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The GoldBugg Report – January 20, 2009

January 20, 2009

WORLD FINANCIAL REPORT ON RADIO JAN 15 2009 SHOW

-Peter Schiff predicts Imminent Doom Fear And Loathing In America. Watch more here-http://www.youtube.com/watch?v=djgH9wA-JSU

-HSBC raises gold forecasts.

-5 New Forces to Drive Gold Higher.

GOLD

-5 New Forces to Drive Gold Higher. Read more here-http://news.goldseek.com/GoldSeek/1231436253.php

China has stopped buying U.S. debt-An interesting piece in the New York Times today signals that China, up until now the biggest buyer of U.S. Treasuries and bonds issued by Fannie and Freddie, is moving towards an end to that policy. China holds over US$1 trillion of such paper, and as interest rates collapse, there is less and less incentive for them to buy American.

China has made several adjustments to programs that used to give banks and other financial institutions within the country incentive to buy U.S. assets, which means essentially that these same customers for assets will now be looking for Chinese products. The effect this will have on gold is two-fold. In the first place, reduced demand for U.S. debt will hamper Obama’s plans to keep printing money, because the one limiting factor that still seems to be respected in terms of how much paper can be printed, is the idea that there

must be a counterparty to every issuance of T-Bills to warrant continued printing. Theoretically, less demand for T-Bills will force a rise in interest rates to attract investors. But that does not appear forthcoming, which will make the U.S. dollar weak relative to other currencies especially gold.

The second effect is that by eliminating incentives for Chinese banks to acquire U.S. denominated assets, investors there will divert more funds to holding gold as a hedge against their current U.S. dollar holdings, which will be diminishing in value.

2. Future discoveries of gold deposits will diminish dramatically-The biggest source of gold ounce inventory for major gold producers is the discoveries made by the several thousand juniors who scour the earth in search of favorable geology. With the collapse in base metals prices, many of these juniors are under increasing pressure to consolidate and downsize, and many more will disappear altogether.

That means less money going into gold exploration, and that means the number of new discoveries that can be acquired by majors is going to go down sharply in the coming years. In theory, as gold continues to outperform all other asset classes, there will be a rush back into junior gold exploration, but that won’t happen until gold is taken much higher and investment demand for it soars.

3. Existing by-product gold production will fall sharply-In copper, zinc and other base metals mines around the world, gold occurs in metallic deposits as a by-product of some other dominant mineral. In the United States, 15 percent of gold production is derived from mining copper, lead and zinc ores.

With the collapse in prices for these metals, the by-product production of gold is most often insufficient to justify the continued operation of the mine profitably, and it is likely that a significant amount of this by-product gold production will cease along with the shutdown of these operations. The result will be less gold production from existing operations, contributing to the now even faster growing gap between supply and demand.

4. Gold is becoming mainstream-One of the biggest contributors to gold’s unpopularity as a main street investment is that its has been mercilessly derided and ridiculed by mainstream investment media and institutions. There is very little opportunity for an investment advisor to insinuate himself into a gold purchase transaction, since most anybody who wants to hold the metal can visit their local bullion exchange or mint and buy as much as they’d like.

Because the massive investment institutions that dominate the investment advisory business can’t make a fee out of advising you to buy gold, they try to convince you to purchase other asset classes which their firm has either originated or is a participant in a syndication of investment banks selling such products.

Thanks to the widespread coverage of the questionable integrity of these complex securities, and since many main street investors have been burned by their investment advisors (they feel), there is increasing main street advice being doled out to buy gold. One need only search Google news on any given day to discover that headlines critical of gold are now replaced with headlines singing its praises.

5. Gold is the best performing asset class of the decade-Now that the global financial meltdown has got up a head of steam, investors are hard pressed to find any investment that has performed well over the last ten years as consistently as gold. 

-CIBC World Markets has increased its 2009 gold price prediction from $900/oz to $950/oz and introduced a 2010 gold price of $1,050/oz. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=76503&sn;=Detail

-Economists around the world are tipping the gold price to soar this year, with the most bullish market-watchers predicting the yellow metal could hit more than $2000 an ounce. ANZ head of commodities research Mark Pervan says the $2000 price forecast is based on speculation of a collapsing US dollar stemming from a “massive injection of US dollars into the system.

People will buy gold as an alternative.” Gold is used as a safe haven in times of weak equity markets, bought as a hedge against inflation and currency markets. Read more here-

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid;=10551285

-HSBC raises gold forecasts. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=76396&sn;=Detail

-Gold prices this year should surge above 2008’s record levels, rising as high as $1,080 an ounce as government fiscal stimulus efforts weaken the U.S. dollar and fuel inflation, a closely watched report said on Thursday. Gold could average $915 an ounce in the first half of 2009, up from last year’s average of $871.96, GFMS, a London-based consultancy, said in an update of its Gold Survey 2008 report. Read more here-http://www.reuters.com/article/marketsNews/idAFN1547398520090115?rpc=44 or http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=amlZ8lCJKrdQ

-A prominent figure at a major Australian stockbroker firm has urged people to buy gold if they are concerned about the effects of the economic crisis, the Melbourne Herald Sun reported on Saturday January 10th. The yellow metal which is seen as a hedge against inflation has been on a bull run since hitting its last significant low back in 1999 and achieved an all-time high price of $1,030 per ounce in March last year.

Now Allan Furlong, manager of private client services with Sydney-based Joseph Palmer and Sons, has explained that purchasing gold bullion is a sensible approach in the current climate.

He told the newspaper: “I expect gold to stay up until we come out of this credit crunch.

If you want gold if you think the world is going to end then go and buy physical gold and pay to have it stored somewhere.” Mr. Furlong’s view on gold investment was strongly echoed recently by Darren Heathcote, head of trading at the Sydney offices of Investec Bank, South Africa’s largest bank.

He explained in an interview with Bloomberg that concerns over the dollar are persisting and that buying gold as a safety measure is on an increasingly upward trend. “Gold is obviously gaining a lot of favour as a safe haven asset again,” he told the news provider. Read more here-http://goldnews.bullionvault.com/Goldbug/gold_buying/gold_prices_to_stay_up_in_the_credit_crunch_18970589

-All that shimmers is gold. The safe haven status of gold is starting to shine brighter and brighter, according to Jurg Kiener, CEO of Swiss Asia Capital. He explains his bullish outlook on the precious metal. Watch video here-http://www.cnbc.com/id/15840232?video=986190031

-Bonds in a Bubble? Gold has been the top-performing asset class over the past decade and we have no reason to suspect it is about to give up that mantle. Indeed, with the risks to bonds outlined above, owning gold becomes even more imperative. David Chapman-Read more here-http://news.goldseek.com/UnionSecurities/1231743900.php

-John Embry commentary, be ready as the U.S. may turn dollar into confetti. Read more here-http://www.sprott.com/pdf/investorsdigest/digest.pdf

-Eric Sprott: Gold: The Go-To Asset in any Environment. Read more here-http://www.theaureport.com/pub/na/2060

-During late 2008’s unprecedented financial-market panic, gold got something of a bum rap. Since this metal didn’t soar during the stock chaos like most of its investors expected, many assume something must be wrong in gold-land. But gold ultimately did hold its own, up 2.1% in Q4 while the S&P; 500 plunged 22.4%.

The bottom line is gold’s performance during late 2008’s epic stock panic did not look anywhere near as bad to most of the rest of the world as it did to American investors. Unfortunately our dollar-centric worldview greatly distorted gold’s true performance. It is a big mistake to read too much into dollar gold’s recent technicals that were driven by an incredibly anomalous panic-driven dollar surge that is already reversing.

Rather than dampening investors’ enthusiasm, gold’s new bull highs achieved in the midst of the panic in much of the world will only accelerate gold investment demand. Post-panic, investors everywhere are much more conscious of risk and diversification. Increasing numbers will begin the time-honored best practice of always having some material fraction of one’s total investment portfolio deployed in physical gold. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton010909.html

-Rising commodity prices to trigger renaissance for uranium and gold. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page72103?oid=76673&sn;=Detail

-Price Gap Portends Gold Price Boom. Read more here-http://www.321gold.com/editorials/browne/browne011509.html

-Gold’s 2-year cycle. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=76222&sn;=Detail

-Gold mine production down but costs up 24% world-wide. The increase in costs is due to rising input prices, notably energy and reagents, along with a hint of management relaxation and life-of-mine conservation in the face of higher prices. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=76792&sn;=Detail

-Initiatives to expedite the use of gold dinars as an alternative main trading currency is among 29 resolutions adopted at the Third Islamic Economic Congress that ended Thursday. Read more here-http://malaysia.news.yahoo.com/bnm/20090115/tts-congress-resolutions-bm-993ba14.html

-Another analyst predicts a big official revaluation of gold. Read more here-http://www.gata.org/node/7090

-Gold revaluation clutching at golden straws. Some gold analysts are coming up with theoretical moves which could have a huge impact on the gold price, but will the suggested scenarios ever happen? Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=76771&sn;=Detail or http://www.gata.org/node/7092

SILVER

-LBMA forecast for gold, silver, platinum, and palladium. Read more here-http://www.thebulliondesk.com/content/reports/tbd/temp/2009Forecast20090109.pdf

-COMEX commercial positions favour silver: Got Gold Report. Read more here-http://www.stockhouse.com/Columnists/2009/Jan-1/12/COMEX-commercial-positions-favor-silver–Got-Gold- or http://saigoncharlie.blogspot.com/2009/01/comex-commercial-positions-favor-silver.html

-Potential silver prices based on the gold to silver ratio.

Gold to silver ratio at 80 to 1 with gold at $1500 the silver price would be $18.75
Gold to silver ratio at 70 to 1 with gold at $1500 the silver price would be $21.43
Gold to silver ratio at 60 to 1 with gold at $1500 the silver price would be $25.00
Gold to silver ratio at 50 to 1 with gold at $1500 the silver price would be $30.00
Gold to silver ratio at 16 to 1 with gold at $1500 the silver price would be $93.75

-While 2008 was supposed to be a banner year for silver, CIBC Global Markets suggested that “events later in the year have tarnished silver’s performance. In a recently published analysis, CIBC metals analysts Barry Cooper, Brian Quast and Cosmos Chiu maintained their 2009 and 2010 silver price forecasts of $12/oz and $11/oz respectively, advising, “We believe that holding gold is better than holding silver through what we think will be a tumultuous 2009 and possibly longer.” Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=76504&sn;=Detail

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1231785890.php

-Silver ETF Reaches New Inventory High. Read more here-http://news.silverseek.com/SilverSeek/1231857472.php

-Silver News and Views with David Morgan. Read more here-http://news.silverseek.com/SilverInvestor/1231483800.php

-Is This the End of Silver’s Outperformance, or Will It Outshine Gold Once Again? Read more here-http://www.kitco.com/ind/Radomski/jan152009.html

-Warnings by Apex Silver executives last summer that the Colorado based silver miner was suffering from a severe liquidity crisis came to pass Monday as the company announced it will file for Chapter 11 bankruptcy this week. The company’s liquidity problems had been compounded by increased cash costs and high operating costs, while lead and zinc prices substantially declined. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=76560&sn;=Detail

DEFINITIONS-QUOTES-QUICK HITS

-Fool’s Gold. What Does Fool’s Gold Mean? A gold-colored mineral that is often mistaken for real gold. Also known as Iron Pyrite. During historical periods of gold rushes, many less-than-knowledgeable miners would frequently believe that they hit the motherload upon finding a huge cache of fool’s gold. Unfortunately, unlike the real stuff, fool’s gold is relatively worthless. Investopedia.com

-Frank Lesh, of FuturePath Trading in Chicago summed it up by saying that, “Ultimately, the dollar is the driver. The dollar push is holding gold back. Lesh pointed out that, “Gold is not as weak as some of the other commodities. Volatility in other markets and the geopolitical tensions are always supportive for gold. A good dip in prices is a buying opportunity.” Casey Daily Resource

-”The problem with socialism is that you eventually run out of other people’s money.” Margaret Thatcher

-The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009. In terms of our sector, we expect consumer loans and credit cards to continue to get worse. Jamie Dimon, CEO, JPMorgan, 14 January 2009

-Investigating Goldman Sachs’ shorting its own mortgage-backed securities when Henry Paulson was CEO would be a good start in cleaning up the mess and restoring confidence. Prosecuting JPMorgan Chase’s involvement in sucker-punching gold prices last August would be another step toward restoring confidence. Curtis Hesler, Forbes.com, 12 January 2009

-Its worth noting that silver and platinum are now unbelievably oversold and they should rally hard and outperform gold over the following months. Accordingly, I would recommend buying some silver and platinum bullion at these levels. Puru Saxena-Read more here-http://www.321gold.com/editorials/saxena/saxena010809.html

-Perth Mint rations gold as rush erupts over financial crisis. Australia’s biggest wholesaler of gold coins and bars, has rationed its sales with the global financial crisis sparking a new gold rush. Worried investors are seeking a safe home for their money and ploughing billions of dollars into the precious metal in a bid to preserve their wealth.

Demand has now reached such unprecedented levels that the Perth Mint has been forced to ration its sales. Perth Mint’s bullion sales rose 194 per cent in the December quarter compared with the corresponding period in 2007, while silver bullion sales were up 140 per cent.

The mint has suspended sales of all gold bars and all bullion coins except its 1oz “Kangaroo” gold bullion coin. On Monday, after a three-month suspension, it will expand its range of bullion coins for sale but the restrictions remain in place for minted gold bullion bars so the mint can sell some gold to as many customers as possible.

“We are working three shifts a day, six days a week, and still can’t keep up with demand,” Perth Mint CEO Ed Harbuz said. “I’ve never known anything like this in the precious metals market. “We would be working Sundays too but we are having difficulty getting enough staff.” Read more here-http://www.news.com.au/perthnow/story/0,27574,24894861-2761,00.html

or http://www.gata.org/node/7078

-After the recent bear market rally the next step in another leg down. Will that then be it? Will the bottom be in the market? I suppose that depends how low we go. My own prediction for this market bottom is 4-5,000 on the Dow and for gold to surge to $4-5,000 an ounce.

However, the initial impact of the stock crash will be a dollar rally, so the gold price surge will have to wait until that is done and then the dollar and bonds will crash. In this environment it makes sense to sit on cash or precious metals and do little else while the financial professionals lose their clients another massive amount of money. Peter Cooper

-What do I want to own in January 2010? Not dollars, not bonds and not stocks, unless they are advantaged by higher commodity prices. Gold and crude oil will remain at the heart of my investment philosophy, along with other tangibles. Curtis Hesler-http://www.gata.org/node/7088

-We get many requests for projections on gold for the year 2009. This is the way we see it a minimum of $1,200 and the possibility of $2,000. The dollar will revisit 71.11 on the USDX and break that level to the downside, perhaps to 60 or 65. We believe $80.00 a barrel is a reasonable price for oil. House prices will fall 15% to 20% more and the 10-year Treasury note should reach 4%. Bob Chapman

-We ask how can major premiums persist for six months in physical gold and silver assets, as supply remains very limited and the futures prices fall at the same time? It is impossible unless our government is rigging the market. Today’s government corruption is as bad as it gets.

In spite of all this gold and silver will move relentlessly higher as they have over the past 8-1/2 years. Sooner or later these crooks will lose. Besides where else can you go with your investible funds? The market is headed much lower as is real estate; commodities face recession and less demand and now the bond market is a bubble. There is only one place left and that is gold and silver assets. Bob Chapman

-”Gold is in a bull market,” said Steven Lehman. “Given the unprecedented stimulus measures that have been taken and will continue to be taken, ultimately that will be negative for the currency. Gold is priced in dollars, so consequently gold will be more expensive.” Bloomberg

-When the resource sector was really hot in 2003 and 2006, silver soared much more than gold. So that’s another barometer for the recession the silver-gold ratio. When silver starts outperforming gold, it means the resource sector is starting to strengthen. Silver will have a bigger boost than gold when it’s rising as both a precious metal and an industrial metal.

Silver always moves with gold. Whether it’s going to be stronger or weaker than gold is the question and right now the trend is favoring gold over silver. Certainly in the years from 2003 to 2006, silver was the winner compared to gold. I think silver is still an okay investment.

Again, if you have to pick, I like gold better, but I do like silver too and its rise is just starting. In fact, though it’s following gold, it could be leading the base metals in an intermediate rise and silver does have more upside potential in the short term. It’s not even close to overbought.

Pamela Aden-Read more here-http://news.goldseek.com/AdenResearch/1230908400.php

-”To be a reasonable investor over the long term, it doesn’t take a high IQ,” said Jean-Marie Eveillard. Instead, it’s a “willingness to move away from the herd to follow your own path, at the risk of lagging, if you think the herd is about to run over the cliff.” Bloomberg

-S&P; Case Shiller sees Southern California home prices off 24.9% in 2009 and 5.1% in 2010; a net 50% drop is seen and perhaps as much as 70% from the peak prices. That puts the $550,000 home at $275,000 or $165,000. Bob Chapman

-Adrian Day, the president of Adrian Day’s Asset Management noted that, “Further out, the massive amounts of dollars created will have an impact. Once they get into the economy that will lead to some inflationary pressure as well as a deteriorating dollar.” Casey Daily Resource

-”Gold is transportable, it’s 100 percent liquid, and it’s perfectly divisible in the context of ounces, bars, or coins,” says the head of a California research firm who keeps a supply of it, along with food, water, and guns, on hand. “And most important, there’s no counterparty” i.e., it’s an investment beholden to no one, and perhaps one of the few assets that will retain value if the financial system collapses. Read more here-http://nymag.com/news/features/all-new/53372/ or http://www.gata.org/node/7087

-Even the rich suffer in a financial crisis. Over a third of American millionaire households said they had lost at least 30% of their net worth since September, according to a new report by Spectrem Group, a financial consultancy.

Property, mutual funds, shares and annuities took the biggest knocks. Unsurprisingly, financial advisors are under more scrutiny, with satisfaction levels falling from 60% earlier in the year to 40%. A majority of the wealthy say they may not be able to support their lifestyles and nearly 20% will delay retirement. Economist.com

-Peter Schiff predicts Imminent Doom Fear And Loathing In America. Watch more here-http://www.youtube.com/watch?v=djgH9wA-JSU

-Iran president: ‘Not feasible’ for Israel to live. Read more here-http://www.breitbart.com/article.php?id=D95NMH4O1&show;_article=1

-U.S. Rejected Aid for Israeli Raid on Iranian Nuclear Site. Read more here-http://www.nytimes.com/2009/01/11/washington/11iran.html?pagewanted=print

-Bin Laden message: Stop ‘aggression’ against Gaza. Read more here-http://www.cnn.com/2009/WORLD/meast/01/14/binladen.message/index.html

-Bin Laden urges jihad against Israel. Read more here-http://www.breitbart.com/article.php?id=D95MURVG0&show;_article=1

-U.S. military report warns ’sudden collapse’ of Mexico is possible. Read more here-http://www.elpasotimes.com/newupdated/ci_11444354

-British Airways credit card is UK’s most expensive after hiking interest charge to 46%. Read more here-http://www.dailymail.co.uk/news/article-1110305/British-Airways-credit-card-UKs-expensive—hiking-charge-46.html

-Decade’s Worst Flu Marches on Europe after Virus Hits Ireland. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a8cTy7tbUjhQ&refer;=home

Rare Colored Diamonds

-The Rare Colored Diamonds Historical Value Tracker is the perfect tool for investors to view the potential future value of a rare colored diamond based on the current market trend of a particular type of diamond. Track the potential future value of colored diamonds here-http://www.rarecoloreddiamonds.com/HistoricalValueTracker.html

-Rio Tinto Diamond Production Declines 20% in 2008. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=31763

-Argyle Stops Underground Project, Reduces Diamond Production until March. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=31755

-Rio Tinto Group, the world’s third largest mining company, will cut production and slow spending on the A$1.86 billion ($1.3 billion) underground expansion at the Argyle diamond mine in Western Australia to reduce debt. Development of the mine will be slowed, Gervase Greene, spokesman for London-based Rio Tinto, said in an interview. “It will mean some job losses,” he said without specifying a number.

There may be about 200 contract positions cut, said Kavneet Elvin, a spokeswoman for Macmahon Holdings Ltd., which is contracted by Rio Tinto to work at Argyle. Rio is slashing spending by $5 billion and eliminating 14,000 jobs worldwide as it seeks to reduce costs and debt. The worst global economic crisis since the Great Depression of the 1930s is reducing demand for commodities from diamonds to copper, causing mine closures and halting expansion projects.

Diamond processing facilities at the mine will be closed for as long as three months, starting in March, Rio said in an e-mailed statement. Argyle is the world’s largest diamond supplier. “We remain convinced that the diamond business has excellent long-term prospects,” said Kevin McLeish, chief operating officer of Argyle Diamonds. Macmahon said the decision will reduce its revenue from the contract to about A$20 million a year, from A$80 million a year.

The Argyle mine in Western Australian supplies 90 percent of the world’s pink diamonds, with those gems accounting for just 1 percent of total production at the mine. Diamonds and industrial minerals accounted for 13 percent of Rio’s sales in 2007. Read more here-http://www.bloomberg.com/apps/news?pid=20601081&sid;=aK_Df4kGFWr0&refer;=australia or http://www.mineweb.co.za/mineweb/view/mineweb/en/page37?oid=76668&sn;=Detail

-’Priceless’ Rare Red Diamond on Display at Los Angeles Museum. A blood-red diamond once stolen by the Nazis is currently on display at a downtown Los Angeles museum through February 1, thanks to a local jeweler who bought it in 2007. The 5-carat, emerald-cut stone is one of only three such stones of that size known to exist in the world, according to a report by local newspaper Daily News on Saturday. “Red is the rarest color in diamonds.

This is one of the rarest diamonds in the world, and even if my company went on for another 1,000 years we would never find a diamond more rare than this,” Douglas Kazanjian, head of a Beverly Hills jewelry firm, told the newspaper. Kazanjian refused to put a price on the diamond, known as Kazanjian Red, which he bought from a female client from the Far East in 2007. The gem was mined in South Africa in the 1920s.

The dark and rough 35-carat stone was bought by a broker for about $40 a carat, and eventually made its way to Amsterdam, where it was cut and polished. At the time, no one knew how to value the stone, and it wound up in a safe in Arnhem, the Netherlands. That’s where Nazi troops found it in 1944 and made it part of a hoard that American soldiers eventually uncovered in a salt mine near Adolf Hitler’s Bavarian summer retreat.

“This was part of Hitler’s personal collection during the war,” Kazanjian said. The stone was returned to the family that owned it, but sold several times before disappearing from the public eye. Years later, one of Kazanjian’s clients from the Far East turned up with it, and the jeweler couldn’t resist the offer, according to the report.

Kazanjian declined to disclose the purchase price or identify the woman who sold it to him. Kazanjian plans to sell the diamond someday and use the proceeds for his family’s scholarship foundation, but decided to send it on a world tour first, starting at the Los Angeles County Natural History Museum. Xinhua News Agency

COMMODITIES-OIL

-Did Speculation Fuel Oil Price Swings? Speculation Affected Oil Price Swings More Than Supply And Demand. Read and watch more here-

http://www.cbsnews.com/stories/2009/01/08/60minutes/main4707770.shtml

-Where is oil going next? Read more here-http://www.iht.com/articles/2009/01/15/business/15oil.php

-Crude Oil Declines After OPEC Reduces 2009 Demand Forecast. Crude oil fell after OPEC said that demand for its crude will decline 4.2 percent this year as the recession in the U.S., Europe and Japan curbs fuel use.

Consumption of OPEC’s oil will shrink 1.4 million barrels a day to 29.5 million barrels a day, according to a monthly report released Thursday. U.S. fuel demand fell 6 percent last year, the biggest drop since 1980, as prices touched records and the economy contracted, the industry-funded American Petroleum Institute said today.

“The overriding factor impacting the market is the fact that we are in the midst of a global recession, which is buffeting the U.S., even China,” said Rachel Ziemba an analyst at RGE Monitor, an economic research company in New York. “That’s going to be a negative for oil demand.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=a11zSWRVPZDQ&refer;=home#

-EIA lowers 2009 world oil demand forecast. Read more here-http://uk.reuters.com/article/oilRpt/idUKN1342228320090113

-Saudi Arabia to Pump Less Oil than Quota in February. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aSJMVLktVOMY

-Chávez reopens oil bids to West as prices plunge. Read more here-http://www.iht.com/articles/2009/01/15/america/15venez.php

-Tumbling oil prices are forcing many of the richest Persian Gulf states to record budget deficits and limit a critical source of foreign investment for poorer Arab countries. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=ai8ZshRIrB3E&refer;=exclusive

-Morgan Stanley is seeking a supertanker to store crude oil, joining Citigroup Inc. and Royal Dutch Shell Plc in trying to profit from higher prices later in the year, four shipbrokers said.

The bank has yet to find a suitable vessel, said one of the brokers, all of whom asked not to be identified because the information is private. Carlos Melville, a spokesman for Morgan Stanley in London, declined to comment.

“There’s a lot of people looking for storage,” Denis Petropoulos, London-based head of tankers at Braemar Shipping Services Plc, the world’s second-largest publicly traded shipbroker, said by phone.

Banks and commodity traders are seeking new ways to make money after the Standard & Poor’s 500 Index fell by the most since 1937 last year and crude oil prices dropped more than $100 a barrel from their peak. Companies including Koch Industries Inc. and BP Plc are hoarding enough crude at sea to supply the world for almost a day. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aZ8zTUi12IkY&refer;=home

FINANCIAL-CREDIT CRISIS

-U.S. Senate Allows Use of $350 Billion From TARP. The U.S. Senate voted to allow the release of $350 billion in financial-rescue funds sought by President-elect Barack Obama.

Senators defeated, 52-42, a resolution that would have prevented the release of the second half of the $700 billion in the Troubled Asset Relief Program, enacted last year to boost the sagging U.S. economy. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aR5bWg.J0iFc&refer;=home

-The Federal Reserve’s top two officials urged a new effort to address the toxic assets held by financial companies, warning that they threaten to prevent banks from resuming lending to households and companies.

Chairman Ben S. Bernanke and Vice Chairman Donald Kohn said in separate remarks yesterday that the illiquid investments raise questions about the “underlying value” of banks and may hinder “private investment and new lending.” They called for the government to remove or insure the assets.

The goal is to prevent the type of economic stagnation that plagued Japan in the 1990s, when banks weighed down with bad loans were unable to lend. President-elect Barack Obama has a window of opportunity to oversee a comprehensive bank restructuring plan after taking office next week.

“Banks are insolvent now,” said Paul Miller, a bank analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia, who estimates that financial institutions need an additional $1 trillion to $1.2 trillion in new help. “Until you address this shortfall, banks will continue to be credit hoarders and destroyers as they shrink their balance sheets.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aVS2KSR6X7r8 or http://money.cnn.com/2009/01/13/news/economy/bernanke_speech/index.htm?postversion=2009011313

-A group led by former Federal Reserve Chairman Paul Volcker called for a regulatory crackdown that would curtail risk-taking by systemically important financial institutions and limit their share of deposits.

The panel of former central bankers, finance ministers and academics known as the Group of Thirty advised that regulators impose capital limits on proprietary trading and bar large banks from running hedge funds and private-equity units that mix their own and their clients’ money. In a report released Thursday, the group also urged governments worldwide to tighten supervision of insurance companies, investment banks and large broker-dealers.

The recommendations come as U.S. lawmakers and the incoming Obama administration consider ways to overhaul regulation after major financial institutions reported almost $1 trillion in losses and writedowns stemming from the credit crisis. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=agfDfcTVCTqw&refer;=home

-David Bowie’s ‘back catalogue bonds’ may have started the credit crunch. Read more here-http://www.mirror.co.uk/news/top-stories/2009/01/12/david-bowie-s-back-catalogue-bonds-may-have-started-the-credit-crunch-115875-21036649/

-Ireland’s Government Will Take Full Control of Anglo Irish Bank. Ireland’s government will take full control of Anglo Irish Bank Corp., it said in Dublin Thursday. The government last month said it would invest 1.5 billion euros and take a 75 percent stake. “The Government believes that the recapitalization is not now the appropriate an effective means to secure its continued viability,” it said in a statement today. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aJvzdotkmJIo#

RECESSION

-Warning: Falling price zone ahead. Deflation has become the No. 1 fear of a growing number of economists, who worry that lower prices will further hurt the economy. Read more here-

http://money.cnn.com/2009/01/14/news/economy/deflation/index.htm?postversion=2009011415

-An $825 billion economic-stimulus measure drafted in the U.S. House of Representatives would provide $550 billion in new government spending along with $275 billion in tax cuts for families and businesses.

A summary of the proposal released Thursday said it would provide about $90 billion in infrastructure spending, $87 billion in aid to states struggling with surging Medicaid costs and $43 billion in unemployment and job training programs, including a $25 per week increase in jobless benefits.

Other provisions would provide $20 billion for federal nutrition assistance, $15.6 billion to Pell Grants, which help low-income families send their children to college, and $6 billion to expand broadband access in underserved areas. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=acGKgfPz6H04&refer;=home

-The International Monetary Fund may need another $150 billion to help counter the hit to emerging markets and poorer countries from a worsening global economic downturn, Managing Director Dominique Strauss-Kahn said. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=ajOSb4P.uH7k&refer;=home

-Fed: Economy continues to sour. Central bank’s Beige Book says the economy continued to deteriorate across the nation amid grim retail sales and depressed real estate markets. Read more here-http://money.cnn.com/2009/01/14/news/economy/beige_book/index.htm?postversion=2009011414

-Economy could lose 2M jobs in ‘09 report. Conference Board says there’s no sign that labor market will improve any time soon. Read more here-

http://money.cnn.com/2009/01/12/news/economy/economy_job_loss/index.htm?postversion=2009011211

-Sales at U.S. retailers fell more than twice as much as forecast in December as job losses and the lack of credit led Americans to cut back on everything from car purchases to eating out.

The 2.7 percent slump marked the sixth straight month of declines, the longest string since comparable records began in 1992, the Commerce Department said today in Washington. Labor Department data showed the global collapse in commodities caused prices of goods imported by the U.S. to fall for a fifth month.

Wednesday’s sales figures indicate the hit to spending in the recession is even deeper than estimated, and spurred a sell-off in stocks. The loss of 2.6 million jobs and declining home and stock values are squeezing households. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aHFAgQKZaE.U&refer;=home

-Holiday sales: Much worse than feared. Retail group says combined November-December sales fell 2.8%, after expecting a modest gain. Read more here-

http://money.cnn.com/2009/01/14/news/economy/nrf_holidaysales/index.htm?postversion=2009011414

-U.S. Drivers Hold On to Autos, Shun Showrooms on Job-Loss Risk. Drivers rattled by the worst U.S. labor market since World War II are hanging on to old autos longer instead of buying new models, threatening to crimp sales again in 2009 after demand plummeted to a 16-year low.

Used vehicles being traded in at dealerships averaged 6.3 years of age after the Wall Street meltdown in late 2008, about 6 months older than before the crisis, according to forecaster J.D. Power & Associates in Troy, Michigan. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=asi8tS5TV0eQ&refer;=exclusive

INTEREST RATES-MONEY SUPPLY

-The European Central Bank cut its benchmark interest rate by half of a percentage point to 2% on Thursday, matching its lowest-ever rate as inflation plummets and recession spreads. Read more here-http://money.cnn.com/2009/01/15/news/international/ecb_rates.reut/index.htm

-The Bank of England will be able to print extra money without having legally to declare it under new plans which will heighten fears that the Government will secretly pump extra cash into the economy.

The Government is set to throw out the 165-year-old law that obliges the Bank to publish a weekly account of its balance sheet a move that will allow it theoretically to embark covertly on so-called quantitative easing. The Banking Bill, which is currently passing through Parliament, abolishes a key section of the law laid down by Robert Peel’s Government in 1844 that originally granted the Bank the sole right to print UK money. Read more here-http://www.gata.org/node/7083

-Growth of Global Money Supply. Read more here-http://news.goldseek.com/GoldSeek/1231778551.php

U.S. BUDGET DEFICIT-TRADE GAP-PENSIONS

-U.S. deficit soars to $485.2 billion. The budget gap in first three months of the fiscal year surpasses the level recorded for all of ‘08. Read more here-

http://money.cnn.com/2009/01/13/news/economy/treasury_budget_deficit_Dec08/index.htm?postversion=2009011314 or http://www.bloomberg.com/apps/news?pid=20601110&sid;=aA_EZHK984c4

-The U.S. trade deficit narrowed 29 percent in November, the most in 12 years, as tumbling oil prices and a slump in consumer spending slashed imports. The gap shrank more than forecast to $40.4 billion, the smallest since November 2003, from a revised $56.7 billion in October, the Commerce Department said today in Washington. Americans bought 12 percent fewer goods and services from overseas, sending imports to the lowest level in three years. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aEq7Am2S15PA&refer;=home

-State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires. Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16, according to the Center for Retirement Research at Boston College. The Standard & Poor’s 500 Index of stocks fell 41 percent in the period.

“Not a whole lot of people get too excited about pension funds,” Philadelphia Mayor Michael Nutter said in an interview. “But if you have to pay those costs, they do grab your attention.”

After Philadelphia’s fund lost $650 million in the first nine months of last year, Nutter joined the mayors of Atlanta and Phoenix in writing a letter to Treasury Secretary Henry Paulson seeking financial help for U.S. cities. Their November letter cited investment deficits and rising pension costs.

The $865 billion in losses, which exceed the $700 billion Troubled Asset Relief Program that Congress approved in October, comes as states face budget deficits totaling $42 billion. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=ahb6gcv6yWcs&refer;=home

STOCK MARKET

-Societe Generale said on Thursday that the United States’ economy looks likely to enter a depression and China’s could implode. In a highly bearish note, veteran cross asset strategist Albert Edwards said investors should now cut equity exposure after a turn-of-the-year rally and prepare for a rout. He predicted that the S&P; 500 index of U.S. stocks could be set for a fall of nearly 70 percent from recent levels. Edwards also raised the danger of a global trade war with China.

“While economic data in developed economies increasingly reflects depression rather than a deep recession, the real surprise in 2009 may lie elsewhere,” Edwards wrote. “It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression.”

Edwards has long been one of the most bearish analysts in London, first with Dresdner Kleinwort and then with SocGen. But he called in October for clients to increase their exposure to equities, which he said were due a rebound. “We believe that the market is (now) set to quickly slide sharply towards our 500 target for the S&P;,” he said. The S&P; 500 stock index is currently at 842, up about 14 percent since hitting a low in November. Read more here-http://www.guardian.co.uk/business/feedarticle/8260101

-Bear Market Comparison. Read more here-http://www.321gold.com/editorials/saville/saville011309.html

-Crashes percentage changes in Dow Jones Industrial Average close

REAL ESTATE-FORECLOSURES

-Warning that Irish house prices may fall by 80%. Read more here-http://www.irishtimes.com/newspaper/finance/2009/0113/1231738220759.html

-U.K. real-estate companies may need to be rescued by shareholders this year to stay afloat. The largest commercial-property firms need to raise as much as $20 billion this year to restore their balance sheets at a time when financing is scarce, according to estimates by Bernd Stahli, an analyst at Merrill Lynch & Co. in London. The FTSE 350 Real Estate Index fell 7.3 percent, the biggest slide since 1987. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aUMpF9JbbnI0

-U.S. home prices, already down 23 percent from their July 2006 peak, will continue to fall until the third quarter of next year, PMI Mortgage Insurance Co. said in a report. Ninety-seven percent of the 381 U.S. metropolitan areas surveyed are likely to have lower home prices in September 2010, according to the Walnut Creek, California-based insurer’s Market Risk Index, which assigns a score to every region based on the likelihood real estate values will be lower in two years.

“The two primary drivers of increased risk scores across a broader segment of MSAs are the continued high level of foreclosures and rising unemployment,” David Berson, PMI’s chief economist and strategist, said in a statement. The three-year-old housing recession has spurred a credit crisis that’s making it harder for borrowers to qualify for home loans. With home values tumbling, homeowners who are unable to refinance or sell have pushed the U.S. foreclosure rate to a post-World War II high.

The lending crunch has, in turn, made it more difficult for companies to pay their bills, driving the jobless rate to a 15-year high. The 10 regions with the highest risk for lower home prices were in California, Florida and Nevada, PMI said. The 10 with the lowest risk for lower real estate values were Denver; Indianapolis; Cleveland; Columbus, Ohio; Charlotte, North Carolina; San Antonio; Pittsburgh and three Texas metro areas: Houston, Fort Worth and Dallas, according to the survey.

Mortgage issuance declined 23 percent last year from 2007, according to the Washington-based Mortgage Bankers Association. Home prices will fall another 15 percent, according to economists Michelle Meyer and Julia Coronado of Barclays Capital Inc. in New York. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aov5kTvfFfAU

-Manhattan apartment rents fell in the fourth quarter as the recession and Wall Street job cuts deterred tenants from moving. Rents fell 3.9 percent for studios to an average of $1,841, one bedroom apartments dropped 2.5 percent to $2,527 and two- bedroom apartments fell 4.2 percent to $3,551 from a year earlier, brokerage Citi-Habitats Inc. said today in a report. Three-bedrooms dropped 0.1 percent to an average of $4,712. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aQ7IUVU9YF5I

-U.S. office vacancies likely will rise to 17 percent by the end of the year as companies give up space amid job cuts and a shrinking economy, said Bob Bach, chief economist at real estate broker Grubb & Ellis Co. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aX7hU.pTuTGY

-Manhattan office vacancies rose to 7.6 percent in the fourth quarter, the highest since 2004, as the recession led companies to give up space, brokerage CB Richard Ellis Group Inc. said in a report. Rents fell 2 percent to $67.20 a square foot, according to the world’s biggest commercial real estate services provider. The vacancy rate was 2.7 percentage points higher than the same period in 2007. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aMdOWzKBs4YM

-U.S. foreclosure filings jumped 81 percent last year as falling house prices, tighter mortgage lending and the longest recession in a quarter century battered property owners, RealtyTrac Inc. said. More than 2.3 million properties got a default or auction notice, or were seized by lenders, the Irvine, California-based seller of default data said today.

That’s the most RealtyTrac has documented in four years of recordkeeping. Filings rose 41 percent in December from a year earlier to 303,410. The nation lost more than 2.6 million jobs last year, the most since 1945, and U.S. stocks had their worst performance since the Great Depression. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=asgBXeQ.u5Lg or http://money.cnn.com/2009/01/15/real_estate/millions_in_foreclosure/index.htm

-Freddie Foreclosures, Eviction Plans Continue During Moratorium. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aNaue9COnrdc&refer;=home

© 2012, Worldwide Precious Metals Canada Ltd.
www.wwpmc.com

The GoldBugg Report – January 20, 2009
Posted by Worldwide Precious Metals on Tuesday, January 20, 2009

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