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The Goldbugg Report - May 26, 2009

May 26, 2009

Memo from PMI

May 22^nd 2009

The Week in Review

This week saw another round of drastic swings in the stock market with the Fed saying the economic outlook was worse than previously expected and the US dollar continuing its decline.

The much discussed credit card bill passed this week. The statements made by those who saw this as a death blow to the already bottlenecked access to overall credit went largely ignored. What bank in their right mind would provide any form of credit to someone with even a minor issue on their credit report if the government is not going to allow that bank to hike the interest rate if that person misuses that credit and can’t pay it back on time? This bill could very well result in millions in lost revenues to the very banks that the government says need all the capital they can get! With this step, the government has essentially legislated its way into the financial decision making process of every American household. On an odd side note; the bill included a provision that now allows carrying concealed and loaded weapons into America’s national parks. Hard as we tried, we could not see how such a provision in any way shape of form aided in the economic recovery the legislature claims to be putting all their efforts into making happen.

Standard and Poor’s rating service cut the UK’s credit rating outlook to negative from stable this week. This move sparked speculation that the UK would lose its AAA credit rating. This also resulted in further speculation that the US could also lose its AAA rating.

Initial jobless claims were down by 12,000 this week, but the number of continuing claims rose again to another record level. With GM and Chrysler continuing their downward spiral, those numbers may continue to climb.

GM bond holders may be about to receive the same treatment that the Chrysler bondholders received in previous weeks, with the union getting the big piece of the pie and the investors left holding the empty bag.

Oil prices hung on to their 60 dollar trading range on news of two refinery fires in the US, and further attacks on pipelines in Nigeria.

The dollar continued its downward slide this week. Brazil’s leader was in China supposedly discussing dropping the dollar as a trade vehicle between them in favor of using their own currencies. China has replaced the US as Brazil’s biggest trading partner, so such a switch is not out of the realm of possibilities.

Gold, Silver, Platinum and Palladium continued to rise as we discussed in our April 30^th memo as the flight to quality is not only continuing but seems to be accelerating at faster rates than we originally anticipated (primarily due to major concerns over continuing weakness in the US dollar, which we also suggested in our April 30^th memo).

Friday to Friday Close

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

Volatility should be expected to continue as surprises continue to upset the market and the weakness and uncertainty surrounding the dollar continues. 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

-Gold the only asset that did its job. Bullion held fast when all others were plunging. Stock markets have seen some decent rallies in 2009 but many investors remain on the sidelines, convinced that the gains are short-term. They expect a correction and, with government spending on the rise, a primary cause for their worry is inflation.

As usual, economists have every conceivable opinion accompanied by caveats like, "Of course, if such-and-such happens." I am not an economist, but I think that we can and should ask ourselves logical questions, draw conclusions, and act accordingly. The U. S. Federal Reserve Board is pumping liquidity into the markets, effectively diluting the value of existing dollars. While it seems a distant threat, such a move triggered inflation the 1970s.

To control inflation, the Fed may need to increase interest rates. However, that could be difficult to do when they require lower rates to manage the mortgage-backed securities they've been purchasing. Traditionally, gold has been viewed as a solid hedge against inflation. It has a very low correlation with other asset classes and, as a core holding, acts as a good buffer against volatility.

In 2008 gold took some criticism from those who felt that it underperformed expectations. Experts called for US$2,000 gold, but it only broke US$1,000 before returning to current levels. Since then, investors have been somewhat indifferent to it.

However, the reality is that gold was the only asset class that actually did its job. It maintained a low correlation to the markets and, as stock market indexes plummeted, it outperformed the broad markets and closed up about 4% on the year. Despite that, gold has maintained an underdog standing but, in my opinion, undeservedly so.

Investors should take a second look at gold bullion. As proven in 2008, bullion offers protection during uncertain economic times. Confidence in paper money and the U. S. dollar as a global reserve currency has dwindled, debt has risen to exceptionally high levels, and investment demand for gold has increased. In these conditions, gold should continue to outperform.

Investors should seek solid, tangible assets that can hedge against inflation, financial collapse, and currency devaluation. To quote Eric Sprott, "In the sea of financial assets and currencies that are being decimated the world over, the one true safe haven continues to be gold." Kim Inglis-Read more here-

http://www.financialpost.com/story.html?id=1607619

-Gold purchases rose 38 percent in the first quarter, led by investment demand that exceeded usage by jewellers for the first time since at least 2004, according to the World Gold Council.

Global demand increased to 1,015.5 metric tons, from 733.9 tons a year earlier, the London-based council said today in a report based on figures from research company GFMS Ltd. Investment purchases more than tripled to 595.9 tons while jewellery demand fell 24 percent to 339.4 tons.

Gold rose to an 11-month high of $1,006.29 an ounce on Feb. 20 as governments spent trillions of dollars to fight recession, sparking speculation inflation will accelerate. In India, the world’s largest gold buyer last year, jewellery demand was the lowest in at least 20 years and net retail investment turned negative for the first time as holders sold metal for recycling, the council said.

Chinese demand was six times that of India. “In the current environment, investment demand is part of the diversification of assets in portfolios and therefore is less sensitive to price than jewellery demand,” said John Meyer, research director at Fairfax IS in London.

Investment demand for coins, bars and exchange-traded funds was the highest since at least 2004, when GFMS began tracking them, and “could well be” a record, GFMS senior metals analyst Philip Newman said. Jewellery demand had accounted for about two- thirds of gold demand in the past 30 years, he said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a9KLEjc7x2ww

-Gold: 'It's a bargain at $930 an ounce.' The bullish outlook for gold rests on the increasing likelihood of accelerating US inflation. Read more here-

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/5324628/Gold-Its-a-bargain-at-930-an-ounce.html

-Inflation or deflation gold will be king according to Clive Maund. In conclusion, this is a very tricky time for investors with the battle on between the forces of inflation and deflation. Because of the highly unusual combination of enormous debt that must unwind with rapid expansion of the money supply, we are likely to see extreme stagflation involving economic contraction, sometimes involving heavy and destructive bouts of deleveraging, accompanied by eventual high inflation that could morph into hyperinflation.

With Treasuries and other government paper becoming less and less attractive and more and more dangerous, investors seeking to preserve their capital will turn increasingly to gold. Gold will be king. Read more here-http://news.goldseek.com/CliveMaund/1242626820.php

-Gold finding support at prices around $900. Over the past couple of weeks the gold price has been resilient at a time when weakness might hav been anticipated. Buying on any weakness is recommended. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=83587&sn=Detail

-Gold on the cusp $1,375 on the cards. The 'Sell in May' situation could arrive right on time this year, according to Roger Wiegand, who anticipates the next larger, extended rally in gold this fall. Interview with The Gold Report. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=83554&sn=Detail

-GATA board member Adrian Douglas, publisher of the Market Force Analysis financial letter, was interviewed for a half hour yesterday by TheFinancialTube.com about the gold and silver market. Listen here-http://www.thefinancialtube.com/video/3551/Interview-with-Adrian-Douglas-marketforceanalysiscom

-Gold 2009: The Story So Far. Read more here-http://news.goldseek.com/BullionVault/1242406320.php

-Why Gold Looks Ready to Move Higher. Read more here-http://www.fxstreet.com/fundamental/analysis-reports/why-gold-looks-ready-to-move-higher-/2009-05-06.html

-German firm plans gold ATMs to feed explosive growth in physical gold demand. A German asset management firm plans to set up 500 gold automatic teller machines across Germany, Austria and Switzerland as appetite for physical gold surges. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=83555&sn=Detail

-Gold headed to $10,000 part 2. Read more here-http://news.goldseek.com/EricHommelberg/1242397613.php

-Are the fundamentals for gold poor? Read more here-http://www.321gold.com/editorials/schwensen/schwensen052009.html

-2009 gold production in the world. Read more here-http://www.dani2989.com/gold/goldprod0509gb.htm

-Hedge Funds Making Big Bets on Gold. Read more here-http://www.smartmoney.com/breaking-news/on/?story=ON-20090518-000493-1519

-Richard Russell gold commentary. Read more here-http://www.321gold.com/editorials/russell/russell051809.html

-Gold Is About to Soar. Read more here-http://www.321gold.com/editorials/learton/learton052109.html

-Gold refiner responds to demand for gold bars. Read more here-http://www.research.gold.org/news/2009/05/19/story/12057/gold_refiner_responds_to_demand_for_gold_bars

-Beware of Exchange Trade Funds (ETFs) Bearing Gold. Read more here-http://blog.goldassets.co.uk/2009/05/20/beware-of-exchange-trade-funds-etfs-bearing-gold/

-Money Magazine's 'Advice' Indicates It's Still Early for Gold. Read more here-http://seekingalpha.com/article/137827-money-magazine-s-advice-indicates-it-s-still-early-for-gold

-AngloGold continues to slash gold hedgebook as swings back to profit. AngloGold Ashanti reported a return to quarterly profit as CEO Mark Cutifani sees gold price between $850-$1,000 this year and says company will continue to slash hedgebook. Read more here-http://mineweb.net/mineweb/view/mineweb/en/page34?oid=83336&sn=Detail

-Mexican miner Penoles, which operates Latin America's largest metals refinery, said on Monday it was lifting a declaration of force majeure following a strike that shut down its precious metals unit. Some 300 striking workers in the gold and silver refinery section of the sprawling MetMex metals complex in northern Mexico laid down tools on Feb. 8, demanding a salary increase of up to 9 percent.

Penoles said on March 13 it could not fulfill all contracts due to the strike. The strike ended a month later, with the union accepting a 6 percent wage hike, but the company said it will still take weeks for operations to return to normal. Read more here-http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSN1835561220090518?rpc=401

-Could President Obama ban U.S citizens from holding gold? Back in 1933, at a time of economic crisis, President Roosevelt forced U.S. Citizens to sell their gold at $20 an ounce - and then subsequently revalued the metal to $35. Could President Obama, a Roosevelt disciple, have similar plans in mind. Read more here-

http://www.mineweb.co.za/mineweb/view/mineweb/en/page72068?oid=83579&sn=Detail

SILVER

Gold to silver ratio at 80 to 1 with gold at $2,200 the silver price would be $27.50

Gold to silver ratio at 70 to 1 with gold at $2,200 the silver price would be $31.43
Gold to silver ratio at 60 to 1 with gold at $2,200 the silver price would be $36.67

Gold to silver ratio at 50 to 1 with gold at $2,200 the silver price would be $44.00
Gold to silver ratio at 15 to 1 with gold at $2,200 the silver price would be $146.67

-Silver Poised for Rally to Eight-Month High: Technical Analysis. Silver futures likely will rally to the highest level since August on signs of increased investment demand, according to an analysis of historical prices by analysts including John Gross and Ralph Preston.

“July silver futures broke $14 an ounce resistance” on May 7 and again this week and may test $14.61, the 2009 high, said Gross, the president of J-E Gross & Co. in Newport, Rhode Island. “If the market is able to overcome that high, the next objective is $15, followed by $16.”

“To the extent the market can hold $14, I believe it will test the next important high at about $14.70,” Gross said yesterday in an e-mailed comment. He said $14 “was the previous important high going back to mid-March.” Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid=aQLwNl0UdJQo&refer=commodities

-Must see silver charts, resistance in $15.00 area with initial upside target upon successful breakout of $21-$22. Read more here-

http://www.silverstrategies.com/story.aspx?local=1&id=16722

-Roland Watson silver update. Read more here-http://news.silverseek.com/SilverSeek/1242831600.php

-America lost 94% physical silver in 50 years. Here's something you probably don't know that 1959 would be the last year the U.S. government would be a buyer of silver, as it had been for decades, until 2001, when it began buying silver for the American Eagle and commemorative coin programs.

In 1959, when the U.S. government held 3.4 billion ounces of silver, the U.S. population was approximately 180 million. That means the U.S. government held almost 19 ounces of silver for every man, woman and child in the nation. Today it holds none.

Here’s another statistic that is just as troublesome. In 1959, there were about 5 billion ounces of silver physically held on U.S. soil. Today there are just 300 million ounces, including all 118 million ounces in COMEX-approved warehouses and privately held silver. Before you disagree, please remember that the more than 400 million ounces in ETF-type vehicles are held outside the U.S. That means the amount of physical silver held on U.S. soil is down about 94% in 50 years. Read more here-

http://www.commodityonline.com/news/America-lost-94-physical-silver-in-50-years-18009-3-1.html

-2009 price forecasts raised for silver, pgms and, to a lesser extent, gold. Mitsui Global Precious Metals has raised its 2009 price estimates for silver, platinum and palladium and also expects gold to rise, although wary on the yellow metal short term. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=83527&sn=Detail or

http://www.reuters.com/article/marketsNews/idUSLJ50788220090519

-Ted Butler silver commentary. While the Silver Institute is reporting on record silver investment demand, they never predicted it. They have never made bullish predictions on silver, no matter what the facts. I, on the other hand, predicted the investment rush in silver http://www.investmentrarities.com/01-22-08.html I bring it up, not to pat myself on the back, but to explain why we should continue to see strong silver investment demand.

The silver story is so compelling, and the facts so clear, that more investors will learn of it as time passes. There will be lulls in investment buying and surges, as there has been in the past. But it will continue. The amount of silver coming out of the ground and through recycling is spoken for by fabrication and that’s not about to change. The amount of silver remaining in existing inventories and available for investment purchase is limited and not about to change.

The number of investors who will come to learn of the remarkable facts concerning the silver story, however, must change and their buying will tilt the equation against the manipulators. As more people become educated to the real silver story, they will buy. Phony stories about surpluses won’t prevent that. Read more here-http://news.silverseek.com/TedButler/1242674918.php

-Strong appetite for silver boosts coin production. Read more here-http://www.ft.com/cms/s/0/c63401da-3fd7-11de-9ced-00144feabdc0.html

PLATINUM-PALLADIUM

-Swiss fund looks for strength in commodities in general and platinum in particular. Head of Swiss fund, Best Asset Class, is looking for particular growth in the platinum price this year and details stocks he feels will do well. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=83485&sn=Detail

-Platinum jewellery market strengthens, physical investment more than doubles. Johnson Matthey's "Platinum 2009" reports that net platinum demand in 2008 was down by 5% in 2008. The largest contraction was in the automotive sector. Net jewellery demand fell 6%, but the price slump brought about a sharp increase in Chinese purchases. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=83521&sn=Detail

-Platinum outlook clouded but $1,350 a viable target Johnson Matthey. Johnson Matthey's respected annual Review of the platinum group metals markets reports that platinum was in a deficit of 375,000 ounces in 2008.

Considerable uncertainty over the precise trajectory of the global economy in 2009 makes it unclear exactly how platinum demand will fare, but the prognosis for jewellery demand is strong and ETF investment is expected to exceed that of 2008. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=83455&sn=Detail

-Platinum and palladium the 'other' precious metals. Read more here-http://www.moneyweek.com/investments/precious-metals-and-gems/platinum-and-palladium-the-other-precious-metals-14770.aspx

DEFINITIONS-QUOTES-QUICK HITS

-In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also a decline in the real value of money a loss of purchasing power in the medium of exchange which is also the monetary unit of account in the economy.

A chief measure of general price-level inflation is the general inflation rate, which is the percentage change in a general price index (normally the Consumer Price Index) over time. Inflation can have adverse effects on an economy. For example, uncertainty about future inflation may discourage investment and saving. High inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.

Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities, as well as to growth in the money supply. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth. Read more here-http://en.wikipedia.org/wiki/Inflation

-Canadian inflation calculator-http://www.bankofcanada.ca/en/rates/inflation_calc.html

-U.S. inflation calculator-http://www.minneapolisfed.org/index.cfm

-Inflation is a disease, a dangerous and sometimes fatal disease that, if not checked in time, can destroy a society. Milton Friedman-Bio here-http://en.wikipedia.org/wiki/Milton_Friedman

-“As long as the value of money falls, the value of real assets will rise.” Angus Murray joint CEO of Castlestone Management-Read more here-

http://www.bloomberg.com/apps/news?pid=20603037&sid=aKjcBvNK6J6M&refer=home

-Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary. Alan Greenspan July 30, 1998

-The dollar does look vulnerable. Pushing government steadily leftward, the Obama Administration has set up the possibility of a US dollar rout. This is especially so, noting that the US$ Index has now closed below its 200-day moving average for the first time in months. If this persists, commodity prices generally shall rise and rise materially, and gold shall too. The Gartman Letter, 20 May 2009

-“Gold cannot decline from its highs as it will be incorporated into the national and international monetary systems at that time.” Alf Fields, May 20, 2009

-“Investors are turning to gold because of fears of long-term inflation and major currency debasement due to fiscal deficits, government debt issuance and quantitative easing. All of these concerns are likely to continue for the next year or so.” UBS analyst John Reade

-“Gold has been the object of affection for hedge funds and also has paid increasing attention to the dollar lately. That helps explain why gold has rallied both when stocks have risen and fallen.” Tom Pawlicki MF Global

-Rumours that the Russian Central Bank may allow Russian banks to pledge gold as collateral are circulating in the market. Such a move should further increase the appetite for gold among financial institutions as its attractiveness as collateral outshines the traditional bonds in the eyes of the regulatory forces. Gold.ie

-Vietnam, gold traders have sought permission from the central bank to import up to $600 million worth of gold, calling for an end to a year-long ban. Casey Daily Resource

-China's gold reserves may serve as backing for the yuan as Beijing promotes its use overseas, said Zheng Lianghao, managing director of the World Gold Council's Far East division, the Shanghai Securities News reported Monday.

Zheng, who was speaking at a forum over the weekend, said increasing gold holdings would provide China with a useful hedge as the dollar faced the possibility of depreciation, according to the report. In late April, the official Xinhua News Agency quoted Hu Xiaolian, the head of China's foreign exchange agency, as saying China's gold reserves had risen 454 metric tons since 2003 to 1,054 tons. Read more here-http://www.gata.org/node/7430

-U.S. Needs More Inflation to Speed Recovery, Say Mankiw, Rogoff. What the U.S. economy may need is a dose of good old-fashioned inflation. So say economists including Gregory Mankiw, former White House adviser, and Kenneth Rogoff, who was chief economist at the International Monetary Fund. They argue that a looser rein on inflation would make it easier for debt-strapped consumers and governments to meet their obligations.

It might also help the economy by encouraging Americans to spend now rather than later when prices go up. “I’m advocating 6 percent inflation for at least a couple of years,” says Rogoff, 56, who’s now a professor at Harvard University. “It would ameliorate the debt bomb and help us work through the deleveraging process.”

Such a strategy would be risky. An outlook for higher prices could spook foreign investors and send the dollar careening lower. The challenge would be to prevent inflation from returning to the above-10-percent levels that prevailed in the 1970s and took almost a decade and a recession to cure. Read more here-

http://www.bloomberg.com/apps/news?pid=20601109&sid=auyuQlA1lRV8&refer=home

-Stock market optimists need to read a history of the Great Depression. The stock market may not have reached its bottom. After a sharp two-month rally, that may sound like a crazy thing to say. But history suggests as much.

The 57pc fall in the Standard and Poor's 500 Index to its March low was jaw-dropping: larger than the 48pc decline of 1973-74, or the 49pc fall of 2000-02. This downward move was also faster: 17 months compared to 21 and 31 months in the previous two tumbles.

Still, there have been three worse bear markets in big economies. From 1929 to 1932, the US stock market dropped 89pc. UK shares fell 72pc in 32 months in 1972-75. Finally, Tokyo fell 48pc in only nine months in 1989-90, and 64pc over 30 months. It remains 76pc below its December 1989 high.

The drop during the Great Depression may be the most relevant to the current situation. It came after a similar long period of optimism, brought a similar degree of systemic financial distress, and was just about as rapid. There were also some big rallies on the way down. Read more here-http://www.telegraph.co.uk/finance/breakingviewscom/5312628/Stock-market-optimists-need-to-read-a-history-of-the-Great-Depression.html

-Rosenberg Says U.S. Stock Market May Test March 9 Low. The Standard & Poor’s 500 Index may fall beneath the 12-year low reached on March 9 because consumer spending hasn’t recovered from the longest recession since the 1930s, economist David Rosenberg said.

“We have to get confirmation the March lows are going to hold,” Rosenberg, the chief economist and strategist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview with Bloomberg Television. “The conventional view was the November lows were going to hold. As we found out in the opening weeks of March, no, those lows didn’t hold.”

Rosenberg said he will “keep an open mind as to whether the lows from March will hold or not as we go into the second half of this year. I’m not sure where the buying power is going to come from.” Rosenberg is the former chief North American economist at Merrill Lynch & Co., the brokerage bought by Bank of America Corp. in January. He left the firm this month. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aG.qtbxYIK_E or http://www.businessinsider.com/david-rosenberg-the-short-covering-rally-is-finished-here-comes-the-leg-down-2009-5

-Another Bottom for Stocks Coming: Rogers. The stock market may hit new lows this year or the next as the current rally has been largely caused by the money printed by central banks and fundamental problems remain unsolved, legendary investor Jim Rogers told CNBC Wednesday.

His views echo those of renowned bear Marc Faber, who told CNBC last week that the rises in share prices did not mean the world was embarking on a path of sustainable economic growth. "I'm not buying shares if that's what you mean. Not at all," Rogers told "Squawk Box Asia."

"The bottom will probably come later this year, next year, who knows when," he added. Governments have not solved the essential problems that caused the crisis but instead they "flooded the world with money," according to Rogers. Trying to solve the problem of too much consumption and too much debt with more consumption "defies belief" and will not work, he said. Read more here-http://www.cnbc.com/id/30838800

-"The Worst Is Yet to Come": If You're Not Petrified, You're Not Paying Attention. Read more and watch video here- http://finance.yahoo.com/tech-ticker/article/248398/%22The-Worst-Is-Yet-to-Come%22-If-You

The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was "preposterous" to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.

"We're in a complete mess and the consumer is smart enough to know it," says Davidowitz, whose firm does consulting for the retail industry. "If the consumer isn't petrified, he or she is a damn fool."

Davidowitz, who is nothing if not opinionated and colorful, paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."

This outlook is based on the following main points:

With the unemployment rate rising into double digits - and that's not counting the millions of "underemployed" Americans - consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity.

Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on not just mortgages but student loans and auto loans and credit card debt.

More consumer loan defaults will hit banks, which are also threatened by what Davidowitz calls a "depression" in commercial real estate, noting the recent bankruptcy of General Growth Properties and distressed sales by Developers Diversified and other REITs.

-IMF head says the global crisis is not over yet. Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), warned the global downturn was not over and more financial shocks were likely. Read more here-http://www.telegraph.co.uk/finance/financetopics/recession/5328718/IMF-head-says-the-global-crisis-is-not-over-yet.html

-The dollar declined Thursday to the lowest level against the euro since January and dropped versus the yen as an increase in Treasury yields and gold prices indicated inflation may accelerate while the U.S. budget deficit widens. “Selling the U.S. dollar is still the preferred play on the street,” said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York.

“The dollar’s weakness reflects growing concern about the fiscal sustainability of the policy response to the crisis,” Todd Elmer, a currency strategist at Citigroup Inc. in New York, wrote in a report today. “This provides for further dollar downside, which extends beyond the turn in the risk cycle.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ0RW2PhOwPQ&refer=home

-Fed's economic forecast worsens. Central bank now expects unemployment to rise to a range of 9.2% to 9.6% this year. Fed also predicts a sharper decline in GDP than it had forecast in January. Read more here-http://money.cnn.com/2009/05/20/news/economy/fed_minutes/index.htm

-Fed’s Rosengren Says U.S. Recovery to Be ‘Slow’ as Banks Heal. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aUec114iGZhE&refer=home

-We have come a long way from Dow 14,168 and we have just completed a strong bear market rally based on little but hopes, dreams and the assistance of the “Working Group on Financial Markets” under the guidance of the Treasury and the Fed. We believe the bear market has a substantial distance to fall as the debt sector is purged.

A 50% retraction of debt, which is far above GDP has to be completed, excess capacity has to be rung out of markets, consumer spending, which is now 70% of GDP, has to return to the long-term average of 64.5% of GDP. Once real estate bottoms in 2011 and 2012, we will probably be half way to the overall bottom. We have 2/3’s of the way to go before credit card debt is purged. We are just beginning to see failure of commercial and industrial loans and that could last another 3 to 4 years.

Presently we are about 40% to the bottom. Then the question arises how long do we bump along the bottom probably 5 years or longer dependent on how bad the structural damage is, whether we still have a Federal Reserve; how many banks are left; whether we have WWIII or whether we have revolution. America and the world are in for a difficult time. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1242627180.php and http://news.goldseek.com/InternationalForecaster/1242844473.php

-Day of reckoning looms for the U.S. dollar. The U.S. dollar's day of reckoning may be inching closer as its status as a safe-haven currency fades with every uptick in stocks and commodities and its potential risks debt and inflation are brought under a harsher spotlight.

Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a "serious case of dollar damage" was underway. "We long warned about the day of reckoning for the dollar emerging at the next economic recovery," Mr. Laidi said in a note.

Mr. Laidi said economic recovery would weigh on the greenback as real demand for commodities, coupled with improved risk appetite, caused investors to seek higher yields in emerging markets and commodity currencies. This would draw investment away from the U.S. dollar, which was dragged down by growing debt and the risk quantitative easing would eventually spark a surge in inflation. Read more here-http://www.financialpost.com/news-sectors/story.html?id=1612964

-The US dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent, The Vedomosti newspaper wrote.

The dollar has thus lost the status of the basic reserve currency for the Russian Central Bank, the annual report, which the bank provided to the State Duma, said. Read more here-http://english.pravda.ru/business/finance/19-05-2009/107581-dollar_russia-0

-China's yuan 'set to usurp US dollar' as world's reserve currency. The Chinese yuan is preparing to overtake the US dollar as the world's reserve currency, economist Nouriel Roubini has warned. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5325805/Chinas-yuan-set-to-usurp-US-dollar-as-worlds-reserve-currency.html

-Brazil and China work together to replace dollar. Brazil and China will work toward using their own currencies in trade transactions rather than the US dollar, according to Brazil's central bank and aides to Luiz Inácio Lula da Silva, Brazil's president. The move follows recent Chinese challenges to the status of the dollar as the world's leading international currency. Read more here-http://www.gata.org/node/7432

-China is pumping more money into US Treasury bonds, recent data show, despite concerns expressed in Beijing in recent months over the safety of dollar-linked assets. Mainland China's holding of Treasury securities jumped to 767.9 billion US dollars in March from 744.2 billion US dollars the previous month, according to US Treasury data.

The figure does not include those of Hong Kong, China's special administration region, which climbed to 78.9 billion US dollars from 76.3 billion US dollars. The statistics showed China sitting comfortably as the top purchaser of Treasury bonds despite years trying to diversify its reserves from the US dollar. Read more here-http://www.gata.org/node/7425

-Wary of U.S. debt, China shifts gears on investment. China has engineered a subtle yet significant shift in the investment of its foreign exchange reserves, a sign of how it is willing to act on concerns about financing an explosion of U.S. debt.

Beijing has been far and away the single biggest foreign buyer of Treasuries over the past year, but this apparent vote of confidence belies how it has turned its back on long-term U.S. debt in favor of shorter maturities.

China's move to the shorter end of the U.S. debt spectrum is a defensive tactic adopted by the wider market as well on the view that the United States will have to raise interest rates down the road to control inflationary pressures when the economy recovers from the financial crisis. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE54I2H620090519?pageNumber=1&virtualBrandChannel=0

-China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline, according to the Royal Bank of Canada.

"It's part of an overall desire to decrease its exposure to dollar assets," said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong, in an interview today. China fears that the hundreds of billions of dollars the U.S. is spending on bank bailouts and stimulus will cause "higher inflation and a weaker dollar," he said. Read more here-

http://www.gata.org/node/7429

-Adrian Douglas: Have China watchers never heard of a decoy? Read more here-http://www.gata.org/node/7428

-Britain may lose its AAA credit rating for the first time as government finances deteriorate in the worst recession since World War II. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=atmfAp9JUvz4&refer=home

-Pimco’s Gross Says U.S. ‘Eventually’ Will Lose AAA. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=alV9gVA7BlZw

-U.S. Pension Insurer May Need Aid as Deficit Soars. Shortfall Fed by Flood of Corporate Bankruptcies. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2009/05/20/AR2009052000778_pf.html

-More Americans than forecast filed claims for unemployment insurance last week, and the total number of workers receiving benefits rose to a record, signs the job market continues to weaken even as the economic slump eases.

Initial jobless claims fell by 12,000 to 631,000 in the week ended May 16, from a revised 643,000 the prior week that was higher than initially estimated, the Labor Department said today in Washington. The total number of people collecting benefits rose to 6.66 million, a record reading for a 16th straight week, and a sign companies are still not hiring. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=aQ7ajSHhUcCc#

-Michigan unemployment reaches 12.9 percent in April. Read more here-http://www.detnews.com/article/20090520/METRO/905200445/1409/METRO

-Consumer spending may have hit bottom, but America’s mountain of debt means the climb back up will be slow and painful. Read more here-

http://www.economist.com/finance/PrinterFriendly.cfm?story_id=13611284

-Berkshire Scales Back Stock Purchases as Cash Erodes. Warren Buffett’s Berkshire Hathaway Inc., the largest shareholder in Kraft Foods Inc. and Coca-Cola Co., is scaling back stock purchases after the firm’s cash holdings fell to their lowest in more than five years.

Berkshire is spending less as the firm comes closer to the $10 billion that Buffett says is the minimum he wants on hand to protect against calamity. The cash hoard, which had been at $47.1 billion in September 2007, fell below $20 billion in April after the company posted its worst loss in at least 20 years and Buffett directed funds to corporate debt and preferred stock.

“He’s tapped out,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha” and founder of hedge fund Ram Partners LP. “He had to sell some of his stocks to buy stuff last fall. That’s why he’s not been making big stock purchases.”

Berkshire spent $624 million on equities including Wells Fargo & Co. in the first quarter, the smallest amount since at least 2005, according to regulatory filings by the Omaha, Nebraska-based company. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a0bkOEPxUVa8

-Crude oil may reach $73 a barrel after futures broke through $60 this week, according to technical analysis by Newedge Group. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid=aZG9aI9nen_k

-The United Arab Emirates is rebelling against Saudi Arabia’s dominant role in the Gulf, pulling out of a single-currency project after the Saudis won the right to host the central bank.

Unless a compromise is found, the U.A.E. withdrawal will effectively end the Gulf Arab dream of creating a monetary union for a group with a combined gross domestic product of $1.1 trillion.

The dispute threatens to set back integration among the six nations of the Gulf Cooperation Council and their desire to adopt a monetary policy independent of the U.S. as they face the global financial crisis and a perceived threat from Iran. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aemjk9fpIplk&refer=home

-The derivatives market shrank for the first time in the second half of 2008 as the global financial crisis curbed trading, the Bank for International Settlements said in a report. The amount of outstanding contracts linked to bonds, currencies, commodities, stocks and interest rates fell 13.4 percent to $592 trillion, the Basel, Switzerland-based bank said yesterday.

That’s the first decline in 10 years of compiling the data. The amount of credit-default swaps protecting investors against losses on bonds and loans fell 27 percent to cover a notional $41.9 trillion of debt. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aH8SyaUL.9H0&refer=home

-GM bankruptcy seen as all but inevitable. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54H6AN20090518

-GM bankruptcy plan eyes quick sale to government. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54H6AN20090519

-GMAC Gets $7.5 Billion in Federal Funds for Car Loans. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aVQYJE8KCUVM&refer=home

-Terminated Chrysler dealerships to challenge sale. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54J0EO20090520

-Letter from a Dodge dealer after receiving notice that his dealership was being shut down. Read more here-http://rense.com/general85/dealer.htm

-22 reasons why Obama will raise U.S. taxes soon! Read more here-http://www.marketwatch.com/story/story/print?guid=8938ACF5-2122-4364-B805-802261385BE4

-Jim Sinclair says this is without a doubt the most important piece of information he will present to you this year. Read more here-http://jsmineset.com/2009/05/20/it-is-now/

-Rick Santelli Says: Watch This Video Of A Clueless Fed Inspector General. Watch video here- http://www.businessinsider.com/rick-santellis-says-to-watch-this-video-of-clueless-fed-inspector-2009-5

-The financial meltdown's unhappy anniversary. The crisis that began with the Bear Stearns debacle is about to enter year three. Read more here-

http://money.cnn.com/2009/05/15/news/economy/bear.stearns.fortune/index.htm

-The credit crisis explained in plain language in this short video. Watch video here-http://www.crisisofcredit.com/

-Police in New Zealand are searching for a couple who disappeared after a banking blunder deposited NZ$10m (£3.9m, US$6m) in their account. Read more here-

http://news.bbc.co.uk/2/hi/asia-pacific/8060681.stm

-President Mahmoud Ahmadinejad said Iran successfully launched its new surface-to-surface Sejil-2 missile and indicated the Persian Gulf country is working on more potent rockets. “Sejil-2, which has advanced technology, was launched from Semnan and hit its exact target,” the state-run Fars news agency cited Ahmadinejad as saying today. “In the near future, we will launch more powerful missiles with longer ranges.”

The solid-fuel missile is an adaptation of the Shahab rocket, which Iran says has a range of 2,000 kilometers (1,240 miles), putting Israel and U.S. forces based in the Persian Gulf within reach. A U.S. government official speaking on the condition he not be identified confirmed that the launch of a medium-range ballistic missile had taken place. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ9D81MW5U_4&refer=home

-Leon Panetta's mission to stop Israel bombing Iranian nuclear plant. America’s spy chief was sent on a secret mission to Israel to warn its leaders not to launch a surprise attack on Iran without notifying the US Administration. Read more here-http://www.timesonline.co.uk/tol/news/world/middle_east/article6289593.ece

-Swine Flu Extends to Tokyo; Global Cases Top 11,000. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aWlAw.TUYszo#

-Adults Older Than 52 May Resist Swine Flu, CDC Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aZd5g0zwdguA

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

-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

-Blue diamond fetches record price. A rare blue diamond has sold for a record 10.5 million Swiss francs ($9.5m; £6.2m) at auction in Geneva. It weighs 7.03 carats, is smaller than a penny piece, and is one of only a handful of blue diamonds in existence. The anonymous phone bidder has yet to name the gem, mounted on a platinum ring, auctioneers Sotheby's said.

The diamond was found in Cullinan mine in South Africa last year, and its clarity was graded as flawless the highest designation. Auctioneer David Bennett said: "It is a new world record price for a blue diamond." It had a pre-sale catalogue estimate of 6.8 million to 10 million francs, excluding commission. Read and watch video here-

http://news.bbc.co.uk/2/hi/europe/8047042.stm

-The Petra Diamonds important fancy vivid blue, internally flawless, cushion-shaped diamond weighing 7.03 carats, which sold at auction by Sotheby's last week, was acquired by Joseph Lau Luen-Hung, renowned Hong Kong collector and connoisseur.

Lau bought the diamond for HK$74 million (US$9.48 million) and he has already exercised his right to name the diamond, which is now known as 'Star of Josephine'. The exceptional blue diamond set two auction records at Sotheby's Geneva on 12 May - the world record price per carat for any gemstone at auction and world record price for a fancy vivid blue diamond at auction.

The blue diamond ranks among the most important diamonds ever to be offered for sale by Sotheby's. It was cut from a 26.58 carat rough discovered in 2008 at Petra Diamonds' historic Cullinan diamond mine in South Africa, the world's most consistently reliable source of blue diamonds. Read more here-

http://www.miningmx.com/news/diamonds/160887.htm and http://in.reuters.com/article/lifestyleMolt/idINTRE54J3JK20090520

-De Beers taking 'serious look' at diamonds as investment. The drop in traditional demand for diamonds has De Beers taking a "serious look" at an alternative market for the stones--diamonds for investment, a company spokeswoman confirmed to National Jeweller.

De Beers spokeswoman Lynette Gould said over the last few months, a number of people both representatives of high-net-worth individuals and funds have approached De Beers expressing interest in investing in diamonds as an asset, likely due to the recent investment boom in commodities.

"These approaches," she said, "have caused us to have a serious look at this opportunity." Gould notes that while De Beers traditionally has not been interested in diamonds as an investment fearing that it would cause price volatility and speculation that could ruin the market for the stones as a luxury product the "changing business environment" has the diamond giant changing its tune. "Diamonds for investment could offer an, as yet untapped, further source of demand," Gould said.

Gould's response came after an article appeared on Friday in London's Financial Times, stating that De Beers has launched a "global campaign" to convince investors that diamonds are on par with gold as a safe haven for investment. Gould, however, stopped short of calling De Beers' current interest in diamonds as an investment a "campaign" on the same level as the enduring-value campaign it used to promote diamonds this past holiday season.

"It's just something we're looking into, very early days," she said. She also noted that De Beers' "core messages" around diamonds as the ultimate symbol of love and romance aren't changing. "Diamonds are always in fashion, like the little black dress of jewellery," she said. "They're elegant and timeless. These are foundations on which our industry is built and should always be front of mind." Read more here-http://www.nationaljewelernetwork.com/njn/content_display/diamonds/supply/e3ie1ce596d1213e2c2b674a103b3d509da and

http://www.ft.com/cms/s/0/3e4212f2-41b3-11de-bdb7-00144feabdc0.html

-Diamonds are an investor's best friend. Move over bonds and cash precious rocks, avant-garde art and collectible cars are now gaining favour as "alternative" investments for some of the world's richest high net worth investors. According to a London-based Datamonitor wealth investment analyst Susan Ellis, high net worth investors are taking advantage of uncertainty in global financial markets by investing in art and other tangibles.

"For the most defensive of investors there are still the safer investment options such as cash, deposits and government bonds," said Ellis. "However there is still plenty of concern about the safety of banks, with the fear that individuals' claims on investments may not be honored," she said. For high net worth individuals, investing in tangible assets such as art, gold bullion, jewelry and antiques and collectable cars is "the equivalent of putting money under the mattress". The trend is particularly prevalent now as certain tangible assets continue to have bargain prices attached to the items.

For example, the fine art market declined as much as 35 per cent this year. But as wealth investors see the increased attraction of collectable assets to safeguard their wealth, this is having a knock-on effect in the insurance industry which is witnessing climbing valuations. "In the past year we've insured more than [$2 million] to [$12 million-plus] fine art, jewelry and car collections than in the previous year," said Jamie Kearney, ultra-high net worth underwriting manager for Chubb Insurance. Read more here-http://www.financialstandard.com.au/news/view/25793/

-Golden Eye Diamond Heading for Auction. U.S. authorities in Akron, Ohio have received the green light from a federal judge to auction off one of the largest and finest diamonds ever unearthed, known as the Golden Eye Diamond. The 43.5 carat diamond, believed to be the world's largest, flawless, 'perfect-cut' Canary Yellow diamond, was seized several years ago by federal authorities during a money laundering sting in Ohio.

Federal prosecutors say that the diamond, which was confiscated from a man who tried to sell it to an undercover agent posing as a broker for a South American drug cartel, could be worth up to $20 million when brought up for auction. A date for the auction has not been announced yet.

Federal Judge John Adams said in his ruling this week that all proceeds from the auction will be going to the government. He also rejected ownership claims for the fine diamond by several parties, including the children of Paul Monea, who was the rock's previous owner and was convicted of money laundering.

The goldeneyediamond.com website, dedicated solely to the story of this diamond, claims the diamond, which weighed 124.5 carats in its uncut form, was discovered in 1871 in the Kimberley area of South Africa and is considered the diamond which ignited the modern diamond industry there. Read more here-

http://www.israelidiamond.co.il/english/News.aspx?boneId=918&objid=5058

-What's a '57 Ferrari worth? $12 million. 1957 Italian racing car sets a record for a public auction. The 250 Testa Rossa is one of only 22 ever made. Read more here-

http://money.cnn.com/2009/05/18/autos/ferrari_sale/index.htm

BANKUNITED THE LARGEST U.S. BANK FAILURE THIS YEAR-BANKING CRISIS CONTINUES

-BankUnited Financial Corp., the ailing Florida lender, was shut by federal regulators and its assets were sold to private-equity firms including WL Ross & Co. and Carlyle Group in the largest U.S. bank failure this year.

The group’s purchase of the bank, deemed “critically undercapitalized” by the Office of Thrift Supervision, was the “least costly” resolution, the Federal Deposit Insurance Corp. said today in a statement. The closing will cost the insurance fund $4.9 billion, pushing the total cost of 34 seizures so far this year to more than $10 billion.

BankUnited, based in Coral Gables with 86 branches on Florida’s southeast coast, will open tomorrow under an ownership group that includes Blackstone Group LP and Centerbridge Capital Partners LLC and will be led former North Fork Bancorp Chief Executive Officer John Kanas, 62, the FDIC said. Read more here-

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

-600 Banks Fail Stress Test. The Wall Street Journal has run its own version of the the Fed's stress test on 900 small and midsize institutions, and it claims they'll see losses of about $200 billion by the end of next year.

In such a scenario, at least 600 of the banks would see their capital levels shrink to a level that would be deemed unsafe by regulators. The biggest culprate? You guessed it, commercial real estate, which could contribute about $100 billion in losses. Continued home loan losses is next, at about $49 billion. Read more here-

http://www.businessinsider.com/small-banks-face-200-billion-in-coming-losses-2009-5

-Greenspan Says Banks Still Have a ‘Large’ Capital Requirement. Former Federal Reserve Chairman Alan Greenspan signaled that the financial crisis has yet to end even as borrowing costs tumble, warning that U.S. banks must raise “large” amounts of money.

“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said in an interview yesterday in Washington. He also said that “until the price of homes flattens out we still have a very serious potential mortgage crisis.”

Greenspan’s comments suggest he sees a bigger capital shortfall in the banking system than reflected in regulators’ stress tests on the 19 biggest U.S. lenders. Treasury Secretary Timothy Geithner told lawmakers yesterday that banks have issued more than $56 billion in new stock or debt since the tests found 10 firms needed to raise about $75 billion.

A lack of capital at banks may inhibit lending to consumers and businesses, tempering any economic recovery. The former Fed chief, who left the central bank in 2006, said that the continued slump in home prices is putting at risk millions of borrowers. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a25ocYh4V5vI&refer=worldwide

-Is the new love affair with bank shares wise? U.S. banks have been able to raise many billions of dollars in the past few weeks by selling shares to investors, but the jury is still out on whether this is the savviest of "smart money" or just plain dumb. For the past year, banks were hard pressed to squeeze even a dime out of investors amid worries of mounting credit losses, failures and even nationalization.

Fast forward to this year, when U.S. financial services companies sold more than $34 billion of common stock, according to Thomson Reuters data, including $26.2 billion in the 13 days since regulators announced their stress-test results for the largest banks. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE54K0B420090521

S&P EARNINGS DOWN 90 PERCENT

-While the stock market is up sharply since early March, the economy as well as corporate earnings continue to suffer. Today's chart helps provide some perspective as to the magnitude of the current economic decline.

Today's chart illustrates that 12-month, as-reported S&P 500 earnings have declined over 90% over the past 20 months (with over 90% of S&P 500 companies having reported for Q1 2009), making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative. Chartoftheday.com

Source: http://www.chartoftheday.com

RECESSION HITS THE U.S. TREASURY

-The magnitude of the recession was underscored by the latest numbers from the U.S. Treasury: last month’s individual income tax receipts dropped 44% and corporate tax revenue plunged 65% compared to April 2008. Alarming news, as April is historically the biggest collection month of the year and usually results in a sizable budget surplus for the month.

As Casey Research Chief Economist Bud Conrad correctly predicted back in January, the initial $1.2 trillion deficit for 2009 was grossly underestimated. The Congressional Budget Office estimate is not only riddled with low-ball expenditure figures and accounting trickery, it also failed to anticipate a precipitous collapse in tax revenues. Casey Charts

-Tax Revenues Tanking. While everyone else has been focused on the banks’ stress tests and how much government is spending to bail out troubled “too big to fails,” a disturbing trend on the other side of the equation is now emerging: how much (or rather, how little) the U.S. government is receiving in tax revenues.

After combing through the past 25 editions of the “Monthly Treasury Statement of Receipts and Outlays of the United States Government,” which is compiled and published by the Treasury Department’s Financial Management Service, we created the following chart. Read more here-http://news.goldseek.com/GoldSeek/1242671362.php

REAL ESTATE-FORECLOSURES-MORTGAGES-RENTS

-Housing Bubble Has Almost Completely Burst! But No Recovery In Sight. Here are the conclusions from Deutsche Bank Securitization Head Karen Weaver's latest look at the housing market. Read more here-http://www.businessinsider.com/henry-blodget-housing-bubble-almost-over-but-no-recovery-in-sight-2009-5

The "bubble" has almost completely burst.  In many markets, prices are now almost back to 2000-2003 levels on an affordability basis.  However...

Rising unemployment, rising delinquencies, tight credit, and over-supply will keep pressure on house prices for a good long while.  Prices will probably significantly overshoot fair value on the downside and they'll stay down.  This would be in keeping with the aftermath of every other bubble we've ever studied.

Nationally, prices will likely fall another 17%, for a peak-to-trough decline of 40%.

There's no recovery in sight.

-New York City Real Estate Prices To Fall At Least Another 35%. Read more here-http://www.businessinsider.com/henry-blodget-new-york-city-real-estate-prices-to-fall-at-least-another-35-2009-5

-Hamptons Homes Decline Most Since Realtors Kept Records in 1982. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid=apbLGZzGvHkQ&refer=home

-U.S. Housing Starts Drop on Apartments, Condominiums. Builders broke ground on the fewest homes on record in April as a plunge in work on condominiums and apartment buildings overwhelmed the second straight gain in starts on single-family properties.

Housing starts slid 13 percent to an annual rate of 458,000, a lower level than forecast, Commerce Department figures showed today in Washington. The drop was led by a 46 percent tumble in multifamily starts, a category that tends to be more volatile.

The slump in homebuilding has brought the supply of new properties below the rate that new households are being created, offering prospects of a recovery in the second half of 2009, analysts said. Surging unemployment and the continuing credit crunch mean the recovery is likely to be weak, they added. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid=asWLID20AM08&refer=home

-Southern California Home Prices Fall on Foreclosures. Southern California house and condominium prices fell 36 percent in April from a year earlier as foreclosures accounted for more than half of all sales, MDA DataQuick said. The median price dropped to $247,000 from $385,000 a year earlier and is now 51 percent below the peak reached two years ago, the San Diego-based research company said today in a statement. Sales rose 31 percent last month from a year ago.

“Whatever price stability is out there is tenuous at best,” said Andrew LePage, an analyst with MDA DataQuick. “It’s going to come down to how much worse job losses and foreclosures are going to get for the balance of the year.”

Sales of foreclosed homes accounted for 54 percent of all transactions involving previously owned properties in April. That marks the seventh consecutive month such properties were more than half of resales, MDA DataQuick said. The median price was down 1.2 percent from March, the research company said. A total of 20,514 new and existing homes sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, up from 15,615 a year earlier, the company said.

Absentee buyers, including investors requesting that their property-tax bills be sent to a different address, bought almost 19 percent of Southern California homes purchased in April. That’s up from 17 percent a year ago and compares with a 15 percent monthly average since 2000, MDA DataQuick said. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&refer=top_news&sid=aTgmas5Ypd58

-Rich Default on Luxury Homes Like Subprime Victims. Chuck Dayton put down a quarter of the $950,000 purchase price when he bought his house in Newport Beach, California, in 2004. He was making $500,000 a year with his drywall company and he expected home values to keep rising.

Then the mortgage market collapsed, new construction stopped and builders no longer needed his services. Dayton, 43, went into default four months ago because he couldn’t afford payments on the three-bedroom home, located within a block of the Pacific Ocean. He hopes his lender will agree to sell the seven-year-old house for less than he owes to avoid a foreclosure.

“It’s just wait and see right now,” Dayton said. Borrowers such as Dayton, whose 2004 compensation was almost 10 times the median U.S. household income, are becoming trapped by the same issue facing the poorest subprime homeowners: falling home prices erase equity and make it impossible to sell or refinance without losing money.

The number of U.S. homes valued at more than $729,750, the jumbo-loan limit in the most affluent areas, entering the foreclosure process jumped 127 percent during the first 10 weeks of this year from the same period of 2008, data compiled by RealtyTrac Inc. of Irvine, California, show. The rate rose 72 percent for homes valued at less than $417,000 and 78 percent for all homes, RealtyTrac said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&refer=top_news&sid=a5750zUcnEEs

-UK repossessions up 50% in a year. The number of homes repossessed in the UK rose to 12,800 in the first three months of the year, the Council of Mortgage Lenders (CML) has said.

This was up 23% from the 10,400 in the previous three months and 50% up on the 8,500 in the same period last year. The CML has predicted that 75,000 homes will be repossessed in 2009, almost double the 40,000 of last year. Read and watch more here-http://news.bbc.co.uk/2/hi/business/8051510.stm

-Hussman: Mountain of Mortgage Resets Still Ahead. Read more here-http://moneynews.newsmax.com/economy/mortgage_resets_ahead/2009/05/19/215818.html

-Fannie and Freddie in 'critical' condition. Regulator says companies still suffer from severe operational and financial weaknesses. Recruiting executives also tough. Read more here-

http://money.cnn.com/2009/05/18/news/economy/fannie_freddie_critical/index.htm

-Rents Crashing in London to 1991 Prices Le Gavroche Shows Gone. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6DMLSwbH.aQ

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The Goldbugg Report - May 26, 2009
Posted by Worldwide Precious Metals on Tuesday, May 26, 2009

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