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The GoldBugg Report – February 24, 2009

February 24, 2009

WORLD FINANCIAL REPORT ON RADIO FEB 20 2009 SHOW

February 20^th, 2009

Memo to All Retail Dealers

Another week comes to a close and the World’s Financial Markets continue their unprecedented turmoil and deterioration. As we pen this memo the Dow has broken down through the 7500 support level and closed at 7365.67.

It’s next key support level is 7200 and if that breaks its “Katie bar the door.”

Today rumours riddled the markets, based on comments by Mr. Bernanke and the market’s paranoid interpretation of his comments, that US Nationalization of some US Banks was being considered by the US Government.

Later in the Day, White House and the Treasury tried to dispel these rumours, but it looks like the markets are not buying in to the possibility that their comments are viable.

Here is how Precious Metals Faired:

(Friday to Friday Close)

Notice that while Gold & Silver continued to appreciate substantially Platinum was moderately up while Palladium actually lost ground. Again we feel this is continued confirmation of Gold & Silver being the product of choice as the “Flight to Quality” continues.

Net Change Year to Date

Since the lows for Gold and Silver seen in October (Gold $680.00, Silver $8.40) with a ratio of 80.95/1, we have seen a remarkable but logical appreciation of $322.00 in Gold (+47.36%) and $6.14 in Silver (+73.1%).

In our memos of Oct 30^th, Nov 6^th, and Nov 24^th 2008 we stressed this to be a time to be proactive and for those folks who did – congratulations and thank you for your confidence in PMI.

For those who have yet to cross over to the world of Precious Metals ownership we do not feel it is too late as we see long term price appreciation having a long way to go.

If we see similar appreciation over the next four months we could see Gold approach $1,500.00 and Silver in the $25.00 range which would put the Silver/Gold ratio at 60/1.

In the meantime here are the Short Term Support and Resistance Levels:

We make no guarantee of price levels discussed, and certainly PMI is not alone in anticipation of much higher prices for Gold, Silver, Platinum and Palladium. However with the continued dissolving of the world financial systems as we have known them, and given the fact that historically Precious Metals have been the only product man can own and hold to preserve purchasing power, it seems logical that now, more than ever is a serious time for Precious Metals.

Trading Department – Precious Metals International

GOLD

-Gold Cycles Relative to the S&P; 500. A chart of Gold cycles relative to the S&P; 500 and a chart of the price of Gold relative to the S&P; 500 clearly suggest an out performance by Gold in the years to come.

As frequently outlined in our Gold Comments, our 40-year cycle suggests similar outcomes, since during the last 1/3rd of the 40-year cycle (1922-1934; 1962-1974; 2002-?) Resources (or “hard-assets”) invariably outperform “soft-assets” (Banks, etc.). Ron Meisels-Story here-http://www.321gold.com/editorials/meisels/meisels021609.html

-Insight: Gold primed to be ‘mania asset.’ Gold is exhibiting all the classic signs of being in a structural bull market. On fears of inflation in early 2008, it rallied. Then, on fears of deflation in late 2008, it rallied again. How high can gold ultimately go? A Dow Jones Industrial Average/gold ratio of 2:1 would be a good sign the bull market in gold is getting well advanced. We saw this in 1932 and 1980. Only nine years ago in 2000, however, this ratio reached over 40:1. Read more here-http://www.ft.com/cms/s/0/eff64394-fdd7-11dd-932e-000077b07658.html?nclick_check=1

-Gold to Beat Equities, Bonds Amid Crisis, MFC’s Pichit Predicts. Investors should boost gold holdings as the global financial crisis will increase demand for the precious metal as a safe haven, according to MFC Asset Management Pcl, Thailand’s fourth-biggest mutual-fund company.

“Returns from investing in gold will continue to outpace those from equities and bonds for the next couple years,” President Pichit Akrathit said today in an interview. “Gold has proven for several centuries that the metal is a safe place as a store of wealth during most economic crises.” Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aqi9enzsjGME

-$2500 gold is Nichols nuts or a prescient observer? Talking to Mineweb radio yesterday, gold commentator Jeffrey Nichols predicted a $2,500 gold price as the global financial crisis gets worse before it gets better. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=78718&sn;=Detail

-McEwen, Goldcorp Founder, Bets Crisis Will Drive Gold to $5,000. Goldcorp Inc. founder Rob McEwen, who has more than $100 million in gold investments, said he expects the metal to top $5,000 an ounce as governments increase the money supply to combat recession. Bullion will more than double to $2,000 an ounce by the end of next year before rising to McEwen’s target by the end of the cycle, which could take an additional four years, the investor said.

“Politicians around the world are listening to cries from their electorates and they’re giving money to all callers,” McEwen said yesterday in a telephone interview from Toronto.

McEwen, who founded what is now the world’s second-largest gold producer by market value, owns stakes in three Canadian precious-metal explorers worth more than $100 million. He said he also has a “big, big” holding in bullion. Gold gained for the eighth straight year in 2008 amid investor concern the economy would collapse and government efforts to prevent that would increase inflation.

McEwen said he started buying bullion in August 2007, at the beginning of the subprime mortgage crisis. Gold has jumped 40 percent since Aug. 1 of that year, touching a high of $948.20 today, while the Standard & Poor’s 500 Index has dropped 43 percent. “I realized we had reached an inflection point regarding money,” McEwen said. “It was all about protecting money, and gold served that purpose.” Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=adHg7t8BL5Bg&refer;=canada

-Murenbeeld reckons gold will reach $2,300. The gold price should average $945/oz during 2009 but rise to $995/oz by the end of the year and average $1,050/oz during 2010.

Those are the latest predictions made by gold “guru” Martin Murenbeeld, chief economist for Dundee Wealth Economics, speaking at the Mining Indaba being held in Cape Town.

But Murenbeeld added he believed gold would eventually reach $2,300/oz although he did not put a timeframe on this prediction. The price level of $2,300/oz holds considerable significance for gold investors and analysts because it represents the current, inflation-adjusted value of the price of $850/oz that gold reached early in 1980.

Interviewed after his presentation Murenbeeld said, “Over the long cycle gold will take out $2,300/oz but that could take up to five years before it happens.” Read more here-

http://www.miningmx.com/events/indaba_2009/murenbeeld-reckons-gold-will-reach-$2,300.htm

-Eric Sprott, the Canadian money manager who last year predicted banking stocks would collapse, said the U.S. is at the beginning of an economic depression that will help gold prices more than double. Bullion may top $2,000 an ounce in coming years amid a series of financial catastrophes, the chairman and founder of Toronto-based Sprott Asset Management Inc. said yesterday in an interview. Banks will battle to replenish capital, Treasury auctions stand the risk of failing and the moribund economy will create a dire operating outlook for many companies, he said.

“The trend is down, and there’s not one signpost that says it’s changing yet,” Sprott said yesterday from Toronto. “We’ll stand by to wait to see those, and until it does, you have to assume it gets worse.” Sprott, who manages $4.5 billion, said in March that the world was in a “systemic financial meltdown,” a call that presaged the collapse of financial institutions including Bear Stearns & Co. and Lehman Brothers Holdings Inc. Since then, the U.S. has entered the worst economic slowdown since the Great Depression, credit markets have tightened and asset prices have dropped as companies and funds sell portfolios to raise cash.

The 81-company Standard & Poor’s 500 Financials Index has dropped 62 percent since Sprott said on March 6 he was buying bullion and gold-producers’ shares, while shorting financial- sector stocks. Gold slipped 6.3 percent during the same period. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ao7hCvQA9QZ0

-James Turk interviewed on gold. ‘Buy gold, it’ll only rise from here.’ Read more here-http://www.dnaindia.com/report.asp?newsid=1230259&pageid;=0

-John Embry of Sprott talks about gold on BNN. Watch video here-http://watch.bnn.ca/commodities/february-2009/commodities-february-19-2009/#clip141495

and http://watch.bnn.ca/commodities/february-2009/commodities-february-19-2009/#clip141497

-Jay Taylor speaks about gold on BNN. Watch video here-http://watch.bnn.ca/#clip139229 and http://watch.bnn.ca/#clip139230

-Gold Demand Pushed Through $US100 Billion Barrier as Investors Turned to Recognized Store of Value. Read more here-http://biz.yahoo.com/bw/090218/20090217006742.html?.v=1

or http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=78660&sn;=Detail

-Gold Demand Rose 26% in Quarter on Investment Appeal. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aW4LBpx1MAUw

-Where do the gold ETFs really get their bullion? Read more here-http://www.gata.org/node/7169

-Did Japan Just Buy the IMF’s 400 Tonnes of Gold? Read more here-http://safehaven.com/article-12624.htm

-William Rees-Mogg: In crisis never forget value of gold. Read more here-http://www.gata.org/node/7175

-How significant is this bear market? It all depends on how you measure. When measured in US dollars, the Dow currently trades 44% off its October 2007 record high. However, when measured with that other world currency (gold), the bear market is much more significant. To help illustrate the point, today’s chart presents the Dow divided by the price of one ounce of gold.

This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 8.4 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces it took back in 1999. When priced in gold, the Dow from 1999 to today is down 81%! Chartoftheday.com

-US Mint Bullion Coin Sales. Read more here-http://www.zealllc.com/2009/mintcoin.htm

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,000 the silver price would be $12.50
Gold to silver ratio at 70 to 1 with gold at $1,000 the silver price would be $14.29
Gold to silver ratio at 60 to 1 with gold at $1,000 the silver price would be $16.67

Gold to silver ratio at 50 to 1 with gold at $1,000 the silver price would be $20.00
Gold to silver ratio at 15 to 1 with gold at $1,000 the silver price would be $66.67

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1234807880.php

-David Morgan silver commentary. Read more here-http://www.321gold.com/editorials/morgan/morgan021309.html

-Gold:silver ratio a pointer to higher prices all round? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=78388&sn;=Detail

-Silver and gold Break Through Resistance. James Turk-Read more here-http://goldmoney.com/en/commentary/2009-02-15.html

-Silver and gold Market Updates from Clive Maund. Read more here-http://www.321gold.com/editorials/maund/maund021609.html

DEFINITIONS-QUOTES-QUICK HITS

-Devaluation. A deliberate downward adjustment to a country’s official exchange rate relative to other currencies. In a fixed exchange rate regime, only a decision by a country’s government (i.e central bank) can alter the official value of the currency. Contrast to “revaluation”.

There are two implications for a currency devaluation. First, devaluation makes a country’s exports relatively less expensive for foreigners and second, it makes foreign products relatively more expensive for domestic consumers, discouraging imports. As a result, this may help to reduce a country’s trade deficit. Investopedia.com-Read more here-

http://en.wikipedia.org/wiki/Devaluation

-”We are spending more money than we have ever spent before, and it does not work. After eight years we have just as much unemployment as when we started, and an enormous debt to boot.” US Treasury Secretary, Henry Morgenthau, May, 1939

-”O gold! I still prefer thee unto paper which makes bank credit like a bank of vapour.” Lord Byron

-”We’re talking about ordinary people not knowing what to do with their savings equity markets are suffering, housing markets are suffering and so they’re buying gold.”

Rozanna Wozniak the World Gold Council’s investment research manager

-Brian Hicks, co-manager of the U.S. Global Investors Global Resources Fund, summed up by saying, “I think $1,000 is pretty much almost in the cards here just given how strong the trend has been.” The demand for gold is “a reflection of just how concerned investors are becoming about the ongoing volatility in the equity market as well as the financial crisis,” Hicks added. Casey Daily Resource

-”The market might see a test of the $1,000 mark in the days ahead should risk aversion continue, however, $1,000 is an important psychological barrier and will be hard to breach at the first instance,” said Tobias Merath, head of commodity research at Credit Suisse Group in Singapore. Bloomberg

-In these unprecedented economic times, it is irresponsible and extremely high risk not to have an allocation to gold bullion in an investment portfolio. Gold.ie

-”Investor confidence is extremely shaky,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “People are still flocking to gold for its perceived safety.” Bloomberg

-”Gold has become, for all intents, the world’s second reserve currency.” Dennis Gartman economist and editor of the Gartman Letter

-”Everyone is looking for a safe haven, and gold is the safest and most-liquid haven of them all,” said James Turk founder of GoldMoney.com

-Gold bugs have been emboldened by news that Russia has accumulated 90 tonnes over the last 15 months. “We are buying gold,” said Alexei Ulyukayev, deputy head of Russia’s central bank. The bank is under orders from the Kremlin to raise the gold share of foreign reserves to 10 percent. Read more here-http://www.gata.org/node/7178 or http://news.goldseek.com/GoldSeek/1234965600.php

-While investment demand remains very strong and is increasing there are growing fears about the declining supply of gold – the world’s mine gold supply has been falling in recent years and it fell to 2,385 tonnes last year, down 3.6 per cent from 2007 (despite the rise in prices in recent years). This is a recipe for markedly higher prices in the coming months and the inflation adjusted high of some $2,400/oz looks more and more likely in the next few years. Gold.ie-Read more here-http://news.goldseek.com/GoldSeek/1234879200.php

-The collapse in silver prices from over $20 to below $9 last year saw a sharp rebound in the gold/silver ratio favouring gold over silver. This rally now appears to be over and the past several weeks have seen a shift back to favouring silver over gold. Investors should also maintain some exposure to silver. At a sharply lower price it gives true meaning to the term “poor man’s gold”.

The ratio charts are telling us that Gold is now favoured over the key asset classes of stocks, bonds and oil. We believe we are at or near the cusp of a period that could see the best gains in gold (and silver). Gold is money and investors need exposure to it to protect their assets in a period where things are going to get a lot worse before they get better. David Chapman-Read more here-http://news.goldseek.com/UnionSecurities/1234565130.php

-”One of the critical factors about gold is that it’s not issued by a central bank,” Charles Kernot, a mining analyst at Evolution Securities in London, said in a Bloomberg Television interview. As governments devalue their currencies, “you want to have a completely independent hedge against that happening and gold really is such an independent hedge. There is still plenty of scope for a further uplift in the metal’s price.” Bloomberg

-”Gold is rallying against all currencies,” said Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago. “Up the road, you’re looking at governments devaluing their currencies to pay for the financial crisis. It’s the ultimate flight to safety for gold.” Bloomberg

-Dan Norcini, writing on jsmineset.com, noted that the flight is near-universal: “Once again gold scored brand new record all time highs when priced in both Euro terms and British Pound terms at the PM Fix. Euro gold was fixed at €740.094 while BP gold was set at £663.746. Canadian Dollar priced gold notched another all time high [Wednesday] over $1,170 and is on course to score yet another [on Thursday]. Aussie priced gold is perched just below its record all time high. Ditto for Russian ruble priced gold. Can someone say world-wide currency devaluation?” Casey Daily Resource-Feb 13 2009

-President Obama’s Economic Stimulus Plan finally passed at $787 Billion. So hear we go. Spend, Spend, Spend and it won’t be enough. What does this equate to? Long Term Inflation! And that should be extremely positive for Precious Metals. Precious Metals International-Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aONSBEtW5iOc

-Economic stimulus plans by governments around the world were likely to drive inflation, stoking demand for gold as a hedge, said Philip Gotthelf, the president of Equidex Brokerage Group Inc., in a Bloomberg Television interview.

“We’re probably going to have to print more and more money and the more money you print, the less valuable it is, so smart investors are moving into hard assets that can hedge against those kinds of devaluations,” he said. “Gold represents a safe haven in a deflationary panic market as well as in an anticipatory inflationary market.” Bloomberg

-China is right to have doubts about who will buy all America’s debt. Chinese doubts about the value of US Treasury bonds highlight a crucial question: who will buy the estimated $2.7 trillion (£1.9 trillion) to $4.2 trillion of debt expected to be issued over the next two years? Read more here-http://www.telegraph.co.uk/finance/breakingviewscom/4611408/China-is-right-to-have-doubts-about-who-will-buy-all-Americas-debt.html

-China bank regulator clarifies, says U.S. bonds are not only option. Read more here-http://www.gata.org/node/7171

-Ireland ‘could default on debt.’ Fears are mounting that Ireland could default on its soaring national debt pile, amid continuing worries about its troubled banking sector. Read more here-

http://business.timesonline.co.uk/tol/business/economics/article5733723.ece

-Efforts to avoid a deflationary depression will probably produce the opposite a nasty bout of inflation, says John Williams of Shadow Government Statistics, who advises hoarding gold and even Scotch to barter. Watch video here-http://online.wsj.com/video/100-bills-as-toilet-tissue/46C4AF8C-4C1D-425E-9570-ADE365D5132C.html

-The number of Americans collecting unemployment benefits jumped to 4.99 million two weeks ago, breaking a record for a fourth straight time, signaling the job market is still deteriorating. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aF6×7A2eBvxU

-Job Losses Pose a Threat to Stability Worldwide. Read more here-http://www.nytimes.com/2009/02/15/business/15global.html

-”Worst Is Yet to Come:” Americans’ Standard of Living Permanently Changed. Read and watch video here-http://finance.yahoo.com/tech-ticker/article/176478/%22Worst-Is-Yet-to-Come:%22-Americans-Standard-of-Living-Permanently-Changed

-Greenspan Says U.S. May Not Be Doing Enough to Promote Recovery. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a2k6XOkp9NYA&refer;=home

-Recession will be worst since 1930s: Greenspan. Read more here-http://www.reuters.com/article/newsOne/idUSTRE51H0OX20090218

-Oil supply crunch in 2010? The International Energy Agency says that when the economy regains strength, demand for crude will pick up. Read more here-

http://money.cnn.com/2009/02/16/markets/iea_supply.reut/index.htm?postversion=2009021607

-China lends Russia $25 bln to get 20 years of oil. Read more here-http://www.reuters.com/article/marketsNews/idUSLH44422920090217

-Driving Fell, U.S. Auto Dealers Closed at Record Rates in 2008. U.S. motorists reduced driving by the most in 66 years in 2008 and auto dealerships closed in record numbers, reflecting a deepening recession that’s causing consumers to pull back.

Vehicle-miles traveled last year fell by 107.9 billion, or 3.6 percent, the Federal Highway Administration said in a report today. The Detroit-based consultant Urban Science said 881 dealers closed, with most coming the fourth quarter. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aBdpMvHBYybk

-Synchronized Boom, Synchronized Bust. Bad U.S. monetary policy had global consequences. Read more here-http://online.wsj.com/article/SB123491436689503909.html

-Zimbabwe earns second place in hyperinflation history: economist. Read more here-http://www.lankabusinessonline.com/fullstory.php?nid=1309462463

-Miami banker gives $60 million of his own to employees. Read more here-http://www.miamiherald.com/news/miami-dade/story/904842.html

RARE COLORED DIAMONDS

-The Rare Colored Diamonds Historical Value Tracker system 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

-Rare colored diamond sales have been solid as a rock in recent months. In fact, the Wittelsbach blue diamond sold for $24.3 million at Christie’s in London on Dec. 11, 2008, setting a record price for any diamond or jewel sold at auction. The buyer was billionaire Laurence Graff. Christie’s Rahul Kadakia believes rare colored gems will remain at respectable price levels. “When it comes to colored diamonds, especially blues and pinks, those are rare in any market,” he says.

Says Lisa Hubbard of Sotheby’s, “Those appear to be holding their value, and they have not been subject to the ups and downs of the white diamond market.” Sotheby’s has also logged strong results in its recent colored diamond sales. An oval-shaped, vivid yellow diamond weighing 36.99 carats, internally flawless, sold at Sotheby’s New York in December 2008 for $71,870 per carat.

These gems are still the most sought after by famous private purveyors like the William Goldberg Diamond Corp. in New York, which has produced some of the most extraordinary colored diamonds in history, including the 30-carat, $50 million Blue Lili and the 5.11-carat, $20 million Red Shield, the largest red diamond ever graded by the Gemological Institute of America.

“I’ve heard different talk totally, about mines shutting down, like the Argyle mine in Australia,” says Barry Berg of the William Goldberg Diamond Corp., adding that he expects pink and blue diamonds to become ever scarcer. “It’s very hard to find a blue today, rough or polished,” he says. “Yellow is a little more available, but orange, I haven’t seen in ages.”

The Goldberg family business has seen prices for important stones remain strong. “We recently sold a 10-carat intense pink diamond for more than $8 million,” notes Eve Goldberg. “We also sold a bracelet with 58 carats of fancy colored diamonds, all over one carat, for close to $3 million.”

The company has moved from selling stones into jewelry and is pushing deeper into markets like Brazil, Russia, China and India in the hunt for new clients. Back in New York it’s opening the William Goldberg Diamond Corp. boutique, designed by William Green. This new apartment showroom above Fifth Avenue boasts an outdoor terrace. In contrast to street-level retailers like Harry Winston, Cartier and De Beers, the Goldberg showroom offers privacy and calm to clients ready to spend millions of dollars, protecting them from the prying eyes of the public.

Clients have started to ask the Goldbergs whether they should consider buying diamonds as an investment and a shelter from plunging markets. Sotheby’s Hubbard is not surprised. Diamonds have an international market, and they are seen as a way to preserve wealth, she says.

But with the economy as unstable as it is, it’s tough for both auction houses and retailers to know how to price their wares. “We’re putting together our spring sale, and it’s not easy,” notes Hubbard, “because values are in a state of flux.” Story here-http://www.forbes.com/2009/02/12/diamonds-jewelry-goldberg-lifestyle-collecting_0212_diamond_jewelry_print.html

-In Pictures: Diamonds That Rock. View diamonds here-http://www.forbes.com/2009/02/12/diamonds-jewelry-goldberg-lifestyle-collecting_0212_diamond_jewelry_slide_2.html?thisspeed=25000

-New Fund Projects Investment Opportunity in Colored Diamonds. Codiam Fund, which invests in high-end polished colored diamonds, is upbeat about the prospects for the colored diamond market, according to an announcement it released on Thursday. The fund, which launched in September, reported a 9 percent increase in its net asset value in the first three months of operation.

Mahyar Makhzani, managing director and cofounder of the fund, stressed the investment value of colored stones, whose prices have remained at a reasonable level through the financial crisis. “The investment in this category rather than white diamonds has been proven correct as we are not dealing nor speculating but intelligently investing in a very rare commodity,” he said.

The fund reported that colored diamonds have not decreased in price on a wholesale level in 35 years, and that their value has increased between 10 and 15 percent a year on average. “Colored diamonds have held their value and not suffered from the current economical crisis as other traditional assets have,” Codiam explained in its statement.

The fund was founded by Makhzani and Philip Baldwin, who have more than 50 years experience in the diamond and jewelry industry between them, having served in managerial positions at the likes of Bulgari, Tiffany & Co. and Habsburg. At Codiam, they have laid out a very clear investment strategy. They only look at polished colored diamonds, avoiding the riskier rough market and the volatile market for white stones. The fund therefore only buys intense colored diamonds larger than 1 carat, in the top colors, including red, intense purple, intense green, purple red, purplish-red, bluish-green, greenish-blue, pink, blue, orange and yellow.

The focus on colored diamonds has allowed it to capitalize on traders’ need for liquidity, particularly those with both white and colored diamonds in their inventory. They are still able to sell their colored stones at some profit, which is not the case with white diamonds, Makhzani explained. Codiam also sources stones from private sellers, and while it has in turn resold some of its stock to private buyers and to its own investors, the focus for now is on buying.

Having launched with an estimated kitty of more than $5 million, Makhzani reported that the fund has the cash to make the purchases for now. “We do not need to borrow at this stage to make purchases. What we raise is what we spend,” he added.

Which is not to say it has an open checkbook. The fund sticks to its strict purchasing guidelines, and Makhzani explained that its investment strategy extends beyond merely buying diamonds and hoping they rise in value. The increase in the fund’s net asset value, he noted, has resulted from creating collections by matching stones of different colors. “The sets are worth more than if we sold the stones individually,” he said. Makhzani stressed that the valuation was based on the opinion of third-party dealers.

Still, Codiam will be hoping the fund’s increase in net asset value, along with its spending power, will woo members of the colored diamond market, particularly at its next major stop, the BaselWorld Watch and Jewellery Show in late March. “We are ready for Basel,” Makhzani said. Diamonds.net-Story here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=25357

-A fund offering access to physical diamonds is being launched to take advantage of investors’ appetite for physical assets they hope will avoid the turbulence in securities markets — as illustrated by rise of physical gold prices to a seven month high.

The KPR diamond fund capitalizes on the price appreciation of top quality colorless diamonds. The diamond fund aims to provide returns which are not correlated with traditional asset classes, act as a hedge against inflation and benefit from the supply/demand imbalance over the long term. The fund, which is part of KPR Fund, a Cayman Islands open-ended investment company, launches on March 2 2009, with a minimum investment of $250,000. Read more here-http://www.wealth-bulletin.com/portfolio/products-and-strategies/content/1053384796/

HOW THE FINANCIAL WORLD ALMOST CAME TO AN END AT 2PM ON SEPT 18^TH 2008

-Youtube has caught a scary moment of previously undisclosed insight by Paul Kanjorski where he reveals some facts that have not been captured by the media previously. At 2 minutes and 20 seconds in the video below, Democratic Representative Kanjorski explains how the Federal Reserve told Congress members about a “tremendous draw-down of money market accounts in the United States, to the tune of $550 billion dollars.” According to Kanjorski, this electronic transfer occurred over the period of an hour or two. And it gets worse. Kanjorski paraphrases the following disclosure by Bernanke and Paulson:

On Thursday (Sept 18), at 11am the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S., to the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn’t be further panic out there.

If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it. We are no better off today than we were 3 months ago because we have a decrease in the equity positions of banks because other assets are going sour by the moment. Watch video here-http://zerohedge.blogspot.com/2009/02/how-world-almost-came-to-end-at-2pm-on.html or http://www.infowars.com/rep-kanjorski-550-billion-disappeared-in-electronic-run-on-the-banks/

or http://www.youtube.com/watch?v=pD8viQ_DhS4

FEDERAL OBLIGATIONS EXCEED WORLD GDP

-As the Obama administration pushes through Congress its $800 billion deficit-spending economic stimulus plan, the American public is largely unaware that the true deficit of the federal government already is measured in trillions of dollars, and in fact its $65.5 trillion in total obligations exceeds the gross domestic product of the world.

The total U.S. obligations, including Social Security and Medicare benefits to be paid in the future, effectively have placed the U.S. government in bankruptcy, even before new continuing social welfare obligation embedded in the massive spending plan are taken into account.

The real 2008 federal budget deficit was $5.1 trillion, not the $455 billion previously reported by the Congressional Budget Office, according to the “2008 Financial Report of the United States Government” as released by the U.S. Department of Treasury.

The difference between the $455 billion “official” budget deficit numbers and the $5.1 trillion budget deficit cited by “2008 Financial Report of the United States Government” is that the official budget deficit is calculated on a cash basis, where all tax receipts, including Social Security tax receipts, are used to pay government liabilities as they occur. Read more here-

http://www.worldnetdaily.com/index.php?fa=PAGE.printable&pageId;=88851

CRISIS WIPES $5.5 TRILLION OFF BANKS VALUE

-The financial crisis has wiped $5.5 trillion off the market value of the world’s banks, equivalent to 10 percent of global GDP, according to a report released on Wednesday. The Boston Consulting Group estimated the banking industry’s market value fell $4 trillion by the end of 2008, and lost a further $700 billion in the first three weeks of this year.

Banks were worth $8.8 trillion in the third quarter of 2007, when the financial crisis began in earnest. Only four banks had market values greater than $100 billion at the end of 2008 China’s ICBC and China Construction Bank, U.S. bank JPMorgan Chase and Britain’s HSBC compared with 11 at the end of 2007, the report said.

The market value of the 30 largest banks slumped 47 percent in 2008 to $1.7 trillion. JPMorgan Chase moved to third in the global rankings, behind China’s top two lenders.

Also moving up the rankings into the top 10 were U.S. lender Wells Fargo and Spain’s BBVA. Read more here-

http://www.reuters.com/article/gc06/idUSTRE51H4Z020090218

U.S. BANKS FAILURES-NATIONALIZE?

-Bank failures: 13 in 2009. Closures in Nebraska, Florida, Illinois and Oregon bring the number of bank failures to 13 this year as the financial crisis continues to roll. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aRgn03yslgCU or http://money.cnn.com/2009/02/13/news/economy/bank_failure/index.htm

-Large U.S. banks on brink of insolvency, experts say. Some of the large banks in the United States, according to economists and other finance experts, are like dead men walking.

A sober assessment of the growing mountain of losses from bad bets, measured in today’s marketplace, would overwhelm the value of the banks’ assets, they say. The banks, in their view, are insolvent. Read more here-http://www.iht.com/articles/2009/02/13/business/13insolvent.php

-Nouriel Roubini trusts Timothy Geithner to get it right on US banks. Roubini can see that the ‘N’ word might be a little difficult for Western governments to swallow right now. But for him, it’s the right indeed, the only route to follow. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/4639504/Nouriel-Roubini-trusts-Timothy-Geithner-to-get-it-right-on-US-banks.html

-Roubini tells Geithner to nationalise US banks. Tim Geithner must nationalise some of America’s biggest banks and take the total toll of the US bail-out to around $2 trillion, according to one of the world’s most prominent economists. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4634398/Roubini-tells-Geithner-to-nationalise-US-banks.html

-Nouriel Roubini, the New York University professor who predicted the global credit crisis, said a government-backed bank “may crack” as officials try to bail out their financial systems.

“The process of socializing the private losses from this crisis has already moved many of the liabilities of the private sector onto the books of the sovereign,” Roubini wrote on his Web site today.

“At some point a sovereign bank may crack, in which case the ability of the governments to credibly commit to act as a backstop for the financial system including deposit guarantees could come unglued.” Roubini didn’t identify any sovereign bank that might run into difficulty. He also said he sees a 30 percent chance of an “L-shaped near-depression” without “appropriate and aggressive policy action” by the U.S. and other major economies to prevent a sovereign bank’s failure. Read more here-

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

-Greenspan backs bank nationalization. Read more here-http://www.ft.com/cms/s/0/e310cbf6-fd4e-11dd-a103-000077b07658.html

-Bank nationalization gains ground with Republicans. Read more here-http://www.ft.com/cms/s/0/2ad3b750-fd27-11dd-a103-000077b07658.html?nclick_check=1

-US banks under pressure from forensic hit-teams. American banking chiefs are facing the biggest, most nail-biting assessment of their lives: a series of financial “stress tests” by teams of government experts to see whether their institutions can be salvaged. Saving the banking system and boosting the economy is the first big challenge for Barack Obama’s new administration.

Forensic inspectors from at least four federal agencies will soon begin combing through asset registers, trading ledgers and balance sheets at the 18 or so biggest US banks. Line by line, the inspectors will tot up billions of dollars in liabilities. Read more here-http://www.guardian.co.uk/business/2009/feb/12/us-bank-bailout

-European banks sitting on 24 trillion of toxic assets. European bank bail-out could push EU into crisis. A bail-out of the toxic assets held by European banks’ could plunge the European Union into crisis, according to a confidential Brussels document.

“Estimates of total expected asset write-downs suggest that the budgetary costs actual and contingent of asset relief could be very large both in absolute terms and relative to GDP in member states,” the EC document, seen by The Daily Telegraph, cautioned. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4590512/European-banks-may-need-16.3-trillion-bail-out-EC-dcoument-warns.html

A FRAUD BIGGER THAN MADOFF

-Senior US soldiers investigated over missing Iraq reconstruction billions. In what could turn out to be the greatest fraud in US history, American authorities have started to investigate the alleged role of senior military officers in the misuse of $125bn (£88bn) in a US -directed effort to reconstruct Iraq after the fall of Saddam Hussein. The exact sum missing may never be clear, but a report by the US Special Inspector General for Iraq Reconstruction (SIGIR) suggests it may exceed $50bn, making it an even bigger theft than Bernard Madoff’s notorious Ponzi scheme.

“I believe the real looting of Iraq after the invasion was by US officials and contractors, and not by people from the slums of Baghdad,” said one US businessman active in Iraq since 2003.

In one case, auditors working for SIGIR discovered that $57.8m was sent in “pallet upon pallet of hundred-dollar bills” to the US comptroller for south-central Iraq, Robert J Stein Jr, who had himself photographed standing with the mound of money. He is among the few US officials who were in Iraq to be convicted of fraud and money-laundering.

Despite the vast sums expended on rebuilding by the US since 2003, there have been no cranes visible on the Baghdad skyline except those at work building a new US embassy and others rusting beside a half-built giant mosque that Saddam was constructing when he was overthrown. One of the few visible signs of government work on Baghdad’s infrastructure is a tireless attention to planting palm trees and flowers in the centre strip between main roads. Those are then dug up and replanted a few months later. Read more here-

http://www.independent.co.uk/news/world/americas/a-fraud-bigger-than-madoff-1622987.html

STANFORD INTERNATIONAL BANK ACCUSED OF FRAUD

-Missing billionaire found in Virginia. The FBI locates and officially serves papers to financier Robert Allen Stanford, who is accused of running a $9.2 billion investment fraud scheme.

Read more here-http://money.cnn.com/2009/02/19/news/newsmakers/stanford/index.htm?postversion=2009021917

-Found! Accused Scammer Stanford Turns in Passport in Washington. SEC Moving to Seize Billionaire’s Planes, Yachts, Bank Accounts and Homes. Read more here-

http://www.abcnews.go.com/Blotter/story?id=6914758&page;=1

-Hunt for Allen Stanford and his billions. Read and watch video here-http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5762670.ece

-Allen Stanford ‘fraud’ uncovered by favor. Read and watch video here-http://www.timesonline.co.uk/tol/news/world/us_and_americas/article5762578.ece

-Stanford International Bank Ltd., the Antigua-based affiliate of billionaire R. Allen Stanford’s U.S. investment firm, placed a 60-day moratorium on early redemptions of its certificates of deposit, people familiar with the matter said.

Stanford Group Co. financial advisers have told three clients that they can’t redeem CDs sold by the firm prior to their maturity date, according to the customers, who asked that their names not be used. The bank in the past let customers pay a three-month interest penalty to get their money back before the contractual maturity of the certificates, the people said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aeHvNZJLOWf0&refer;=home

-Stanford International Bank Ltd., accused by U.S. regulators of defrauding investors, relied on more than high interest payments to sell $8 billion of what it called certificates of deposit.

The Antigua bank, founded by Stanford Group Co. Chairman R. Allen Stanford, attracted clients with assurances that its CDs were as safe as U.S. government-insured accounts, if not safer, investors said.

“Security was the key aspect,” said Pedro, a 62-year-old software engineer in Mexico City who invested $150,000 in CDs issued by Stanford International. “They told me that they had insurance. The broker told me not to worry and that the bank was safe,” said Pedro, who asked that his last name not be used because he didn’t want to anger bank officials.

Most U.S. certificates of deposit are insured for as much as $250,000 by the Federal Deposit Insurance Corp. CDs issued by Stanford International, a foreign company, aren’t FDIC-protected. A Stanford International training manual obtained by Bloomberg instructed financial advisers to tell clients that “the FDIC provides relatively weak protection.”

While its marketing materials played up coverage, the bank didn’t explicitly guarantee investors’ funds. An “extensive insurance program has been in place for years and requires that a regular review of the bank’s risk management practices be conducted to determine that adequate safeguards are in place,” Stanford International said in a December newsletter signed by President Juan Rodriguez Tolentino. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=afAlQbj8CZ6A

-Stanford Bank Highlights Need for CD Investors to Check Bank’s FDIC Status. Michael, a former vice president of sales in Dallas, said he thought the certificates of deposit he purchased from Stanford International Bank were like any other CD issued by a U.S. bank, except for the high interest rates and lack of insurance provided by the Federal Deposit Insurance Corp.

“Obviously I was attracted by such high returns,” said Michael, 51, who invested $1.9 million in two 5-year CDs, which he said were supposed to provide annual yields of almost 10 percent. He declined to give his last name because he is trying to secure his funds. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=aHEUTMzXJoGE&refer;=home

REAL ESTATE-MORTGAGES-FORECLOSURES

-Latest home prices: October December 2008. The median home price fell a record 12.4% year-over-year during the fourth quarter of 2008. Read more here-

http://money.cnn.com/2009/02/12/real_estate/Median_home_prices_in_record_plunge/index.htm

-U.S. builders broke ground in January on the fewest houses on record as a lack of credit and plunging sales exacerbated the worst real-estate slump since the Great Depression. Housing starts plunged 17 percent last month to an annual rate of 466,000, lower than projected, according to figures from the Commerce Department today in Washington.

A report from the Federal Reserve showed industrial output sank in January for the sixth time in seven months. Builders are struggling as record foreclosures swell the glut of homes on the market, undermining efforts to revive demand and lighten inventory by cutting prices. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aFULM7TWQGc8&refer;=home

-WL Homes LLC, the 161-year-old homebuilder, filed for bankruptcy protection from creditors with plans to focus on developments in Southern California. The company blamed its filing on the collapse of the real estate market, saying its 2007 sales had fallen by about half in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware. The company listed assets of more than $1 billion and debt of $500 million to $1 billion.

The company said it has as many as 50,000 creditors. Irvine, California-based WL Homes, which also does business as John Laing Homes, traces its history to 1848, when its predecessor was a homebuilder in the U.K. WL Homes was formed in 1998 when John Laing merged with Watt Homes, according to court documents. In 2006 the company was purchased by Dubai-based Emaar Properties PJSC. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aTYGfS1m6PKE

-Commercial Property Prices in U.S. Fell 15% in 2008. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aVEeri_yi0gc

-TV’s Robin Leach Sues Deutsche Bank over Las Vegas Condo Delay. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a8Igsdf7qmZo&refer;=home

-Credit-crunched Russian billionaire asks for the £39million deposit he put down on world’s most expensive house. Read more here-http://www.dailymail.co.uk/news/worldnews/article-1148887/Credit-crunched-Russian-billionaire-asks-39million-deposit-worlds-expensive-house.html

-The Obama Administration wants banks to offer loans with easier terms to more than 2 million borrowers in danger of defaulting on their mortgages, twice as many as 2008. That won’t stem the foreclosure crisis if prices keep falling.

A third of owners will walk away when the value of their homes drops 20 percent or more below what they owe, even if they can afford the payments, a situation known as “rational default,” said Norm Miller, director of real estate programs at the University of San Diego School of Business Administration. Read more here-

http://www.bloomberg.com/apps/news?pid=20601213&sid;=aIex9YRATOo8&refer;=home

-Obama Pledges $275 Billion to Stem U.S. Foreclosures. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a5xBdiMqKaqY&refer;=home

-Mortgage Plan Effect May Be Limited, Analysts Say. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aAfRLFtvLfqw or http://www.bloomberg.com/apps/news?pid=20601087&sid;=a7oRhgLcILI8&refer;=home

-Riverton Apartments, a high-rise complex in Manhattan’s Harlem neighborhood, is set to be auctioned off Feb. 20 because owners Rockpoint Group LLC and Stellar Management have been unable to modify loan terms, according to Trepp LLC, a commercial real estate data company. A recent appraisal valued the property at $196 million, compared with a valuation of as much as $340 million when the complex was last appraised in December 2006, Trepp said in an e- mail citing loan servicer data.

The Riverton loan was packaged into bonds as part of a $6.6 billion commercial mortgage debt offering sold in March 2007 by Citigroup Inc. and Deutsche Bank AG, according to Bloomberg data. If the property were to sell for $196 million, the commercial mortgage bond trust would take a loss of $29 million plus expenses, according to Trepp estimates.

“The sale of the property, should it take place, will be closely watched by the CMBS market as investors try to get a sense of what properties like the Riverton are worth,” Trepp said. “The value of the Riverton in foreclosure would give the market a new benchmark.” Delinquencies on commercial mortgages bundled and sold as bonds may triple by late 2009 as large real estate loans default, Standard & Poor’s said today. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=apVy1vpZM8zY

-Foreclosures eased in January. Moratorium sends foreclosure filings down 10% for the month. Read more here-

http://money.cnn.com/2009/02/12/real_estate/January_foreclosures_ease/index.htm

-California Foreclosure Center Shows Obama Challenge. It has taken Susan Erb just three years to see the value of her Merced, California, home plunge by more than half to $350,000. Next month, her mortgage payment jumps 20 percent to $3,321 and she knows she can’t afford it. Her bank won’t rework the loan unless she stops paying altogether.

“Now I know how people feel when I go knocking on their door,” said Erb, 53, a real estate agent who works for a company that notifies residents in foreclosed properties that they must vacate. “I’m in their shoes.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aRI9yKRivnbY

60 MINUTES-HOW THE MORTGAGE INDUSTRY DESTROYED ITSELF

-How did the mortgage industry destroy itself and set off an economic collapse that ruined the finances of millions of Americans? Executives tend to hold themselves blameless, saying that no one could have seen the disaster coming.

Well, judge for yourself after you hear the story of Paul Bishop, who worked at the nation’s second largest savings and loan. World Savings Bank was among the industry’s most admired mortgage lenders. But Bishop says the kind of lending practices he saw were leading to a world of trouble that would ultimately result in billions in losses and a federal investigation.

What does Paul Bishop say he told executives at World Savings, three years before the crash?

“We’re breaking the law, okay? We’re breaking the law. You know we’re breaking the law. I know we’re breaking the law. What the hell do you think is going on here? You know, you’re granting too many people loans who simply can’t qualify,” Bishop told 60 Minutes correspondent Scott Pelley.

Bishop’s story is a rare inside look at forces that tore the economy apart, as seen by a plain-spoken loan salesman who is now suing World Savings, claiming that he was fired for telling executives what they didn’t want to hear. Read and watch video here-http://www.cbsnews.com/stories/2009/02/13/60minutes/main4801309.shtml

GEOPOLITICAL

-Financial Crisis Called Top Security Threat to U.S. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2009/02/12/AR2009021202365_pf.html

-U.S Intelligence underscores fundamental Russian challenges to US interests. Read more here-http://en.apa.az/news.php?id=97335

-Iran, Syria Withhold Cooperation on Atomic Inspections, UN Says. Iran and Syria are failing to cooperate with United Nations inspectors as they try to determine whether the countries are concealing nuclear weapons programs. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=absww1ngJGls

-Iran holds enough uranium for bomb. Iran has built up a stockpile of enough enriched uranium for one nuclear bomb, United Nations officials acknowledged on Thursday. Read more here-http://www.ft.com/cms/s/0/f367aada-fec8-11dd-b19a-000077b07658.html

-Iran Finishes Dome over Reactor, Thwarting IAEA Surveillance. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aXjV_8vnf08c

-Israel engaged in covert war inside Iran: report. Israel is involved in a covert war of sabotage inside Iran to try to delay Tehran’s alleged attempts to develop a nuclear weapon, a British newspaper said on Tuesday, quoting a former CIA agent and intelligence experts.

An intelligence source in the Middle East told Reuters last year Israel planned to target Iranian nuclear scientists with letter bombs and poisoned packages and had set off explosions in Iran. Analysts offered similar accounts and said such tactics would be credible, but no confirmation has been available.

Some analysts caution that reports of such a “dirty war” may form part of a psychological warfare campaign to unsettle Iran. Read more here-

http://www.reuters.com/article/newsOne/idUSTRE51G1VR20090217

-President Barack Obama said the war in Afghanistan is “still winnable” as he signed an order increasing U.S. troops there by 17,000 combat and support personnel. Military force alone cannot adequately deal with the threat posed by a “resurgent” Taliban, Obama said in an interview with Canadian Broadcasting Corp.

The war is “still winnable in the sense of our ability to ensure that it is not a launching pad for attacks against North America.” Only a “comprehensive strategy” that also relies on diplomacy and development can halt the Taliban and the spread of extremism, the president said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a66BDTvdjWDY

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The GoldBugg Report – February 24, 2009
Posted by Worldwide Precious Metals on Tuesday, February 24, 2009

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