would be worse than the depression,” Whitehead said. “We’re talking about reducing the credit of the United States of America, which is the backbone of the economic system.” Whitehead encountered plenty of crises during his 38 years at the investment banking firm and was a young boy during the 1930s. Whitehead warned the country’s financial strength is at risk due to the sweeping demand for tax relief and a long list of major government spending plans.

“I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America,” said Whitehead, who served as chairman of the Lower Manhattan Development Corp after the World Trade Center was destroyed during the September 11, 2001 attacks. Read more here-

http://www.reuters.com/article/Finance08/idUSTRE4AB7HT20081112

-Volcker issues dire warning on slump. Paul Volcker, the former chairman of the US Federal Reserve, has warned that the economic slump has begun to metastasize after a shocking collapse in output over the past two months, threatening to overwhelm the incoming Obama administration as it struggles to restore confidence. Read more here-

http://www.telegraph.co.uk/finance/economics/3474683/Volcker-issues-dire-warning-on-slump.html

-Roubini Says U.S. Recession to Be Worst in 50 Years. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T;=Roubini%20Says%20U.S.%20Recession%20to%20Be%20Worst%20in%2050%20Years&clipSRC;=mms://media2.bloomberg.com/cache/vC6A2kpBh6Ts.asf

-Economic depression possible, says George Soros. Read more here-http://www.news.com.au/business/story/0,27753,24650136-14334,00.html

-30 reasons for Great Depression 2 by 2011. New-New Deal, bailouts, trillions in debt, antitax mindset spell disaster. Read more here-http://www.marketwatch.com/news/story/well-great-depression-2-2011/story.aspx?guid={B28B49B5-EFD1-4941-B57E-A2BA1545BA09}&dist;=TNMostRead&print;=true&dist;=printMidSection

-Long, painful U.S. recession is likely survey. Forecasters see anemic economic growth through 2009 as consumers retreat and unemployment rises. Read more here-

http://money.cnn.com/2008/11/17/news/economy/nabe_survey/index.htm

-Forecasters: U.S. in 14 month recession. Read more here-http://www.reuters.com/article/newsOne/idUSTRE4AG54L20081117

-Sharp decline seen in U.S. holiday shoppers. Retail group says 2008 should be the weakest year since it began tracking activity. Read more here-

http://money.cnn.com/2008/11/19/news/economy/holiday_retail/index.htm?postversion=2008111914

-Manufacturing in the Philadelphia region shrank in November at the fastest pace in 18 years, a sign that the credit crunch and weak demand are causing companies to cut back. The Federal Reserve Bank of Philadelphia’s general economic index was minus 39.3 this month, weaker than forecast and the lowest reading since October 1990, from minus 37.5 in October, the bank said today. Negative readings signal contraction. The index averaged 5.1 last year. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aSYTi.L_ViqI&refer;=home

-The index of leading U.S. economic indicators fell in October for the third time in four months as stocks and consumer confidence plunged, signaling a deepening recession. The Conference Board’s gauge dropped 0.8 percent, more than forecast, after rising 0.1 percent in September, the New York- based group said today. The index points to the direction of the economy over the next three to six months. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=a6mEfxa.SBf8&refer;=home

-First-time claims for U.S. unemployment insurance unexpectedly rose last week to the highest level since 1992, a sign the labor market is deteriorating as the economic slump deepens.

Initial jobless claims increased by 27,000 to a higher- than-forecast 542,000 in the week ended Nov. 15, from 515,000 the prior week, the Labor Department said today in Washington. The number of people staying on benefit rolls the prior week rose to 4.012 million, the most since December 1982. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=axoMU2lh.goE

-Fed hints at rate cut, lowers forecast. The Fed reduces its GDP projection, signals additional interest rate cuts and sees unemployment over 7% next year. Read more here-

http://money.cnn.com/2008/11/19/news/economy/fed_economy.ap/index.htm

-Japan’s economy, the world’s second largest, unexpectedly shrank in the third quarter, entering the first recession since 2001 as companies cut spending. Gross domestic product fell an annualized 0.4 percent in the three months ended Sept. 30, the Cabinet Office said today in Tokyo. Economists predicted the economy would grow 0.1 percent after contracting a revised 3.7 percent in the previous period. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a5R9G.OGm4MU&refer;=home

-Americans are digging deep to save money. Read more here-http://www.usatoday.com/money/perfi/basics/2008-11-16-thrift-saving-frugal_N.htm?loc=interstitialskip

-U.S. Downturn Drags More Consumers Into Bankruptcy. Read more here-http://www.nytimes.com/2008/11/16/business/16consumer.html?em=&pagewanted;=print or

http://www.iht.com/articles/2008/11/16/business/16consumer.php

FINANCIAL CRISIS

-Financial Crisis Tab Already In the Trillions. Given the speed at which the federal government is throwing money at the financial crisis, the average taxpayer, never mind member of Congress, might not be faulted for losing track.

CNBC, however, has been paying very close attention and keeping a running tally of actual spending as well as the commitments involved. Try $4.28 trillion dollars. That’s $4,284,500,000,000 and more than what was spent on WW II, if adjusted for inflation, based on our computations from a variety of estimates and sources. Read more here-

http://www.cnbc.com/id/27719011

-The U.S. may need to spend as much as $1.2 trillion to stabilize the eight largest financial institutions because private investors are unwilling to take the risk, an FBR Capital Markets analyst said. “The sheer size of the capital deficiency, coupled with the opaque nature of credit risk, will keep private capital sidelined,” Paul Miller said in a research note yesterday.

Treasury Secretary Henry Paulson has spent $290 billion of a $700 billion Troubled Asset Relief Program buying stakes in banks and in insurer American International Group Inc. to stabilize the U.S. markets. The Treasury’s preferred equity investments aren’t ”real capital” and won’t ensure the firms will survive, said Miller, who’s based in Arlington, Virginia.

The eight companies are Bank of America Corp., JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co., Morgan Stanley, AIG, Goldman Sachs Group Inc. and GE Capital Corp. They have a combined cushion of roughly $405.7 billion in tangible common equity, FBR estimates. They also have as many losses, $408.3 billion, on their balance sheets that will eventually hit earnings and wipe out that equity.

Though Treasury’s cash injections so far have bolstered bank capital, they give Treasury a senior repayment position that leaves common equity holders to absorb the majority of the losses, Miller said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=artMfO8m83fM

-Iceland agreed a $4.6 billion bailout from the International Monetary Fund and Nordic countries to help resurrect the island’s economy. It will get about $6.3 billion more from the U.K., the Netherlands and Germany to cover foreign deposits at a failed bank. The two accords will heap a total of about $11 billion of debt on the shoulders of a population of 320,000, or $34,375 for each individual. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aIq1nHqZxcos

-Pakistan reached an agreement in principle with the International Monetary Fund on a $7.6 billion loan package aimed at preventing the nation from defaulting on foreign debt and restoring investor confidence. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aqMqAaRZiuO0&refer;=home

-Florida pension fund loses a quarter its value. Fla. pension fund loses a quarter of its value but officials say no need to panic. Read more here-

http://finance.yahoo.com/news/Florida-pension-fund-loses-a-apf-13603975.html

-U.S. banks tighten credit card lending too late. Closing millions of accounts, cutting credit lines and raising interest rates are just some of the moves credit card issuers are using to try to inoculate themselves from a tsunami of expected consumer defaults.

Still, the measures may fall short in containing a growing area of stress on banks’ balance sheets that some experts say could rival the subprime crisis. “It’s so similar to the mortgage situation that it is shocking when you think about it,” former Goldman Sachs chairman John Whitehead said at the Reuters Global Finance Summit. Read more here-

http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE4AG4UO20081117?sp=true

SHADOWSTATS.COM INFO

-http://www.shadowstats.com/alternate_data

STOCK MARKET-HEDGE FUNDS

-A gallon of gas or a share of GM? More than 5% of the firms in the S&P; 500 are penny stocks, trading for less than $5 a share including GM, Motorola and Sprint. Be wary of the looming wave of reverse splits. Read more here-http://money.cnn.com/2008/11/18/markets/thebuzz/index.htm?postversion=2008111812

-Goldman Falls below IPO Price, Erasing Almost 10 Years of Gains. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=arGAFnER7RVE

-Wall Street Lays Another Egg. Read more here-http://www.vanityfair.com/politics/features/2008/12/banks200812?printable=true&currentPage;=all

-General Electric Co. Chief Executive Officer Jeffrey Immelt and Citigroup Inc.’s Vikram Pandit are back to buying their own companies’ shares. That means there may be more stock declines to come. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a7fW2×5_qvzg

-Suspicions about Plunge Protection Team break onto CNBC. Read more here-http://www.gata.org/node/6891

-There is no magic elixir for the cure of the market. While we believe we are at a low it will still take many months of work and no new lows before we can determine whether we have put in our lows. We have often remarked on the similarities between the markets of the 1930’s and this decade. We can only hope that continues.

We compare the two below and are showing that chart of the 1930’s and early 1940’s. If we continue to follow the earlier decade’s road map we should see a feeble recovery in 2009 followed by another collapse in 2010. Another feeble rise could get underway in 2011 and then we plunge to our final lows in 2012.

The scary alternative is that a feeble recovery into 2009 is followed by a further collapse to new lows and while we follow the road map the final lows of 2012 are made some 40 to 50 per cent below today’s lows. We certainly hope not but it is possible if things do not go well in attempting to restructure the world. But right now the scenario still calls for a rebound into 2009. David Chapman-Read more here-http://www.321gold.com/editorials/chapman_d/chapman_d_111708.html

-Analysts have cut profit estimates for 48 percent of stocks they cover worldwide, the most in at least 15 years, and more downgrades are likely as the economy slows, JPMorgan Chase & Co. said. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=a4bEItVxt2sw&refer;=home

-Watch a video series on the crash of 1929. Watch video here-http://www.pbs.org/wgbh/amex/crash/program/index.html

-Hedge Fund Assets Shrank 9% as Investors Withdrew $40 Billion. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=arL.nGOD_PPY

-Hedge-fund assets may fall to about $1 trillion by the middle of next year, a decline of almost 50 percent from their peak in June, because of market losses and client withdrawals, Citigroup Inc. said in a report. Managers are likely to see investors, led by funds of funds, pull 20 percent of their money, Tobias Levkovich, an analyst at the New York-based bank, wrote this week. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aHZezLEuKOpo&refer;=home

REAL ESTATE-RENTS

-Home prices fell in four out of every five U.S. cities in the third quarter, a record spurred by distressed foreclosure sales across the country. The median price of a U.S. home fell 9 percent from a year earlier and sales of properties with mortgages in default accounted for at least a third of all transactions, the Chicago based National Association of Realtors said today. Prices fell in 120 U.S. metropolitan areas rose in 28 and were unchanged in four, the biggest share of declines in data going back to 1979. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aLgJDGcwH0oI

-San Francisco Bay Area Home Prices Fall Record 41%. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aev1RZEuwD6Y

-U.S. housing starts and permits for future construction both dropped to record lows in October, signs the housing downturn may extend into a fourth year. Construction starts on housing fell 4.5 percent in October, less than economists forecast, to an annual rate of 791,000 that was the lowest since records began in 1959, the Commerce Department said in Washington. Building permits, a sign of future residential projects, dropped 12 percent to a 708,000 pace, the lowest since at least 1960. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=ayFpFXHa5bvU&refer;=home

-Dubai’s Palm Jumeirah sees prices fall as crunch moves in Property prices on the Palm Jumeirah, the island in Dubai that has been dubbed the ‘eighth wonder of the world’, have plummeted by as much as 40pc since September amid fears that the global credit crisis is stalling the emirate’s economy. Read more here-

http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/3489393/Dubais-Palm-Jumeirah-sees-prices-fall-as-crunch-moves-in.html

-Crisis in paradise: Meltdown leaves ghost resorts. Read more here-http://www.breitbart.com/article.php?id=D94I86580&show;_article=1

-Homeowners fleeing underwater mortgages in California and Florida know where to come up for air: Texas. “Texas is an extremely friendly place to live if you owe money and do not want to pay,” said Marjorie Britt, a bankruptcy attorney with Britt & Catrett PC in Houston.

“If you have a lot of money and even more debt and want to shelter your assets, you can live fairly normally.” Distressed borrowers can hang on to luxury cars, a primary residence, paychecks, retirement accounts, and even jewelry that creditors might claim elsewhere, Britt said. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=aI99ZTfd5KEo&refer;=home

-Rents for U.K. homes fell for the first time in five-and-a-half years as the worst housing slump since the 1990s caused a record increase in properties put on the rental market, the Royal Institution of Chartered Surveyors said. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=aI.M_5CqhbCY&refer;=home

-Office rents in Mayfair and St. James’s, the London districts with Europe’s biggest concentration of hedge funds, are falling for the first time since 2005 as the alternative investment industry has its worst year in two decades. The annual cost of renting new or refurbished offices in those neighborhoods, the most expensive in the world, fell 6.5 percent to 107.50 pounds ($168) a square foot in the six months ended Sept. 30, data compiled by Jones Lang LaSalle Inc. show.

Incentives such as rent-free periods lowered the net figure to 95.96 pounds, the commercial property broker estimates. Demand for space is falling as at least 350 funds in the $1.7 trillion hedge fund industry have closed this year amid the global financial crisis, including Peloton Partners’ ABS Fund and MKM Longboat Capital Advisors’ Multi-Strategy Fund. Client

redemptions and forced asset sales have given investors losses for five straight months through October, the longest streak since 1990. The slump may push rents down to as low as 90 pounds a foot, Jones Lang of Chicago estimates. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=axGGfACsOKY0&refer;=home

GEOPOLITICAL NEWS

-Barack Obama is warned to beware of a ‘huge threat’ from al-Qaeda. Security officials fear a ’spectacular’ during the transition period. Read more here-

http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5158569.ece

-Iranian President Mahmoud Ahmadinejad signaled that the Persian Gulf country will press ahead with its nuclear program, hours prior to the release of a report on the atomic dispute by the United Nations nuclear agency.

The U.S. and its major allies want to deprive Iran of “honor and independence” by pressuring the country into halting uranium enrichment work, Ahmadinejad said today in a speech in the northwestern Zanjan province broadcast on state television. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aHxYSxPodlKU

-Iran has produced the minimum amount of low-enriched uranium needed to make a bomb if it was processed to weapons grade, a scenario that would first require the expulsion of UN inspectors, arms-control experts said.

“There is definitely cause for concern,” Andreas Persbo, a senior researcher at the London-based Verification Research, Training and Information Center, said by telephone today. “Their uranium conversion operations are going quite well.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a_RUWtZMdXxY or

http://www.iht.com/bin/printfriendly.php?id=17986277

-Israeli Air Force chief: We are ready to deal with Iran. “We are ready to do whatever is demanded of us” in order to stop Iran from getting a nuclear weapon, IAF commander Maj. Gen. Ido Nehushtan told German magazine Der Spiegel in an interview published Tuesday. Read more here-http://www.jpost.com/servlet/Satellite?cid=1226404771120&pagename;=JPost%2FJPArticle%2FShowFull

-Israeli Defense Minister Ehud Barak said the U.S. and Europe should put aside differences with China and Russia over human-rights and missile-defense issues to focus on working together to stop Iran from developing nuclear weapons. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aM5aOd86Q69M

-Admiral Michael Mullen said it will take at least two years to safely withdraw all U.S. troops from Iraq, an estimate that may conflict with President-elect Barack Obama’s goal of pulling most forces out within 16 months. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=akdf3aroo0JM

© 2010, Worldwide Precious Metals.
www.wwpmc.com

The GoldBugg Report – November 25, 2008
Posted by Worldwide Precious Metals on Tuesday, November 25, 2008

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