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The Goldbugg Report – June 9, 2009

June 9, 2009

WORLD FINANCIAL REPORT ON RADIO JUNE 5 2009 SHOW

-How much gold should be in your portfolio? Financial advisers often suggest maintaining at least some part of one’s investment portfolio in gold as a diversifier, stabilizer and inflation hedge but how much makes sense?

-World Silver Survey 2009 Commentary. It is important to stress that investment demand is now dominating silver.

-Precious Metals ETFs Lack Proper Insurance.

June 5th 2009

The Week in Review

Another extremely volatile week comes to a close:

GM filed for bankruptcy and announced that they would be selling their Hummer division to Chinese owned heavy machinery company Tengzhong, who have aspirations of becoming a car maker.

New and existing home sale numbers were up (though Tim Geithner hasn’t seen the benefit of them, since he’s been unable to sell his own home). Despite the figures, as mortgage rates begin to climb, mortgage applications have been declining. If the rates continue their rise, it could forestall the recovery of the housing industry.

Initial jobless claims were down for the third week in a row, but the week covered the Memorial Day holiday, which could have had an effect on the numbers. Continuing jobless claims fell for the first time since January 3rd, and this was the first time in almost 17 weeks that the number did not set a record. Despite good news on this front, unit labor costs, which are used as a gauge of inflation and profit pressure, rose 3 % in the first quarter, which was more than expected. Figures released Friday show unemployment at 9.4%. Job losses came in at 345,000, less than the 502,000 that had been forecast. March and April’s job losses were revised down to show smaller declines as well. These numbers make absolutely no sense when balanced against the 9.4% unemployment figure, and just stand out as an example that the steady stream of numbers being released by the government cannot be taken at face value.

The SEC charged Countrywide’s ex-CEO with insider trading, and he is most likely only the first target. Further shake ups in boardrooms across the business world could lead to further uncertainty in the stock market.

Goldman Sachs raised its forecast on oil to 85 dollars a barrel from 65 dollars for the end of the year and withdrew its prediction that prices will dip prior to a rally. US oil inventories showed a 6.2 million barrel increase, and overall petroleum inventories rose much more than expected.

In Europe, the European Central Bank said it expected a much sharper recession this year in the euro zone than earlier forecast and stated that it will keep rates unchanged for the time being. The ECB president Jean-Claude Trichet and German Chancellor Angela Merkel are beginning to argue publicly over monetary policy. The Bank of England also announced they will be keeping rates at .5 percent, which seemed to be lost in news of the political shakeup happening over abuse of Parliament expense accounts as Parliament members begin to resign their positions.

The dollar index fell to its lowest level since mid-December earlier in the week before clawing its way up to a minor degree after our good friend Mr. Bernanke spoke for over an hour on Wednesday. Thursday saw additional weakness.

Gold, Silver, Platinum and Palladium continued to rise again this week over continuing concerns of the weakening dollar and uncertainty in the stock market.

Friday to Friday Close

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

Volatility should be expected to continue as tensions look poised to continue to rise among Europe’s governments over monetary policy and political scandals. The confidence in governments across the globe is being shaken to the core, which could lead to further declines in both currencies and the stock market. 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

-Today’s chart presents the median single-family home price divided by the price of one ounce of gold. This results in the home-gold ratio or the cost of the median single-family home in ounces of gold. For example, it currently takes 192 ounces of gold to buy the median single-family home.

This is considerably less that the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down 68% from its 2001 peak and remains within the confines of its four-year accelerated downtrend. Chartoftheday.com-Read more here-http://www.chartoftheday.com/20090529.htm?T

Source: www.chartoftheday.com

-Either Stocks Will Fall 37% Or Gold Will Rally 60%. Read more here-http://www.kitco.com/ind/Summers/jun012009.html

According to Dr Marc Faber, editor of the Gloom Boom Doom Report, gold and stocks move in distinctive long-term trends. Over the last 110 years, these trends has staged six major phases:

1900-1929: stocks outperform gold
1929-1932: gold outperforms stocks
1932-1966: stocks outperform gold
1966-1980: gold outperforms stocks
1980-2000: stocks outperform gold
2000-???: gold outperforms stocks

Overall, the median stock to gold ratio for the last 106 years is 5.4. In other words, throughout the 20th century, on average 5.4 ounces of gold would buy one unit of the DJIA. Today, gold trades at $980. The DJIA trades at 8,500. This puts the ratio of gold to stocks at 8.6. Thus, the DJIA needs to fall to 5,292 (a 37% drop from today’s level), gold needs to rally to $1,574 (a 60% rally from today’s level), or some combination of the two, in order for gold to be appropriately priced relative to stocks again.

-Following their government, Chinese catching gold fever. Read more here-http://www.gata.org/node/7455

-Gold and base metals predicted to carry on rising but beware the Kondratieff Wave! Ian Gordon of Bolder Investment Partners is very much a Kondratieff Wave theorist and believes the 4th Kondratieff winter will decimate stocks and last to 2020.

In his view the Kondratieff Wave is on a 60 year cycle with the last wave downturn ending in 1949 and the new one staring now, with the recent stock market upwards correction just that and drew a parallel with the 1932 upturn which suckered people back into the markets only for the stock indices to crash far further subsequently.

Stock prices fell 90% in the Great Depression and this time around it could be even worse and he felt that the housing price crash is also still far from over. "Debt is what brings the system down" he said and U.S. debt he reckoned was closing in on 400% of GDP a far worse situation than in the 1930s.

A commodity price crash would, he felt, be mitigated by the anticipated decline in the value of the dollar. But, for the gold bugs he did offer some cheer as this is the money of last resort the most liquid of assets in a depression. People trust gold when all else fails them. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=84230&sn;=Detail

-A significant quantity of gold, silver, and other precious metals is unaccounted for at the Royal Canadian Mint. External auditors are investigating a discrepancy between the mint’s 2008 financial accounting of its precious metals holdings and the physical stockpile at the plant on Sussex Drive in Ottawa. The mystery raises possibilities from sloppy bookkeeping to a gold heist. Read more here-http://www.gata.org/node/7470 or http://www.ottawacitizen.com/Business/Mint+account+missing+gold/1656084/story.html

-Changes to Indian gold market could bode well for demand. Bringing more uniformity to Indian gold prices could boost local demand as it should bring transparency to a market in which there have historically been bouts of uncertainty over regional price variations and also in which the issues of purity and weight have been issues in the past. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=84222&sn;=Detail or http://www.gata.org/node/7460

-How much gold should be in your portfolio? Financial advisers often suggest maintaining at least some part of one’s investment portfolio in gold as a diversifier, stabilizer and inflation hedge but how much makes sense? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=84224&sn;=Detail

-The privately owned hedge fund sponsor Paulson & Co. added over $3.7 billion in new gold positions during the first quarter of 2009, increasing its total investment to $4.3 billion. About 46% of the equity portfolio is now allocated towards gold and gold stocks. Not familiar with Paulson & Company, or founder John Paulson? You should be, and here’s why-

http://caseyresearch.com/displayCcs.php?e=true

SILVER

-White metal looks to outpace gold again, thanks to its industrial uses. Silver’s use in a range of industries from photography to electronics to medical applications, as well as its attraction as a store of wealth when inflation heats up, could keep propelling its outperformance, analysts say.

Carlos Sanchez, an analyst at New York-based metals consultancy CPM Group, said silver could surpass last year’s 28-year high of $20.92 in the second half of this year if investors remain optimistic about an economic recovery and the U.S. dollar keeps falling. Since silver, like most other commodities, is denominated in dollars, a drop in the greenback drives prices of the commodity higher.

"It’s definitely possible that prices pass that level to above $20," said Sanchez. "You have stock markets rising, you have industrial demand expected to pick up later this year, and investment demand will continue rise." An advance to above $20.92 an ounce would represent a more than 30% gain from current levels. Read more here-http://www.marketwatch.com/story/story/print?guid=BD3D53E9-7F12-4644-BFE5-9348C5B91BFB

-World Silver Survey 2009 Commentary. It is important to stress that investment demand is now dominating silver. Any fall off in that demand will undermine the silver price. A continuation or rise in that demand will send the silver price to much higher levels. As the economic recovery takes hold other demands for silver [which have fallen only slightly in this recession] are expected to rise healthily.

As silver has shown itself in India to be the poor man’s gold now, we expect that source of demand to keep on rising. This bodes well for 2009, so much so that we believe that silver will rise to its historic highs $25 plus by the end of 2009. Julian D. W. Phillips-Read more here-http://news.silverseek.com/SilverSeek/1243863210.php

-Where Is Silver Heading? Those who buy silver now and have a 10-20 year horizon will not be disappointed. Roland Watson-Read more here-

http://news.silverseek.com/SilverSeek/1243831522.php and http://news.silverseek.com/SilverSeek/1244123828.php

-Ted Butler silver commentary. The spirited price rally in silver and gold carried further in the past week. In silver, the rally in May was the best in 22 years, and the price has reached its highest level in ten months, as foretold by the nice market structure set up back in April. From the price depths of last fall, to the recent highs, silver has climbed 75%.

Relative to gold, silver is at its best price ratio since September. This means that anyone who did buy silver, instead of gold over the past ten months has had a better return. Read more here-http://news.silverseek.com/TedButler/1243963795.php

-David Morgan, silver in the long term. Read more here-http://news.silverseek.com/SilverInvestor/1243604997.php

-Peter Cooper, silver shines and will continue to outperform gold. Read more here-http://news.silverseek.com/SilverSeek/1243717428.php

-Silver a far better investment than gold in 2009. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=84321&sn;=Detail

-Silver’s new boost comes from rising solar industry. Read more here-http://www.commodityonline.com/news/Silver%E2%80%99s-new-boost-comes-from-rising-solar-industry-18265-3-1.html

-Silver nanoparticles aid clotting therapy. Scientists in India report the discovery of a potential alternative to aspirin and other anti-platelet agents used to prevent blood clots. The researchers said they’ve found the use of silver nanoparticles might prevent blood clots in coronary artery disease, heart attack and stroke patients. Read more here-

http://www.upi.com/Science_News/2009/06/01/Silver-nanoparticles-aid-clotting-therapy/UPI-74171243872951/

-The new gold standard in health is silver. A British scientist says the use of silver in healthcare and hygiene is increasing, frequently because of a shortage of new antibiotics. A research review conducted by Professor Valerie Edwards-Jones of Manchester Metropolitan University found advances in technology, particularly nano-technology, are allowing scientists to increasingly apply silver’s benefits in more areas.

"In simple terms, silver ions are highly effective and eliminate bacteria rapidly," said Edwards-Jones. "Silver ions enter the bacterial cell where they are able to deactivate important functions inside. This helps to shut down the bacteria’s ability to reproduce which, depending on the type of bacteria, prevents the spread of infection or the development of odor."

She said one of silver’s most important benefits is its low allergenic properties. Surgeons using silver treated bandages in wound care, including treatment of severe burns, do so because of the low incidence of irritation and allergy that patients often suffer, she said.

Edwards-Jones also said for the first time ever in Europe, silver is being used in a new deodorant. The silver ions neutralize the bacteria that cause body odor, stopping it before it begins.

The research review is reported in the journal Letters of Applied Microbiology. Read more here-http://www.upi.com/Science_News/2009/06/01/The-new-gold-standard-in-health-is-silver/UPI-54251243871372/

-Precious Metals ETFs Lack Proper Insurance. Read more here-http://seekingalpha.com/article/140839-precious-metals-etfs-lack-proper-insurance

DEFINITIONS-QUOTES-QUICK HITS

-Double Dip Recession. When gross domestic product (GDP) growth slides back to negative after a quarter or two of positive growth. A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession.

The causes for a double-dip recession vary but often include a slowdown in the demand for goods and services because of layoffs and spending cutbacks from the previous downturn. A double-dip (or even triple-dip) is a worst-case scenario. Fear that the economy will move back into a deeper and longer recession makes recovery even more difficult. Read more here-

http://www.investopedia.com/terms/d/doublediprecession.asp

-U.S. economy at risk of double-dip recession. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE54P2ZC20090526

-Roubini says U.S. economy may dip again next year. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54R1U120090528

-"The American people will never knowingly adopt socialism. But under the name of ‘liberalism’ they will adopt every fragment of the socialist program until one day America will be a socialist nation without knowing how it happened. I no longer need to run as a Presidential candidate for the Socialist Party. The Democrat Party has adopted our platform. Norman Thomas, six-time U.S. presidential candidate for the Socialist Party, 1944.

-"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium." Murray N. Rothbard-Bio here-http://en.wikipedia.org/wiki/Murray_Rothbard

-Insurance giant bets on gold for first time in 152 years. Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer by 2008 sales, has bought gold for the first time the company’s 152-year history to hedge against further asset declines. "Gold just seems to make sense. It’s a store of value," Chief Executive Officer Edward Zore said in an interview following his comments at a conference hosted by Standard & Poor’s in Brooklyn.

"In the Depression, gold did very, very well." Northwestern Mutual has accumulated about $400 million in gold, and Zore said the price could double or even rise fivefold if the economy continues to weaken. Gold gained 10 percent last month, the most since November. The commodity has more than tripled since 2000, rising for eight straight years. "The downside risk is limited but the upside is large," Zore said.

"We have stocks in our portfolio that lost 95 percent." Gold "is not going down to $90." Policyholder-owned Northwestern Mutual, based in Milwaukee, ranks third by 2008 life insurance premiums according to data from the National Association of Insurance Commissioners. The data excludes annuities. Read more here-http://www.gata.org/node/7464 or http://www.bloomberg.com/apps/news?pid=email_en&sid;=ajf0L9wTPq6Y

-U.S. Bubble Collapse to Be Worse Than Japan’s, CLSA’s Wood Says. The U.S. is facing a deflationary collapse more severe than the crash that hobbled Japan’s economy in the 1990s, leaving gold as the only defensive play for investors, according to CLSA Ltd.’s Christopher Wood.

The housing recession in the U.S. led to a crisis in the banking system as lenders became saddled with illiquid mortgage assets, souring the securitization industry that helped drive credit growth in recent years. The nation’s retail sales fell 10.5 percent in December as consumers became more pessimistic and scaled back purchases.

“The collapse of securitization is a much more deflationary situation in the U.S. than anything seen in Japan when the bubble collapsed in the early 1990s,” Wood, Institutional Investor’s top-ranked Asia strategist, said at a conference in Tokyo sponsored by CLSA. “What we need in the future is a more fundamentally disciplined system, even at the cost of higher levels of growth.”

Gold may be the safest haven for investors as policy makers accelerate responses to the crisis, devaluing currencies versus hard assets such as gold in the process, said Wood. Gold is likely to more than quadruple from the current level of $986 per ounce currently to $3,500 in 2010, he said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aU6QD7.BBkO8

-Black Swan Fund Makes a Big Bet on Inflation. A hedge fund firm that reaped huge rewards betting against the market last year is about to open a fund premised on another wager: that the massive stimulus efforts of global governments will lead to hyperinflation.

The firm, Universa Investments L.P., is known for its ties to gloomy investor Nassim Nicholas Taleb, author of the 2007 bestseller "The Black Swan," which describes the impact of extreme events on the world and financial markets. Funds run by Universa, which is managed and owned by Mr. Taleb’s long-time collaborator Mark Spitznagel, last year gained more than 100% thanks to its bearish bets. Read more here-http://online.wsj.com/article/SB124380234786770027.html

-The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said. Prices may increase at rates “close to” Zimbabwe’s gains, Faber said in an interview with Bloomberg Television in Hong Kong. Zimbabwe’s inflation rate reached 231 million percent in July, the last annual rate published by the statistics office.

“I am 100 percent sure that the U.S. will go into hyperinflation,” Faber said. “The problem with government debt growing so much is that when the time will come and the Fed should increase interest rates, they will be very reluctant to do so and so inflation will start to accelerate.” Read more here-

http://www.bloomberg.com/apps/news?pid=20603037&sid;=avgZDYM6mTFA&refer;=home

-You Should Be Worried About Inflation, Not Deflation, Says Paul Kasriel. Read more here-http://finance.yahoo.com/techticker/article/257623/You-Should-Be-Worried-About-Inflation,-Not-Deflation,-Says-Paul-Kasriel

-Bill Gross, founder of Pacific Investment Management Co., advised holders of U.S. dollars to diversify before central banks and sovereign wealth funds ultimately do the same amid concern about surging deficits. The U.S.’s “fortune-producing capabilities seem to be declining, which might suggest that its relative standard of living is doing so as well,” Gross wrote in his June investment outlook posted today on the Newport Beach, California-based firm’s Web site.

“If so, the implications are serious.” Gross, manager of the world’s biggest bond fund, said on May 21 that the U.S. will “eventually” lose its AAA credit rating after Standard & Poor’s lowered its outlook on the U.K.’s AAA to “negative” from “stable” amid an escalating ratio of debt-to-gross domestic product.

While U.S. marketable debt is at about 45 percent of GDP, annual deficits of 10 percent will push the amount to 100 percent within five years, a level that rating companies and markets view as a “point of no return,” he said. Government spending will push the budget deficit to $1.75 trillion in the year ending Sept. 30, according to the Congressional Budget Office’s forecast. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aKNFgoTAf39s

-For those who placed bets that the gold-silver ratio had risen too far have been well rewarded. An ounce of gold now buys about 61.5 ounces of silver, the lowest ratio since September. That compares with almost 84.4 in October, the highest since March 1995. That reflects their respective spot price performances, with gold up 11% so far this year vs. 37% for silver. Casey Daily Resource

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

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

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

-Silver has benefited from its dual nature. “The $15 level is a break-out area for silver,” said George Gero, of RBC Capital Markets. “Silver is not a pure precious metal. It’s also an industrial. So what helps silver is the fact that there could be a recovery.” Casey Daily Resource

-I think we’re ready for a real increase in the price of gold, which is why I am looking at more modest targets, such as $1,300 to $1,400, happening fairly quickly, probably bouncing plus or minus $200 or $300, around that level, but it’s a real price increase without a corresponding catastrophic collapse in the U.S. dollar or hyperinflation descending upon us. If it breaches $1,000, I think it’ll very quickly go to $1,300-$1,500 and establish that as a new base. John Kaiser-Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page31?oid=84082&sn;=Detail or http://www.commodityonline.com/news/Gold-price-to-touch-$1-400-in-six-months-18253-3-1.html

-”The market is certainly overdue for a downside correction,” Tom Pawlicki, an analyst at MF Global in Chicago, said today in a report. “Longer-term, we still see the market as being supported, with an advance above $1,000 an ounce possible over the next few weeks. Support will come from weakness in the dollar and from ongoing inflows of investment to commodities.” Bloomberg

-”Gold has traditionally done well during periods of inflation and I believe we are entering a period of hyperinflation,” James Turk, the founder of GoldMoney.com, said today at a conference in London. “We are going to see clear signs of inflation by the end of the year. The Federal Reserve is trying to destroy the dollar to save the economy.” Bloomberg

-Richard Davis, co-manager of the £1.6bn BlackRock Gold & General fund which has returned more than 685pc in the past decade said investors are the key force behind what he sees as an ongoing long-term gold bull market. Unlike those buying for jewellery purposes about two-thirds of annual global demand investors are less price sensitive.

The supply of gold, meanwhile, is so inelastic that "even if gold went to $2,000 per ounce for 10 years" it would not have a big impact on the amount of new gold mined. "We probably passed ‘peak gold’ back in 2000-01," Mr Davis said, meaning key mines that are getting older in places such as South Africa are not being replaced by new ones as resource rich.

Telegraph.co.uk

-Daniel Sacks, manager of the £50m Investec Global Fund, said professional and retail investors typically still have a relatively small percentage of their wealth in gold, giving potential for more money to go that way, encouraged by the fact that, on an inflation-adjusted basis, gold is well off its 1980 price of $2,500 per ounce.

"Gold appears to be benefiting both from being the traditional hedge for inflation hawks, some of whom are now beginning to worry about the risk of hyperinflation, and from the mistrust of some investors towards cash assets and government obligations. It would probably only require a minority of investors to believe that they need to continue to allocate more towards gold to have a significant price impact." Telegraph.co.uk

-Let me start with gold. It remains an essential insurance element in portfolios today as a hedge against inflation, currency devaluation and general chaos. I look for higher prices over the next few years. The US dollar’s position as the sole reserve currency is being called into question as never before and the Chinese are putting their heads above the parapet for the first time.

They quietly doubled their gold holding between 2003 and 2007 and I believe they have continued to build them since then. It is the same for the Russians and must only be a matter of time before other Asians and Middle East governments do the same. William Thompson Chairman Private Capital Ltd

-Chinese students laugh at Geithner’s assurances that China’s huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency. Read more here-

http://www.gata.org/node/7461

-Schwarzenegger says day of reckoning for California is here. The state wallet is empty. The bank closed. Credit has dried up, Gov. Arnold Schwarzenegger told lawmakers in a special Tuesday morning address at the Capitol.

“California’s day of reckoning is here,” he said. With no action, the state could run out of cash in 14 days. Three months after the state budget was approved, California faces a $24 billion deficit. Schwarzenegger has already proposed massive cuts to education, health care and prisons. Now he’s looking for structural reform to make government more efficient and stretch taxpayer dollars. Read more here-http://www.bizjournals.com/sacramento/stories/2009/06/01/daily29.html?t=printable

-The 10 largest U.S. bankruptcies. From Lehman to Texaco, the mighty have fallen, taking down billions and billions with them. Read more here-

http://money.cnn.com/galleries/2009/fortune/0905/gallery.largest_bankruptcies.fortune/index.html

-GM Files Bankruptcy to Spin Off More Competitive Firm. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aA1LQFDhqkJ0&refer;=canada and

http://money.cnn.com/2009/06/01/news/companies/gm_bankruptcy/index.htm

-Firing Wagoner Became Necessary for GM CEO in Denial. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&refer;=home&sid;=aPSsqtu_9M0c

-There goes another $30 billion. With GM set to receive another round of federal financing in its bankruptcy, the auto bailout is quickly becoming one the largest aspects of the TARP program. Read more here-http://money.cnn.com/2009/06/01/news/economy/gm_auto_bailout/index.htm

-Detroit’s Woes Wound an Army of Suppliers. Read more here-http://www.nytimes.com/2009/06/03/business/03suppliers.html

-GM, Citigroup Replaced in Dow by Cisco, Travelers. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aKJur2r3zEnc

-World’s cheapest car coming to US. India’s Tata Motors hopes to offer the Nano, which costs $2,300, to Americans within two years. Read more here-

http://money.cnn.com/2009/06/04/news/international/tata_cheapest_car.reut/index.htm?postversion=2009060411

-The recession is driving the safety net of government benefits to a historic high, as one of every six dollars of Americans’ income is now coming in the form of a federal or state check or voucher. Benefits, such as Social Security, food stamps, unemployment insurance and health care, accounted for 16.2% of personal income in the first quarter of 2009, the Bureau of Economic Analysis reports.

That’s the highest percentage since the government began compiling records in 1929. In all, government spending on benefits will top $2 trillion in 2009 an average of $17,000 provided to each U.S. household, federal data show. Benefits rose at a 19% annual rate in the first quarter compared to the last three months of 2008. Read more here-http://www.usatoday.com/news/washington/2009-06-03-benefits_N.htm

-Manipulation: How The Stock Market Really Works. Read more here-http://www.baltimorechronicle.com/2009/052909Lendman.shtml

-Ireland set to go bust, claims economic historian. A dire warning that the Republic is a prime candidate to go bust has come from one of the world’s leading economic historians. "The idea that countries don’t go bust is a joke," said Niall Ferguson, Harvard professor and author of The Ascent of Money.

"The debt trap may be about to spring" he said, "for countries that have created large stimulus packages in order to stimulate their economies." His chosen prime candidate to go bust is "Ireland, followed by Italy and Belgium, and UK is not too far behind".

Argentina is top of his list of shaky countries but "the argument that it can’t happen in major western economies is nonsense". Professor Ferguson believes the economists are ill qualified to analyse the current economic situation since they lack the overview of historians such as himself. Read more here-

http://www.independent.co.uk/news/world/europe/ireland-set-to-go-bust-claims-economic-historian-1692673.html

-Obama Calls for New Beginning Between U.S., Muslims. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a9GyYP6sbSzY

-Ahmadinejad says Holocaust a ‘big deception.’ Read more here-http://ph.news.yahoo.com/afp/20090603/twl-iran-vote-ahmadinejad-holocaust-575b600.html

-Al-Qaeda chief Osama bin Laden criticized President Barack Obama’s stance on the Muslim world in an audiotape released as the U.S. leader began a Middle East tour with a visit to Saudi Arabia, Al Jazeera television said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=awo74Xb5DpEA

-Al Qaeda eyes bio attack from Mexico. Read more here-http://www.washingtontimes.com/news/2009/jun/03/al-qaeda-eyes-bio-attack-via-mexico-border/print/

-U.S. Accidentally Releases List of Nuclear Sites. Read more here-http://www.nytimes.com/2009/06/03/us/03nuke.html

-Flu Is No Typical Pandemic; WHO Tries to Reassure. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aT9sIzRoUnNo

-Swine Flu ‘Overwhelmed’ U.S. Health-Care System, Report Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ah5TJ82PZ_T0

-The food industry’s newest smell test. Manufacturers are experimenting with aroma infusions that can trick our brains into thinking we are tasting certain flavours. Read more here-

http://money.cnn.com/2009/05/29/news/companies/smell_test.fortune/index.htm

-The risk of El Nino weather developing this year has increased, Australia’s Bureau of Meteorology said, raising the chance of drought in Australia and parts of Asia, and potentially curbing agricultural output. The odds of El Nino in 2009 are now likely to be greater than 50 percent, more than double the normal risk in any year, the bureau said today in an e-mailed statement.

“If recent trends in Pacific climate patterns were to be maintained, an El Nino event would be established by mid- winter,” David Jones, head of climate analysis at the bureau’s National Climate Center, said in the statement. Mid-winter is July in the southern hemisphere. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ax5gZU.7LS_0 or

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

-New Solar Cycle Prediction. Read more here-http://science.nasa.gov/headlines/y2009/29may_noaaprediction.htm

-Colorado State University today cut its hurricane forecast for the 2009 Atlantic season to five, from a prediction of six in April. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=alk9jbwDYaYo

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

-Rio Tinto Group, the third-largest mining company, is considering a plan to raise as much as $15 billion in a stock sale after rejecting an investment from Aluminium Corp. of China, two people involved in the talks said. Rio Tinto owns the Argyle mine that produces 90 percent of the worlds pink diamonds. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=al9VS7cGXGeQ

-The story of the Hope diamond. Harry Winston first displayed the Hope Diamond in his Fifth Avenue salon in New York. After putting it on display at various charity shows, he sent it by registered mail in a plain brown wrap, to the Smithsonian Institution in 1958. The stamps cost him $145.00, $2.44 postage and the rest for insurance of $1,000,000. It is now on display at the Smithsonian Institute in Washington. Read more here-http://en.wikipedia.org/wiki/Hope_Diamond

-More Big Blue Diamonds Up For Auction. At auction over the past six months blue diamonds have been hot. SInce the record-setting sale of the Wittelsbach diamond, more blue diamonds have been seeing strong results on the auction block. Christie’s New York Jewels Sale on June 11 will include four blue diamonds. Natural blue diamonds are among the rarest of colored diamonds, getting their blue shading from the introduction of boron into the crystal structure of the stone during its formation.

Blue diamonds including the famous Hope diamond belong to the extremely rare Type IIb category of diamonds and are semi-conductors of electricity, the only diamonds with that characteristic. The Christie’s sale will offer a superb fancy intense blue pear-shaped internally flawless diamond of 6.29 carats estimated at $3.3-5.5 million and a fancy dark gray-blue rectangular-cut diamond ring, SI2 clarity, of 3.28 carats estimated at $250,000-350,000.

The showstopper is a diamond pendant necklace that puts two fancy intense blue pear-shaped rose-cut diamonds of 5.01 and 2.03 carats on either side of a fancy intense pink hexagonal-cut diamond of 3.01 carats on a platinum chain. The price hasn’t been listed for the piece but it should be the top lot in the auction. Read more here-

http://www.luxist.com/2009/06/03/more-big-blue-diamonds-up-for-auction/

-Christies London Vintage Auction. Among the jewelry is an Art Deco colored diamond and onyx pendant, circa 1925, containing a 44.14 carat fancy yellow circular-cut diamond, estimated at: £200,000-£250,000 ($330,260-$ 412,825). Read more here-http://www.idexonline.com/portal_FullNews.asp?id=32448

-Rio Tinto’s Pink Diamonds Play Tribute to Grand Passions & Great Loves. Rio Tinto’s 2009 Argyle Pink Diamond Tender is set to celebrate the 25th anniversary of its iconic offering of pink diamonds with an exceptional collection, including four outstanding heart-shaped gems. Suitably titled "Grand Passions," this year’s tender collection comprises 43 of the rarest and the best pink diamonds from Rio Tinto’s Argyle Diamond Mine in Western Australia. With around 10 years of production remaining for the Argyle Diamond Mine, these rare pink diamonds will be keenly contested for by investors, collectors and diamond experts from around the world.

Josephine Archer, business manager for Argyle Pink Diamonds, commenting on the 2009 collection, said, “the pink diamonds selected for this year’s tender are a fitting tribute to the artistry and passion of all those who worked to bring them to the marketplace. These diamonds are for appreciators of the truly exceptional, and we are delighted to be showcasing them to the world.”

Included in this year’s collection is a magnificent 2.61-carat, intense pink, heart-shaped diamond named Argyle AmourTM. The Argyle AmourTM is the most valuable heart-shaped pink diamond ever produced from the Argyle mine. Exuding passion, romance and warmth, this extraordinary diamond captures all that is Amour. The two other “hero” stones set to captivate bidders are the Argyle ShalimarTM diamond, a 1.25-carat, purplish-pink round diamond named after the exotic garden sanctuary built by Indian emperor Jahangir for his beloved wife, and, in keeping with the theme of legendary passions, the Argyle ScarlettTM diamond, a 1.10-carat red oval diamond.

According to Jean-Marc Lieberherr, general manager for sales and marketing of all diamonds from Rio Tinto’s diamond mines, “excitement around this tender collection is understandable. The rarity of Argyle pink diamonds has created a connoisseurship for them, and there is a growing recognition that the earth will not produce pink diamonds for that much longer.”

This will be the first year that the Argyle Pink Diamond Tender will be presented in Mumbai. Also for the first time, Argyle Pink Diamonds Select Ateliers in London, Sydney and Perth will showcase these rare diamonds to their respective clients at in-store preview events. Tender viewings will held be in Mumbai, from August 6 to 10, Perth, from September 1 to 11, and Hong Kong, from September 19 to 27. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=26551 or http://www.idexonline.com/portal_FullNews.asp?id=32447

OIL

-Goldman Raises Year-End Crude Forecast by 31% to $85. Goldman Sachs Group Inc. raised its forecast for U.S. benchmark oil by 31 percent to $85 a barrel for the end of 2009 and predicted further gains next year as demand recovers and supplies shrink.

“As the financial crisis eases, an energy shortage lies ahead,” Goldman analysts Jeffrey Currie in London and David Greely in New York said in a report e-mailed today. The bank set a 12-month price target of $90 a barrel for West Texas Intermediate crude, up from $70, and introduced a forecast of $95 for the end of 2010. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=a1Ev4HxCKXRI

-Oil to Reach $70-75 by Year End, OPEC’s El-Badri Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a_Z3wakEALrU or http://www.reuters.com/article/GlobalEnergy09/idUSTRE5513BW20090602

-OPEC’s Oil Output Rose 1.5% in May, Survey Indicates. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a7.8kUhvVvXk

-JPMorgan Hires Supertanker for Storage, Brokers Say. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ar.MDg1.RGBg

U.S GOVERNMENT OWES 63.8 TRILLION

-U.S. Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows. The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.

That’s the biggest leap in the long-term burden on taxpayers since a Medicare prescription drug benefit was added in 2003. The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That’s quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined.

"We have a huge implicit mortgage on every household in America except, unlike a real mortgage, it’s not backed up by a house," says David Walker, former U.S. comptroller general, the government’s top auditor. USA TODAY used federal data to compute all government liabilities, from Treasury bonds to Medicare to military pensions. Bottom line: The government took on $6.8 trillion in new obligations in 2008, pushing the total owed to a record $63.8 trillion. Read more here-http://www.usatoday.com/news/washington/2009-05-28-debt_N.htm

-Bernanke Warns Deficits Threaten Financial Stability. Federal Reserve Chairman Ben S. Bernanke said large U.S. budget deficits threaten financial stability and the government can’t continue indefinitely to borrow at the current rate to finance the shortfall.

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” Bernanke said in testimony to lawmakers today. “Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.”

Bernanke’s comments signal that the central bank sees risks of a relapse into financial turmoil even as credit markets show signs of stability. He warned the financial industry remains under stress and the credit crunch continues to limit spending. The Fed chief said in his prepared remarks to the House Budget Committee that deficit concerns are already influencing the prices of long-term Treasuries. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=agmj05AcqWHo

INTEREST RATES

-The Bank of Canada kept its key lending rate at a record low as expected, cautioning that the strengthening currency could “fully offset” recent improvements in financial markets and consumer confidence, and prolong the recession.

The target rate for overnight loans between commercial banks remains at 0.25 percent, a decision forecast by all 22 economists surveyed by Bloomberg News. Policy makers also reiterated they have no plan to change the rate over the next year, and that they still have “flexibility” to use other measures should more stimulus be needed.

The world’s eighth-largest economy shrank at a 5.4 percent annual pace in the first quarter, less than the 7.3 percent central bankers had predicted, a sign the recession is easing. The strengthening Canadian dollar, which posted its biggest monthly gain in more than 50 years in May, is hobbling a return to growth by reducing demand for the country’s already frail exports of goods such as cars and lumber to the U.S.

“If the unprecedentedly rapid rise in the Canadian dollar, which reflects a combination of higher commodity prices and generalized weakness in the U.S. currency, proves persistent, it could fully offset these positive factors,” the Bank of Canada said in a statement today from Ottawa. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=atZJpH6RMzVU

-The European Central Bank kept its benchmark interest rate at a record low of 1 percent today after first signs of an economic recovery emerged. President Jean-Claude Trichet also said the ECB will start its plan to buy 60 billion euros ($85 billion) of covered bonds in the primary and secondary markets next month.

“The current rates are appropriate,” Trichet said at a press conference in Frankfurt. “For the remainder of the year economic activity will decline with much less negative rates.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a8B1TJc.u.As

-The Bank of England left the benchmark interest rate at a record low and kept up its plan to buy bonds with newly created money to pull the economy out of the worst recession in a generation.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, reiterated its plan to buy 125 billion pounds ($205 billion) of government and corporate bonds. Policy makers also kept the bank rate at 0.5 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aRJ84QFnxAQk

-Australia Keeps Benchmark Rate at 3% for Second Month. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aSr5GAexitgo&refer;=home

-Iceland’s central bank lowered the benchmark interest rate by a percentage point, defying the International Monetary Fund, as the economy slumps into its worst recession in 60 years.

The repo rate was cut to 12 percent from 13 percent, Reykjavik-based Sedlabanki said on its Web site today. The rate cut is the fourth since the island received a $5.1 billion IMF- led bailout in November.

Policy makers bowed to pressure from labor unions and businesses for lower rates to soften a recession that the bank estimates will culminate in an economic contraction of 11 percent this year. IMF Mission head to Iceland, Mark Flanagan, last week advised against a cut, arguing a planned gradual easing of capital controls requires higher krona returns. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aC7JBbDSkKlM

REAL ESTATE-MORTGAGES-FORECLOSURES

-Pending U.S. Home Resales Surge the Most Since 2001. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aUox8hHm9OqY&refer;=home

-U.K. House Prices Unexpectedly Jumped by 2.6% in May. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZ8TtCGSJNe0 and

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZV86G8u9.kE and http://www.bloomberg.com/apps/news?pid=20601110&sid;=a8LFsNSxQxY4

-London Luxury Homes Fall 20%, Smallest Drop This Year. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aI8pH7esVmsQ

-The $4 trillion housing headache. House prices have returned to 2002 levels, but mortgage debt hasn’t deflated from its bubbly highs. Read more here-

http://money.cnn.com/2009/05/27/news/mortgage.overhang.fortune/index.htm?postversion=2009052716

-Is a commercial real estate bust inevitable? The government hopes to restore lending via cheap financing. Skeptics say programs aimed at restarting the market haven’t worked yet. Read more here-http://money.cnn.com/2009/05/28/news/commercial.mortgages.fortune/index.htm?postversion=2009052803

-Lost resorts: The Credit Suisse loan debacle. Eight luxury resorts backed by the bank are either in foreclosure, bankruptcy or liquidation. Read more here-

http://money.cnn.com/2009/05/29/news/companies/creditsuisse_luxury.fortune/index.htm

-Foreclosures Hit ‘Milestone’: 1 Million in ‘09. Here’s a bleak milestone: there’s been more the 1 million foreclosures filed in the U.S. so far this year, according to a count by the Center for Responsible Lending. Not all of those foreclosures will result in evictions, but the statistic offers a sobering illustration of the magnitude of the problems that still face the housing market. Read more here-http://blogs.wsj.com/developments/2009/06/03/foreclosures-hit-milestone-1-million-in-09/

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

The Goldbugg Report – June 9, 2009
Posted by Worldwide Precious Metals on Tuesday, June 9, 2009

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