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The Goldbugg Report - May 19, 2009

May 19, 2009

WORLD FINANCIAL REPORT ON RADIO MAY 15 2009 SHOW

-Gold will reach $3000 before this chapter of U.S. history is fully written. Silver will reach $100 before the last chapter is written. Jim Willie

-Rising gold price a "virtual certainty" Adrian Day

-Be wary of the markets gold still offers the best insurance.

-The Week in Review from PMI

May 15^th 2009

The Week in Review

This week the stock market started showing signs that the Bear Market Rally we’ve been discussing may be finally coming to an end.

US Retail data was down this week, showing that there is still much uncertainty out there on the part of the consumer.

Monday amid statements from the company that bankruptcy has become more and more probable, 6 GM executives, including Vice Chairman Bob Lutz, sold what was left of their stock. The collective total value of the sale of 205,000 shares was only $315,000. Later in the week, GM actually touched $1.00 a share.

Initial jobless claims rose more than expected and continuing job claims hit yet another record. As the “Big Three” automakers continue their struggle to survive, you can expect to see further increases in unemployment. Many plants are shutting and some 1100 GM and 789 Chrysler dealerships are already being told that they are being cut and will be losing their businesses. With job openings at their lowest levels in 8 years, the outlook for the consumer to get out and start “spending to save the economy” as the US government wants them to do is pretty grim.

Insurance companies have been lobbying to receive TARP funds. It looks like the Insurance companies are going to get their wish. Here is the preliminary list of those insurers that need money: Allstate, Hartford, Lincoln Financial, Principal, Ameriprise, and finally can you believe even Prudential needs money from the TARP? (So much for “The Rock”)

Crude oil and gasoline inventory numbers came out much lower than expected this week, surprising the market and pressuring the price of oil to rise above $60. Demand forecast reductions by both OPEC and the IEA, however, forced the price back below that level again on Thursday. Venezuela seized the assets of an oil services company this week, with Chavez saying “private companies were no longer needed in the country’s oilfields.” He went on to say “We’re going to bury capitalism in Venezuela”. This, combined with Russia increasing its posturing to lay claim to a large chunk of the Arctic for the purpose of oil and mineral exploration, and the constant and increasing tension in the Middle East, should continue to keep oil at volatile price levels.

Gold and Silver both pushed through and held above the first resistance levels we gave you in our May 8^th memo.

The dollar continued its plummet against the euro and yen the first part of the week on fears that the US was going to lose its AAA credit rating. It climbed back out of its nosedive against the euro in the latter half of the week but not against the yen and closed down against both currencies. The continued weakening of the dollar could lead to further price increases in Precious Metals as the flight to quality is expected to continue.

Friday to Friday Close

Here are your Short Term Support and Resistance Levels for the upcoming week.

The continuing invasion by the US government into the decision making process of the American business world are leading to more and more uncertainty in the markets. Volatility should be expected to continue as more and more “hammers” fall. Next in the sights of the US Government guns are the credit card companies and following that, the battle for the American healthcare system will begin. We feel that current prices are very attractive for long term appreciation. Just remember not to over-extend your ability to stay the long term.

Trading Department – Precious Metals International, Ltd.

GOLD

-Rising gold price a "virtual certainty" Adrian Day. Adrian Day and Martin Murenbeeld are positive on gold at the New York Hard Assets Investment meeting, but conservative on their growth estimates. Ian McAvity warned the audience to be careful what they wished for. In separate talks to the New York Hard Assets meeting analysts Adrian Day and Martin Murenbeeld concurred in many aspects on their view of where the gold price was likely to go in the short to medium term and both were positive, but not inordinately so.

Day chose to compare the current global financial recession with the Great Depression and with Japan's more recent problems, pointing out that recovery in each case took many years not months. He felt that monetary authorities have little idea of what they are doing and that measures to bring the world out of recession are experimental at best. At least the Europeans have a plan, he said, but they don't know where to find it!

The crux of Day's talk was that we are indeed in for a period of long and protracted economic weakness, and in such circumstances there were two of what he called virtual certainties ahead. The first was that the US dollar would lose purchasing power and the second was that the price of gold will rise not necessarily sharply, or immediately, but over a two to three to five-year period.

Martin Murenbeeld of Dundee Wealth Economics who has a pretty good track record on gold price forecasting in recent years largely concurred, despite noting that recession was generally bad for gold. But in the current environment the bull points for the yellow metal outweighed the bearish ones, with policies which had not been with us before like quantitative easing being very positive.

Looking at gold's cyclical pattern, with cycles generally lasting ten years, he felt that gold would reach $2300 at some stage in the current cycle, but this might still be some way ahead. In the near term the weighted average of his price predictions were for an average price this year of $952, $1005 next year and $1058 in 2011.

Speaking earlier in the day, Ian McAvity, who edits the Deliberations newsletter and is very much a technical analyst, pointed out that if gold followed the 1980 peak pattern in real terms it would hit $5400 an ounce in 2011. But he, commented, this was an observation, not a prediction - although not beyond the bounds of possibility. He further warned his largely pro-gold audience to be careful what they wished for. The circumstances which could bring gold to this kind of level would not be pleasant! Read more here-

http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=83197&sn=Detail

-Henderson multi-manager Mark Harris: Gold will go 'a lot higher'. Watch video here-http://www.citywire.co.uk/selector/-/news/fund-manager-interviews/content.aspx?ID=340119

-Be wary of the markets gold still offers the best insurance. Past major bear markets have seen false new dawns which have tended to be short lived and the recent big uptick in stock markets could be another of these, so don't disinvest from gold yet. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=83043&sn=Detail

-Schmidt's Gold Thoughts. The summer of 2009 may be the last great buying opportunity for Gold. What we mean is that the prices that develop in the next few months, or weeks, may not be revisited. In the next leg of the structural Gold bull market, US$1,000 is more likely to be a floor than a ceiling. Waiting to buy Gold till the next announcement of purchases by the People’s Bank of China may be too late. Read more here-http://news.goldseek.com/NedSchmidt/1242108300.php

-Gold bracing for return to long upward march. US gold guru, Jeff Nichols, reckons that gold is a bargain at recent prices in the $900 to $930 an ounce range looking long term, and will remain so even as it begins to moves to higher levels. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=83298&sn=Detail

-Long Gold During Deflation? Read more here-http://news.goldseek.com/GoldSeek/1242306000.php

-The Basics: Gold. "Gold is a very effective hedge against uncertainty because even as investors are watching the value of their equity investments plummet, gold still has value. In that way, gold can help diversify away some of the risks in an investor's portfolio," said Tom Pawlicki, a precious metals and energy analyst at MF Global. Read more here-

http://www.financialpost.com/story.html?id=1588801

-DMCC vault may store region's gold reserves. Read more here-http://www.business24-7.ae/articles/2009/5/pages/12052009/05132009_4d115a2aa5da4d69b8e7350a8875bd9d.aspx or

http://www.gata.org/node/7421

-James Turk-The US Dollar Breaks Down. Read more here-http://goldmoney.com/en/commentary/2009-05-10.html

-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 9.2 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 is down 79% from its 1999 peak and the scale of the current two-month rally has not distinguished it from the many bear market rallies that have occurred over the past decade. Chartoftheday.com

-Murray Pollitt: The gold monetization scheme is ending. Read more here-http://www.gata.org/node/7415

-Is U.S. buying back gold pledged to IMF for $100 billion? Read more here-http://www.gata.org/node/7413

-Likening GATA to terrorists, GFMS exec refuses debate. Read more here-http://www.gata.org/node/7420

-Paul Mylchreest: GATA tells the real gold story in London. Read more here-http://www.gata.org/node/7418

-Minesite reports on GATA's expedition to London. Read more here-http://www.gata.org/node/7417

-On Tuesday April 7th, 2009 Sprott Asset Management presents a speaker series with guests Eric Sprott, Meredith Whitney of Meredith Whitney Advisory Group, Nouriel Roubini of New York University and Ian Gordon, author of The Long Wave Anaylst newsletters. Watch video here-http://www.sprott.com/night_with_the_bears.php

-Gold: Does Gordon Brown's regret selling half of Britain’s gold reserves 10 years ago? A decade ago Gordon Brown started to sell-off Britain's gold reserves at the time the price of gold was $282 an ounce, today it is $900-plus. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/5296526/Gold-Does-Gordon-Browns-regret-selling-half-of-Britains-gold-reserves-10-years-ago.html

SILVER

Gold to silver ratio at 80 to 1 with gold at $2,100 the silver price would be $26.25

Gold to silver ratio at 70 to 1 with gold at $2,100 the silver price would be $30.00
Gold to silver ratio at 60 to 1 with gold at $2,100 the silver price would be $35.00

Gold to silver ratio at 50 to 1 with gold at $2,100 the silver price would be $42.00
Gold to silver ratio at 15 to 1 with gold at $2,100 the silver price would be $140.00

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1242061902.php

-Silver hedge book at just four weeks mine supply. The silver mine hedge book has never been as significant as the gold book is to the gold mining industry, but the underlying shifts last year make interesting reading. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=83221&sn=Detail

-Robust silver investment shows no sign of waning this year-World Silver Survey. The robust investor demand that drove silver's price up 12% last year to an average of $14.99/oz shows few signs of abating, the Silver Institute's World Silver Survey 2009 advises. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=83219&sn=Detail

-Massive silver shipments to India raise borrowing rates. Indian bar and coin investment now the largest sector in the Indian silver market. The Silver Institute's World Silver Survey 2009 describes borrowing patterns in the silver market in 2008, and notes that the financial markets' liquidity drainage was not the only factor at work behind silver lease rates last year.

Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=83223&sn=Detail

DEFINITIONS-QUOTES-QUICK HITS

Calgary 2009: Worldwide Precious Metals - Rob McInerney, Lucas R. Bugg http://www.metalsnews.com/picturegalleries/PicturePopUp.aspx?ID=58451

-The diamond from the ancient Greek á¼€δάμας adamas meaning invincible, is one of the best-known and most sought-after gemstones. Diamonds have been known to mankind and used as decorative items since ancient times; some of the earliest references can be traced to the Indians. Diamond's hardness and high dispersion of light make it useful for industrial applications and jewellery. Read more here-http://en.wikipedia.org/wiki/Diamond_(gemstone) or http://en.wikipedia.org/wiki/Diamond or http://www.youtube.com/watch?v=BWYMJnEz-n4

-"The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice." Henry Hazlitt-Bio here-http://en.wikipedia.org/wiki/Henry_Hazlitt

-"If we didn’t live in a tolerant society, the chairman and the rest of the board would be hanging by their necks with piano wire out on the road." AIB shareholder, Gary Keo-Read more here-http://newsvote.bbc.co.uk/2/hi/uk_news/northern_ireland/8047657.stm

-Do I think there's manipulation going on? You bet I do. I wouldn't put anything past Wall Street and the Fed. I think gold is being manipulated down. I think the Dow is being manipulated UP to cover up the weakness in the dollar. Put the public's attention on the Dow as long as the Dow is rising, "everything must be all right." And we know that the Fed is buying bonds. Isn't it time for the IMF to remind us that they're thinking of selling a load of gold? Richard Russell, 12 May 2009

-In his latest newsletter Howard Ruff focuses both in his own writing and in a long interview with John Williams of Shadowstats.com, on when the inflation he expects to follow Obama's monetary expansion will actually show up. The answer, in Williams' words: "We will see inflation levels not seen in our lifetime by as early as the end of this year." Read more here-

http://www.marketwatch.com/story/story/print?guid=24C0763F-AE5E-4D03-A97A-8C3385D985FC

-“Gold can go to $1,500 an ounce in the next two to three years,” Aaron Smith, a managing director at Superfund Financial Singapore, said in a Bloomberg Television interview. “Much of that is based on the erosion of the value of the dollar because of the increasing money supply.” Bloomberg

-James Steel, of HSBC Securities in New York, says that platinum, palladium and silver are catching up with gold because of the outlook for reduced supply. He notes that platinum producers have halted expansion plans and eliminated jobs, while silver output may be affected by cutbacks at non- ferrous metals mines. Casey Daily Resource

-The optimism is beginning to seem a bit overblown, as some are thinking like this: “The global recession and the U.S. recession probably is over this month, maybe next month,” said Jan Loeys, of JPMorgan Chase & Co. in Hong Kong. “Commodities, materials in particular, are going to be benefiting right now as investors start to get a bit worried about future inflation.”

But whether or not the recession is coming to an end, Loeys is likely correct in saying that, “Over the next year or so, we think we are going to be crossing $1,000, probably go ultimately to $1,200, $1,300 just for inflation hedging and lack of supply.”

Loeys concluded that clients “are very worried about inflation in two, three years time. The buying we are seeing now in commodities is really hedging, hedging off the potential risk that we will see a spike in inflation.” Casey Daily Resource

-The real story of the year, of course, is with silver, which is up over 25% on the year vs. gold’s near +5% performance. It’s not explainable in terms of industrial demand, which is bound to be off in the downturn. More likely, investors are increasingly coming to treat silver as an investment, like gold, only cheaper. Casey Daily Resource

-With the credit ratings of the US and UK under threat and the cost of insuring UK government debt now higher than chocolate manufacturer, Cadbury’s, gold’s safe haven appeal looks set to increase in the coming months. Especially as the issuance and supply of government bonds is set to surge as budget deficits balloon internationally while gold supply remains anaemic at best (news today that South African gold production fell 7.6% for the year in March). With inflation likely to rise in the coming months, those saving for a rainy day may soon turn to the finite inflation hedge that is gold. Gold.ie

-The dollar has fallen not due to an increase in risk appetite but rather due to an increase in risk aversion due to the dawning realization that the very credit worthiness of the US is at risk due to the global financial and economic crisis. The former US Comptroller General, David Walker, warned in an op-ed article in the Financial Times that “America’s Triple A Rating is at Risk”.

This is because the US has an accumulated negative net worth of US$11 trillion, additional off-balance sheet obligations of US$45 trillion and a current year budget deficit forecast at US$1.8 trillion (a massive nearly 13% of GDP). These daunting fundamentals mean that America is at risk of losing its AAA credit rating for the first time since 1917. This would have massive implications for the international financial and monetary system as it would likely lead to the dollar’s dominance as the global reserve currency being diminished and consequently gold’s role greatly enhanced.

The Chinese government and overnight the Japanese opposition have voiced their concerns regarding their dollar assets (Chief Finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar and if elected Japan would not buy US dollar denominated bonds).

The deteriorating financial condition of Uncle Sam is a long term fiscal and economic challenge that should result in gold remaining in a bull market for the foreseeable future. Indeed, it means that the inflation adjusted high of $2,400/oz reached in 1980 (when the US fiscal situation was positively benign compared to today) is a more than plausible target in the coming years. Gold.ie

-Japan's opposition party says it would refuse to buy American government bonds denominated in US dollars, if elected. The chief finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar. Read more here-http://news.bbc.co.uk/2/hi/business/8046599.stm

-People's Bank of China deputy governor Hu Xiaolian said on the 10th during the second Sino-British economic and financial dialogue held on the eve of the official media briefing that China would regularly publish the reserves of gold. QuamNews

-Gold will reach $3000 before this chapter of U.S. history is fully written. Silver will reach $100 before the last chapter is written. Jim Willie CB-Read more here-

http://news.goldseek.com/GoldenJackass/1242333710.php

-According to Eric Sprott, what we’re seeing isn’t a recession or a depression, but an outright collapse of the postwar economic order. “I’m a CA, and I’m seeing a lot of questionable financial assets on the balance sheets of banks,” says Sprott. “I think it will take 10 years to get this off the books of the banks.”

Demographic forces, meanwhile, will conspire to work against any government action. “There was a net withdrawal from U.S. Social Security the first time this year, the first year the baby boomers could collect,” Sprott notes. “And so it’s going to get worse. And I don’t even think the promises to the elderly are going to be met. We know that the United States has an accrued liability of US$55 trillion. There is no way to maintain that.” Read more here-http://www.canadianbusiness.com/markets/stocks/article.jsp?content=20090518_10004_10004

-Courtesy of the global stimulus, the price of precious metals and other tangibles should appreciate over the following years. However, over the short-term, if seasonal trends remain intact, gold is likely to correct over the summer months. Same applies to other precious metals. Therefore, nimble traders may want to sell out of bullion with the intention of buying back in a few weeks time. Long-term investors should ignore the action and simply go for a nice summer holiday. Puru Saxena-Read more here-

http://www.321gold.com/editorials/saxena/saxena050809.html

-We continue to believe that gold will be the best hedge against the problems to come. This is not because gold is always a good hedge against monetary inflation, because it isn't. For example, there have been many times when gold has fared poorly in response to rapid money-supply growth.

It is, instead, more appropriate to think of gold as a hedge against government stupidity and the negative economic effects of that stupidity, and rarely in history have the governments of 'free' and developed countries acted as stupidly as they are today. As a result of the way governments are acting and have committed to act in the future, economic and monetary conditions over the next few years are likely to come together to create the ideal environment for gold-related investments.

Specifically, we are likely to get the combination of rapid money-supply growth, economic weakness, a strong desire by the public to increase its savings in terms of something stable, low financial-market liquidity (liquidity and money are different things), and, eventually, rising goods and services prices. Steve Saville-Read more here-

http://www.321gold.com/editorials/saville/saville051209.html

-The 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted.

Sooner than we think, the dollar may be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear. Read more here-http://www.nytimes.com/2009/05/14/opinion/14Roubini.html

-Chrysler bankruptcy may take up to two years: report. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54C0XY20090513

-GM Now Sees Bankruptcy as ‘Probable,’ Henderson Says. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aT7c_fzK.ECk

-GM, Chrysler to cut up to 3,000 dealers: sources. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54C64K20090513 or http://www.bloomberg.com/apps/news?pid=20601110&sid=an4YZQ5UeAJc

-Marc Faber economic forecast part 1. Watch video here- http://www.youtube.com/watch?v=bMtfTuIgsB0&eurl=http%3A%2F%2Fgoldismoney.info%2Fforums%2Fshowthread.php%3Ft%3D374408&feature=player_embedded

-Marc Faber economic forecast part 2. Watch video here-http://www.youtube.com/watch?v=kkKO_k7UBjQ&feature=related

-Pimco says slow global growth the "new normal." Higher unemployment, slow global growth and persistent government intervention in financial markets and companies will become the "new normal" for world economies, the chief executive of top bond fund Pimco said on Tuesday.

Mohamed El-Erian of Pacific Investment Management Co wrote in the firm's "Secular Outlook" report that Pimco's three- to five-year "baseline" investment strategy favors the front end of government yield curves in many countries, as central banks will opt to keep negative real interest rates.

"Relative to where it is coming from, the financial system will be de-levered, de-globalized, and re-regulated," said El-Erian, who helps oversee more than $800 billion in assets. "Global growth will be lower and unemployment higher, notwithstanding the continued rotation of dynamism away from industrial countries and toward emerging economies." Read more here-

http://www.reuters.com/article/businessNews/idUSTRE54B3UA20090512?feedType=RSS&feedName=businessNews

-America threatens trade war with China. The United States government is planning to revive a bill that will punish China for artificially boosting its trade through "currency manipulation". Read more here-http://www.telegraph.co.uk/news/worldnews/asia/china/5316145/America-threatens-trade-war-with-China.html

-Shortages stir coffee and sugar prices. Read more here-http://www.ft.com/cms/s/0/64955332-3d90-11de-a85e-00144feabdc0.html

-Kremlin: Battles over energy may lead to wars. Read more here-http://news.yahoo.com/s/ap/20090513/ap_on_re_eu/eu_russia_security_strategy_2

-'Iran deploys missile batteries after reports Israel, US planning attack.' Iran's Revolutionary Guard Corps has deployed mobile ground-to-air and ground-to-sea missile batteries in the Strait of Hormuz and other areas in the Persian Gulf, an Iranian source was quoted by Al Watan as saying on Tuesday. The source told the Saudi-based newspaper that the move was made after Iran received reports that the US and Israel were preparing to attack the Islamic republic's nuclear facilities. Read more here-

http://www.jpost.com/servlet/Satellite?cid=1242029504871&pagename=JPost%2FJPArticle%2FPrinter

-Pakistani president: Osama bin Laden is dead. Read and watch video here-http://rawstory.com/08/news/2009/05/10/pakistani-president-believes-osama-bin-laden-is-dead/

-Pakistan conflict map. Read more here-http://news.bbc.co.uk/2/hi/south_asia/8047504.stm

-Scientist arrested for smuggling vials used in Ebola research into US. Read more here-http://www.breitbart.com/article.php?id=CNG.1eb625e36e305c62ccc14e75288e023d.6f1&show_article=1

-Swine Flu May Be Human Error, Scientist Says; WHO Probes Claim. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=afrdATVXPEAk&refer=home

-Swine flu could affect third of world's population, says study. Researchers say swine flu will spread around world within nine months, as UK confirms three more cases. Read more here-

http://www.guardian.co.uk/world/2009/may/12/swine-flu-report-pandemic-predicted

-The swine flu strain that has sickened people in 30 countries rivals the severity of the 1957 “Asian flu” pandemic that was as much as four times deadlier than typical seasonal flu, scientists said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aK_YmSVuTa_w

-Shadowy Bilderberg group meet in Greece and here’s their address. Read more here-http://www.timesonline.co.uk/tol/news/world/europe/article6283373.ece

-Update, What Does $1 Trillion Look Like? Read more here-http://www.cnbc.com/id/30108264/

WWW.RARECOLOREDDIAMONDS.COM

-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

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.youtube.com/watch?v=BWYMJnEz-n4

and http://www.rarecoloreddiamonds.com/articles/index.html

-Rare blue diamond sells for record $9.5 million. A flawless vivid blue diamond weighing 7.03 carats sold on Tuesday for a record 10.5 million Swiss francs (6.2 million pounds), the highest price paid per carat for any gemstone at auction, Sotheby's said. The rectangular-shaped blue stone, the rarest to enter the international market this year, went to an anonymous buyer bidding by telephone after hectic bidding see-sawed between two callers for 15 minutes.

It was the centrepiece of its semi-annual sale in Geneva, conducted by David Bennett, chairman of Sotheby's jewellery department in Europe and the Middle East, who said the results showed the market's resilience despite the economic downturn. "This is already a new world record price for a fancy vivid blue diamond and a new world record per carat for any gemstone at auction," Bennett told reporters.

"It is fantastic in this market and shows that these rare things are very much in demand," he said. The final price includes a commission paid by the buyer to the auction house. The stone sets a record price per carat for any gemstone sold at auction of $1,349,752, (890, 275 pounds) Sotheby's said.

The previous record price for a fancy vivid blue diamond was $7.9 million, including commission, for a stone weighing 6.04 carats at sale in Hong Kong in October 2007, also by Sotheby's.

The new owner will have the right to name the stone, which is mounted in a platinum ring. The pre-sale catalogue estimate was 6.8 million to 10 million francs, excluding commission. The hammer price excluding commission was 9.3 million francs. Read more here-http://uk.reuters.com/article/topNews/idUKTRE54C0S620090513 or

http://www.bloomberg.com/apps/news?pid=20601088&sid=a5rFLItKsMuc&refer=home

-Christie's Geneva Jewels Sale Tops $19M, here are the top colored diamonds sold at the auction.

-LOT 357, IMPORTANT AND RARE FANCY VIVID BLUE DIAMOND RING. The fancy vivid blue modified rectangular brilliant-cut diamond weighing 7.03 carats, on a plain platinum mount, size 51, illustrated unmounted. 6,850,000-10,000,000 CHF. Lot Sold. Hammer Price with Buyer's Premium: 10,498,500 CHF. Accompanied by GIA report no. 1102633475 stating that the diamond is Fancy Vivid Blue, Natural Colour, Internally Flawless. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?lot_id=159536313

-LOT 314A, RARE FANCY INTENSE PINK DIAMOND RING. The fancy intense pink pear-shaped diamond weighing 5.29 carats, flanked by shield-shaped stones, mounted in platinum, size 51½, illustrated unmounted. 2,100,000-3,100,000 CHF. Lot Sold. Hammer Price with Buyer's Premium: 2,266,500 CHF. Accompanied by GIA report no. 17451666 stating that the diamond is Fancy Intense Pink, Natural Colour, VS2 Clarity. Further accompanied by a GIA diamond type classification report stating that the diamond is Type IIa. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE0902&live_lot_id=314A

-LOT 306, FANCY INTENSE YELLOW DIAMOND RING. The fancy intense yellow round-cornered square mixed-cut diamond weighing 31.06 carats, set between triangular diamond shoulders, mounted in yellow gold, size 54. 290,000-400,000 CHF. Lot Sold. Hammer Price with Buyer's Premium: 554,500 CHF. Accompanied by GIA report no. 2105595081 stating that the diamond is Fancy Intense Yellow, Natural Colour, VS2 Clarity. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE0902&live_lot_id=306

-LOT 323, MAGNIFICENT UNMOUNTED FANCY VIVID YELLOW DIAMOND. The unmounted fancy vivid yellow marquise modified brilliant-cut diamond weighing 18.13 carats.

620,000-920,000 CHF. Lot Sold. Hammer Price with Buyer's Premium: 1,178,500 CHF. Accompanied by GIA report no. 1102595075 stating that diamond is Fancy Vivid Yellow, Natural Colour, VVS2 Clarity, together with a GIA worksheet stating that the diamond may be Potentially Flawless after repolishing. Read more here-

http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE0902&live_lot_id=323

-LOT 57, FANCY LIGHT YELLOW DIAMOND RING. The fancy light yellow oval diamond weighing 10.06 carats, the shoulders and frame set with brilliant-cut stones, mounted in gold and platinum, size 52. 105,000-145,000 CHF. Lot Sold. Hammer Price with Buyer's Premium: 127,300 CHF. Accompanied by GIA report no. 16387962 stating that the diamond is Fancy Light Yellow, Natural Colour, SI1 Clarity.

-Christie’s will hold its spring auction in Hong Kong on May 26, offering a selection of white and colored diamonds as well as jadeite jewelry. Other items include rare period pieces, signed jewels and a wide range of jewels offered at no reserve.

Leading the May sale is a pear-shaped 20.70 carats, D color and Flawless clarity diamond pendant. The diamond, graded excellent polish and excellent symmetry, is mounted with a 10.07 carats pear-shaped D color and Internally Flawless clarity diamond. Both stones are Type IIa.

Also on the block is a necklace boasting 56 colored diamonds, including stones certified fancy deep, vivid and intense pink as well as blue, yellow and green diamonds. Estimated at $1.35-1.9 million, the total weight of the diamonds in this unusual jewel is 14.67 carats. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=32328 or http://www.diamonds.net/news/NewsItem.aspx?ArticleID=26315

OIL

-BP CEO Tony Hayward said on Wednesday solar power technology was unlikely to ever be competitive with more conventional energy sources. "I think solar is probably the most challenged of all of BP's alternative energy interests," Hayward said. "It is not going to make the transition to be competitive with more conventional power, the gap is too big if solar is going to make a breakthrough, there will be a technology disintermediation step," he added. Reuters

-OPEC Cuts Forecast for Oil Demand as Economy Shrinks. The Organization of Petroleum Exporting Countries cut its 2009 forecast for the ninth straight month, predicting oil demand will fall as consumption shrinks in the U.S., the world’s biggest energy consumer.

OPEC lowered its estimate for global demand this year by 150,000 barrels a day to 84.03 million. Demand will contract by 1.57 million barrels a day this year, or 1.8 percent, the Vienna-based producer group said today. Read more here-http://www.bloomberg.com/apps/news?pid=20601072&sid=a2XTXg5kzGiY&refer=energy

-OPEC Raised Oil Output for the First Time Since July. The Organization of Petroleum Exporting Countries boosted oil production last month for the first time since July, exceeding its quota by 967,000 barrels a day and backtracking its implementation of supply cuts intended to stem falling prices.

The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day, down from a revised 82 percent for March, the Vienna-based organization said in a monthly report today.

Those 11 nations, which exclude Iraq, pumped 25.812 million barrels a day in April, the report said, citing secondary sources, which include estimates from analysts and news organizations. That compares with 25.587 million a day in March. Those 11 nations have a target of 24.845 million barrels a day that took effect from Jan. 1.

“There is too much revenue on the table to not produce” as crude prices rise, said Paul Tossetti, director of oil market analysis at PFC Energy in Washington. “This is as far as we will see the cuts come.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a6NTm7qxfBK4

-Oil Companies May Wait for Hedges to End to Go Bargain Shopping. Quantum Energy Partners, the Houston private-equity firm that put together a $3.5 billion bankroll to go bargain-hunting for acquisitions after oil and natural-gas prices plunged, is waiting for a better time to pounce.

Buyers will accelerate acquisitions late this year and in early 2010 as the hedging contracts that shielded potential takeover targets from tumbling prices expire, said Wil VanLoh, Quantum’s chief executive officer.

“By the first quarter of next year, we’ll be pretty darn active,” VanLoh said in an interview at his downtown office. “Many companies are very well hedged for 2009, so the squeeze hasn’t happened yet. The point of capitulation probably will arrive in the fourth quarter or the first quarter of 2010.”

The record drop in crude prices from 2008’s all-time high hasn’t triggered a surge in takeovers because would-be sellers are demanding mid-2008 valuations, said Michael Bodino, director of research at Sanders Morris Harris Inc. in Dallas. That will change, Bodino and VanLoh said, as hedging contracts drop off, forcing the weakest producers to sell or face bankruptcy.

The number of oil and gas deals last month fell 35 percent from a year earlier, and the value of transactions dropped 60 percent to $5 billion, according to data compiled by Bloomberg. UTS Energy Corp. of Calgary repulsed a third and final takeover bid of C$830 million ($680 million) by Total SA last month, saying the company is worth more. Read more here-

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

U.S. BUDGET DEFICIT TO TOP $1.8 TRILLION-TRADE DEFICIT UP-MEDICARE AND SOCIAL SECURITY

-US red ink to top $1.8 trillion, 4 times record; gov't borrows 46 cents for every dollar spent. The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates.

Budget office figures released Monday would add $89 billion to the 2009 red ink increasing it to more than four times last year's all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.

The unprecedented deficit figures flow from the deep recession, the Wall Street bailout and the cost of President Barack Obama's economic stimulus bill as well as a seemingly embedded structural imbalance between what the government spends and what it takes in.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps. Read more here-

http://finance.yahoo.com/news/White-House-Budget-deficit-to-apf-15199183.html?.v=8 or http://www.bloomberg.com/apps/news?pid=20601110&sid=aD98UaT9kVGw

-The U.S. reported the first budget deficit for April in 26 years, recording a shortfall in the month that usually sees a jump in individual tax payments before the Internal Revenue Service’s mid-month deadline. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aWODuis.QTU8

-US Government Receipts Collapse. Read more here-http://jsmineset.com/2009/05/12/us-government-receipts-collapse/

-The Federal Reserve Can Not Account For $9 Trillion In Off-Balance Sheet Transactions. Read and watch video here-http://zerohedge.blogspot.com/2009/05/federal-reserve-can-not-account-for-9.html

-President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries. “We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque.

“We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.” Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”

The president pledged to work with Congress to shore up entitlement programs such as Social Security and Medicare and said he was confident that the House and Senate would pass health-care overhaul bills by August. “Most of what is driving us into debt is health care, so we have to drive down costs,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aJsSb4qtILhg

-Is America about to go broke? Read more here-http://articles.moneycentral.msn.com/RetirementandWills/InvestForRetirement/is-america-about-to-go-broke.aspx?page=all

-U.S. Trade Deficit Widens First Time in Eight Months. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=atoIyhSDXGB4

-Medicare, Social Security Funds Worsen in Recession. The financial health of Social Security and Medicare, the two main safety nets for American retirees and the elderly, is declining as the recession cuts payroll tax contributions just as the baby-boom generation begins to retire.

The Social Security trust fund will run out of assets in 2037, four years sooner than previously forecast, the trustees said today. Spending on Medicare, the health insurance plan for the elderly, will reach a legal limit by 2014, the same year predicted in 2008, the trustees’ report said.

The deteriorating position of the two funds puts pressure on Congress and President Barack Obama to come up with ways to cut costs and boost revenue for both. Obama yesterday said fixing the nation’s health-care system is an “imperative for America’s economic future.”

“After we have passed health-care reform that puts our nation on a path to lower growth in health-care costs and expanded affordable coverage, this president will work to build a bipartisan consensus to ensure the long-term solvency of Social Security,” Treasury Secretary Timothy Geithner said in a statement. The trustees’ annual report also estimated that Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=amTqW1OAHXl8&refer=home

DAVID WALKER-U.S. TRIPLE A RATING IS AT RISK

-Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us. That warning from Moody’s focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades.

The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding. Prices have risen on credit default insurance on US government bonds, meaning it costs investors more to protect their investment in Treasury bonds against default than before the crisis hit. It even, briefly, cost more to buy protection on US government debt than on debt issued by McDonald’s.

Another warning sign has come from across the Pacific, where the Chinese premier and the head of the People’s Bank of China have expressed concern about America’s longer-term credit worthiness and the value of the dollar. The US, despite the downturn, has the resources, expertise and resilience to restore its economy and meet its obligations. Moreover, many of the trillions of dollars recently funneled into the financial system will hopefully rescue it and stimulate our economy.

The US government has had a triple A credit rating since 1917, but it is unclear how long this will continue to be the case. In my view, either one of two developments could be enough to cause us to lose our top rating. First, while comprehensive healthcare reform is needed, it must not further harm our nation’s financial condition. Doing so would send a signal that fiscal prudence is being ignored in the drive to meet societal wants, further mortgaging the country’s future.

Second, failure by the federal government to create a process that would enable tough spending, tax and budget control choices to be made after we turn the corner on the economy would send a signal that our political system is not up to the task of addressing the large, known and growing structural imbalances confronting us. For too long, the US has delayed making the tough but necessary choices needed to reverse its deteriorating financial condition.

One could even argue that our government does not deserve a triple A credit rating based on our current financial condition, structural fiscal imbalances and political stalemate. The credit rating agencies have been wildly wrong before, not least with mortgage-backed securities. Read more here-http://www.ft.com/cms/s/0/5534bd04-3f27-11de-ae4f-00144feabdc0.html

INFLATION

-Former official slams Fed for inflation risk. A sharp critic of the Federal Reserve and prominent authority on monetary policy on Tuesday slammed the U.S. central bank for risking inflation and warned that government action had "caused, prolonged and worsened" the country's financial crisis. John Taylor, a former undersecretary of the Treasury for international affairs and author of the widely cited Taylor Rule of central banking, ran his own numbers for the U.S. economy and said the Fed's monetary stance was way too loose.

"My calculation implies that we may not have as much time before the Fed has to remove excess reserves and raise the rate," he said in remarks prepared for a financial markets conference hosted by the Federal Reserve Bank of Atlanta. "We don't know what will happen in the future, but there is a risk here and it is a systemic risk," he said.

He noted a recent Financial Times report of internal Fed estimates using the Taylor Rule. This found interest rates should be minus 5 percent at the moment to compensate for the headwinds on the U.S. economy. But Taylor said that his own analysis suggested a rate of 0.5 percent, indicating that the Fed could have a lot less time to raise interest rates than it may currently think.

In addition, the Fed has pumped hundreds of billions of dollars into the economy to support credit markets in the face of a severe U.S. recession, and may find it very hard to remove this expansion by shrinking its balance sheet in the future. "While Federal Reserve officials say that they will be able to sell newly acquired assets at a sufficient rate to prevent these reserves from igniting inflation, they or their successors may face political difficulties in doing so.

"That raises doubts and therefore risks. The risk is systemic because of the economy-wide harm such an outcome would cause," Taylor said. Taylor used these cases to illustrate examples of where government intervention had magnified market failures and turned them into system-wide problems. However, he saw much more risk coming from the planned U.S. government budget deficits, which could place the Fed under extreme pressure to allow inflation, as this would diminish the debt burden. Read more here-

http://www.reuters.com/article/newsOne/idUSTRE54B7HF20090513

-Billionaire Rupert Says Crisis May Provoke Unrest, Inflation. South African billionaire Johann Rupert said the financial crisis may lead to inflation and social unrest as savers find they’re too poor to retire, while pension-fund managers deserve to be jailed for incompetence.

Rupert, speaking at the annual presentation for Cie. Financiere Richemont SA, the luxury-goods company he controls, said he doesn’t see any “green shoots” of economic recovery. He said governments may resort to inflation to reduce the burden of increased debt from stimulus programs, such as U.S. President Barack Obama’s $787 billion package.

“If this thing carries on, my generation will have to work until they are 75,” the 58-year-old Rupert said. Governments are “going to have to find the capital in the markets, which will crowd out the private sector, or they’re going to have to tax the living hell out of consumers, or inflate their liabilities to oblivion. There are not too many other options.”

Rupert told analysts at the meeting that they’re too young to remember Red Brigade terrorism in Italy or the 1968 Paris uprisings, when the French state sent tanks into the streets.

“Things can get volatile very quickly,” he said. “This is a very turbulent situation. It could flat-out turn into big inflation if not managed properly over the next two or three years. The saver is going to start rebelling.” Spain needs to reduce unemployment from its current rate of about 20 percent to avoid future social problems, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid=a4X0Co5HSGYE&refer=home

-This is not the 1930's and that means a Whole Lot of Inflation to Come, Truly Different this Time. Part 1 here-http://www.321gold.com/editorials/pollaro/pollaro051209.html

-This is not the 1930's and that means a Whole Lot of Inflation to Come, How Big is this Inflation. Part 2 here-http://www.321gold.com/editorials/pollaro/pollaro051209a.html

-Hyperinflation May Be Over hyped. Read more here-http://online.barrons.com/article/SB124182237497802079.html?mod=googlenews_barrons

-Ecoflation: coming to a market near you. Optimistic stock markets are betting that the Great Recession may have hit bottom despite the devastation in American banking and auto sectors. But punters have yet to build into price forecasts inflation and the newly-coined phenomenon of “ecoflation”. It is a clever pun used by Reuters’ environmental reporter and describes the rising cost of doing business due to a “changing climate”.

Whether that refers to global warming (hotly disputed) or the increasing overhead involving government regulations and environmental compliance is anyone’s guess. But the facts are that these enhanced business costs will end up being passed along mostly to consumers then taxpayers. Consumers will pay more for everything, a form of green inflation, notably in developed countries where environmental activitists and laws are demanding better remediation, recycling or responsiveness to concerns.

They will also pay more for commodity scarcities which will result in higher prices as economic growth resumes and Chinese, Indians and others strive toward indoor plumbing and a US$2,000 Nano car by Tata Motors. Read more here-http://network.nationalpost.com/np/blogs/francis/archive/2009/05/07/ecoflation-coming-to-a-market-near-you.aspx

ROGERS-U.S. DOLLAR RALLY WILL END IN CURRENCY CRISIS

-Dollar Rally Will End, Rogers Says; May Short Stocks. The dollar’s rally is set to end in a “currency crisis,” investor Jim Rogers said, adding that he may bet on a slide in equities after nine weeks of gains. The advance in the U.S. currency has been driven by investors covering their short sales, Rogers, 66, said in an interview with Bloomberg Television in Singapore. He may consider adding to his holdings of the yen and prefers the euro to the dollar or the pound, the investor added.

“We’re going to have a currency crisis, probably this fall or the fall of 2010,” Rogers said. “It’s been building up for a long time. We’ve had a huge rally in the dollar, an artificial rally in the dollar, so it’s time for a currency crisis.” The dollar has climbed against all of the so-called Group of 10 currencies except the yen over the past 12 months, according to data compiled by Bloomberg.

Rogers joins “Black Swan” author Nassim Nicholas Taleb in avoiding the U.S. currency. Taleb told a May 7 conference in Singapore he preferred gold and copper to the dollar and the euro as the global economy faces a “big deflation.” Gains in U.S. stocks also signal a “correction,” Rogers said. He’s avoiding equities for the next two to three years because prospects haven’t changed, he added. Read more here-http://www.bloomberg.com/apps/news?pid=20601100&sid=a3YnR0N8LgpQ&refer=germany

BANKING CRISIS MAY LAST UNTIL 2013-CREDIT CARDS-STRESS TESTS-THIRD WAVE OF CRISIS IN U.K.

-U.S. banking crisis may last until 2013: S&P. A day after saying big U.S. banks probably needed to raise only one-fourth the capital demanded by the government, Standard & Poor's said the nation's banking crisis has "merely entered a new phase" and might not end before 2013.

The credit rating agency said the industry is being propped up by hundreds of billions of dollars of government support, especially for lenders considered too important to the financial system to fail.

While efforts to spur lending, take bad assets off banks' balance sheets, and restart the market for packaging and selling securities may help the sector, S&P said banks will have a tough time surviving absent a bigger capital cushion than regulators require.

"There's nothing to say that this banking crisis can't go on for another three or four years," S&P Managing Director Tanya Azarchs said. Read more here-

http://www.reuters.com/article/ousiv/idUSTRE54C6XL20090513

-Banks Brace for Credit Card Write-Offs. It used to be easy to guess how many Americans would have problems paying their credit card bills. Banks just looked at unemployment: Fewer jobs meant more trouble ahead. Read more here-http://www.nytimes.com/2009/05/11/business/11credit.html

-Banks Won Concessions on Tests. Read more here-http://online.wsj.com/article/SB124182311010302297.html and http://www.reuters.com/article/businessNews/idUSTRE5481F520090509?feedType=RSS&feedName=businessNews&rpc=23&sp=true

-Bank of England braced for third wave of financial crisis. Surprise £50bn cash injection is attempt to avert new phase of credit crunch. Read more here-http://www.guardian.co.uk/business/2009/may/08/bank-england-recession-economy

-Why the Banks Still Aren’t Fixed. Read more here-http://www.usnews.com/blogs/flowchart/2009/05/11/why-the-banks-still-arent-fixed.html

33^RD U.S. BANK FAILURE OF THE YEAR

-Westsound Bank in Bremerton, Washington, was seized by a state regulator today, bringing the tally of failed U.S. banks to 33 this year. Kitsap Bank of Port Orchard, Washington, will assume almost all deposits of the closed bank and will open its nine branches on May 11, the Federal Deposit Insurance Corp. said in a statement on its Web site. Westsound Bank had total assets of $334.6 million and deposits of $304.5 million.

The FDIC estimates the seizure of Westsound will cost the government’s deposit insurance fund $108 million. Bank failures have drained money from the fund, which fell 45 percent in the fourth quarter to $18.9 billion. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aIzmG53WwDqE or http://money.cnn.com/2009/05/08/news/economy/bank_failure.reut/index.htm

BEWARE OF SUCKERS STOCK RALLY

-Charles Napier, author of Anatomy of the Bear, tells FT.com that a rise in treasury yields will cause a cataclysmic bear market within two years. Watch video here-

http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html?_i_referralObject=4883575&_i_referrer=mrss

-Volatility Too High to Signal Bull Market, Bank of America Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a5XHNVI3_8Yc

-Analysts Turning Bearish on S&P 500 After 14% Rally. The biggest earnings-season rally since 2002 has pushed 34 percent of the companies in the Standard & Poor’s 500 Index above analysts’ price targets for the next year, raising concerns about the pace of the recovery. The S&P 500 was within 5 percent of the combined price projections of more than 1,700 securities analysts last week after gaining 14 percent since Alcoa Inc. reported first-quarter results on April 7. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=algJ_1hrRxrE&refer=home

-Enjoy the rally while it lasts but expect to take a sucker punch. Our delicious spring rally is nearing the limits. The 40pc rise on global bourses since March assumes that central banks have conjured away the debt overhang by slashing rates to zero and printing money. Nothing of the sort has occurred. Two thirds of the world economy will be in deflation by July. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5301123/bEnjoy-the-rally-while-it-lasts---but-expect-to-take-a-sucker-punchb.html or http://www.gata.org/node/7414

-On Wall Street: Beware of the sucker’s rally. The market is a cruel mistress indeed. Compounding the pain of big swoons, it kicks investors when they are down by luring them into sucker’s rallies typically sharp but fleeting bounces in the middle of a bear market. Read more here-http://www.ft.com/cms/s/0/158f174a-3bed-11de-acbc-00144feabdc0.html

U.S. ECONOMY

-U.S. Economy: Jobless Claims Increase on Impact From Chrysler. Initial jobless claims rose by 32,000 to 637,000 in the week ended May 9, the Labor Department said today in Washington. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a5aNqahBpCaA

-Number of layoffs since Nov. 1, 2008, at America's 500 largest public companies: 558,087. Read more here-http://www.forbes.com/2008/11/17/layoff-tracker-unemployement-lead-cx_kk_1118tracker.html

-Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to boost their savings. The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Excluding auto dealers, sales fell 0.5 percent.

Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years, analysts said. As long as the biggest part of the economy is constrained, any recovery from the worst recession in at least half a century is likely to be subdued.

“The second quarter is going to be tough,” Bill Cheney, chief economist at John Hancock Financial Services Inc. in Boston, said in a Bloomberg Television interview. “Consumers are losing their jobs, concerned about losing their jobs and losing wealth.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aLqc3woGnzWE&refer=home

-U.S. risks "lost decade" due to half-steps: Krugman. The United States risks a Japan-style lost decade of growth if it does not take aggressive action to stimulate its economy and clean up its banking system, Nobel Prize-winning economist Paul Krugman said on Monday. "We're doing half-measures that help the economy limp along without fully recovering, and we're having measures that help the banks survive without really thriving," Krugman said.

"We're doing what the Japanese did in the nineties," he told a small group of reporters during a visit to Beijing. He said it was not clear that China would suffer sub-par growth as a consequence of the fallout of the present crisis. "I'm mostly worried that the U.S. and the euro zone will have Japanese-type lost decades," he said.

Krugman said he expected little or no employment growth this year or next in the United States, where the jobless rate in April hit a 25-year high of 8.9 percent. "A second stimulus is becoming clearly urgent. They need a very, very strong stimulus," said Krugman, a Princeton University professor and a New York Times columnist.

He said stress tests carried out on 19 leading U.S. banks had bought time for the administration of Barack Obama, but they had not answered the key question of whether the banks have enough capital to fulfill their key role in the economy. "It's clear the administration won't take radical action to strengthen the banks any time soon," he said. To have done so would have meant temporarily nationalizing Citigroup and, perhaps, Bank of America, he said. Read more here-http://www.reuters.com/article/ousiv/idUSTRE54A0WU20090511

-The Zarnowitz rule may live, but not for long. The current contraction may so far be following the economic law named for Victor Zarnowitz, the late expert on business cycles: Deep recessions are almost always followed by rapid rebounds. Consumer confidence rose by the most in more than two years in April as surging stock prices and falling mortgage rates boosted optimism. A gauge of U.S. manufacturing activity had its biggest bounce since 2005 as companies eased up on efforts to slash inventories.

Even the crippled housing market has shown signs of stabilizing. The risk is that any snapback may end up stunted by structural impediments from heavily indebted consumers to a hobbled banking system that continue to weigh on the economy and may prevent a sustained run of rapid expansion. “We could see one or two quarters of 6, 5, 4 percent growth,” says Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, who was the top forecaster of the U.S. economy in Bloomberg News surveys last year. “But that doesn’t mean that the economy will be in good shape.

We’ll just be going from truly gruesome to bad.” Bridgewater Associates agrees. The Westport, Connecticut- based financial firm, which says it manages $72 billion in assets, sees a good chance of a big spurt in the economy late in the year, with growth then settling back to a trend line of a shade over 2 percent. That would be well below the postwar rate of 3.3 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=aVK2m3ibUH6o&refer=home

REAL ESTATE-FORECLOSURES

-Home Prices in U.S. Drop Most on Record in Quarter. Home prices in the U.S. dropped the most on record in the first quarter from a year earlier as banks sold seized homes and foreclosures in California and Florida dominated sales.

The median price fell 14 percent to $169,000, the National Association of Realtors said today. Prices dropped in 134 of 152 metropolitan areas, with the deepest declines in Cape Coral-Ft. Myers, Florida, and the San Francisco and San Jose areas.

Distressed sales increased transactions in 17 states from the fourth quarter as speculators and first-time buyers purchased bank-owned properties. Such homes typically sold for 20 percent less than others, the NAR said today. The inventory of previously owned homes on the market dropped to 3.7 million in March from 3.8 million a month earlier, according to NAR data. The number of new homes for sale fell to 311,000, the lowest since January 2002, according to the Commerce Department.

“We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other,” Lawrence Yun, the NAR’s chief economist, said in a statement.

Total existing home sales fell 6.8 percent from a year earlier to a seasonally adjusted annual rate of 4.59 million units, the group said. Sales were down 3.2 percent from the fourth quarter. The figures include single family homes and condominiums and co-ops. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aKkPN8keugMw&refer=home

-Greenspan Sees ‘Seeds of a Bottoming’ in U.S. Housing. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=amYs8axswrJQ&refer=home

-Most U.S. homeowners think a bottom has been reached: Zillow. Most American homeowners believe their home's value has declined over the past year, but a majority also think a bottom has been reached, real estate website Zillow.com said on Thursday. A majority, or 60 percent, believe their home lost value during the past 12 months, according to the Zillow Q1 Homeowner Confidence Survey.

In reality, 80 percent of homes across the country lost value during the past 12 months, according to Zillow's first-quarter Real Estate Market Reports. Additionally, 18 percent believe their home gained value in the past 12 months, and 22 percent believe its value remained the same, according to the survey.

That resulted in a Zillow Home Value Misperception Index of five the lowest it has been since Zillow introduced the index in the second quarter of 2008 and down from 10 in the fourth quarter of 2008. A Misperception Index of zero would mean homeowners perceptions' were in line with actual values. Read more here- http://www.reuters.com/article/wtUSInvestingNews/idUSN1339409420090514

-Australian Prime Minister Kevin Rudd’s bid to ensure his housing market avoids the global property slump may push a generation of buyers into a debt crisis. Grants of as much as A$21,000 ($16,142) to first-time buyers and the lowest interest rates in 49 years have emboldened more than 40,000 young Australians to take out home loans since October, stoking demand for properties that cost less than A$500,000.

These buyers may be vulnerable when interest rates begin rising, potentially triggering a jump in foreclosures that will drive down property prices, cut profits at banks and damp household spending, which accounts for half the economy. A surge in defaults in America was a key trigger for the financial crisis that pushed the global economy into its worst recession since World War II.

“We’re mirroring what happened to the U.S. three years ago, when people who shouldn’t have been in the market bought houses,” said Martin North, managing director of Fujitsu Australia, a Sydney-based property-consulting company. “It’s a strategy set for an unfortunate outcome.”

As Australia slides into its first recession since 1991, Rudd’s payments have been criticized by economists and newspapers for fueling a property boom that may burst once the grants are reduced, possibly as soon as July 1. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=azjnQbCD2dm8&refer=exclusive

-Worries growing about commercial real estate. Delinquency rates at hotels, office buildings have more than doubled. Read more here-

http://www.msnbc.msn.com/id/30701874/

-Luxury retail strips from Manhattan’s Fifth Avenue to London’s Bond Street and the Avenue des Champs Elysees in Paris recorded lower rents in the first quarter as the global recession cut sales, Colliers International said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=amIJt1OBFTqg

-U.S. Foreclosure Filings Hit Record for Second Straight Month. Foreclosure filings in the U.S. rose to a record for the second consecutive month in April as banks increased efforts to seize homes from delinquent borrowers.

A total of 342,038 properties received a default or auction notice or were seized last month, RealtyTrac Inc. of Irvine, California, said today in a statement. One in 374 households got a filing, the highest monthly rate since the property data service began issuing such reports in 2005.

“What you’re seeing is the inevitable result of severe job losses,” Nicolas Retsinas, director of housing studies at Harvard University in Cambridge, Massachusetts, said in an interview. “Until we stem the job losses, we can expect to see continuing foreclosures.”

Unemployment is hampering the housing market as property prices fall. The U.S. jobless rate rose to 8.9 percent, the highest in more than a quarter century, the Labor Department said May 9. Home prices fell the most on record in the first quarter to a median $169,000 amid sales of foreclosure properties, the National Association of Realtors said yesterday.

Foreclosure filings jumped 32 percent from the year-earlier period, RealtyTrac said. Filings were little changed from March as some states delayed seizures. Ten states accounted for three quarters of all foreclosures in April, with California leading the nation. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid=aYokz_rb3kbw&refer=home

-Beware Crisis' Next Wave: Option ARM Foreclosures, More Debt Defaults. Read and watch video here-http://finance.yahoo.com/tech-ticker/article/243889/Beware-Crisis%27-Next-Wave-Option-ARM-Foreclosures-More-Debt-Defaults?tickers=XLF,FAS,C,^GSPC,JPM,BAC,^DJI?sec=topStories&pos=9&asset=&ccode

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The Goldbugg Report - May 19, 2009
Posted by Worldwide Precious Metals on Tuesday, May 19, 2009

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