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The Goldbugg Report – August 11, 2009

August 11, 2009

WORLD FINANCIAL REPORT ON RADIO AUG 7 2009 SHOW

-New use for silver could send the metal soaring.

-Indicators suggest gold poised for big breakout by end Q3.

-Gold Near Summer Doldrum Lows Prior to Traditional Strong Autumn and Winter.

GOLD

-Indicators suggest gold poised for big breakout by end Q3. In an assessment of the current gold market, Donald W. Doyle, chairman of top coin dealers Blanchard & Co. sees very positive signs for the gold price in the short term. The slow trading months of summer are usually a time when gold prices decline, but economic analysts at Blanchard and Company, America’s largest precious metals investment firm, say that indicators this year have them believing the metal is poised for a big breakout by the end of the third quarter.

Specifically, inflation, possible hyper-inflation, dollar weakness, and supply/demand and investor demand fundamentals are all positive for the price of gold toward the end of the summer, says Donald W. Doyle, Chairman and CEO of Blanchard and Company. While gold remains range bound, it does so at levels above $900 per ounce, which Doyle says he sees as a springboard to greater price gains, and even new record highs, through the remainder of the year and beyond.

“Gold is performing strongly at the same time the stock market is making a mild rally and as the dollar continues to stay at a level that we consider to be inordinately high,” Doyle says. “Typically, gold would be declining but that’s not happening, and there are solid reasons why.” Doyle says demand is central to gold’s current sustained high price levels, with Chinese and Russian central banks adding to their holdings and investor demand continuing at record levels.

“The fundamentals for gold, and particularly investment demand, are very strong,” Doyle says. “Sales of gold by the U.S. Mint, which have always been a good proxy for U.S. investment demand, are approaching those of all of 2008 a banner year for gold and it’s only the beginning of August.” Through July of 2009, the U.S. Mint has sold 756,500 ounces of gold as compared to 247,500 ounces through July 2008 an increase of more than 300 percent for the same time period. The Mint sold 860,500 ounces of gold during all of 2008.

The other catalyst for gold’s future price rise, Doyle says, is the likelihood of inflation and dollar weakness, both of which are very real considering the record amounts of liquidity and stimulus that are making their way into the global economy. “For some time now, we have been in the middle of a disinflationary recession, hardly a propitious time for gold to boom,” Doyle says. “However, despite the short-term outlook for inflation, the longer-term picture looks to be just the opposite, particularly in the wake of record government deficits and extraordinary easing in monetary policy.”

Doyle also says the case for gold now is being made by people who, in the past, recommended only stocks. In Merrill Lynch’s “Metals Strategist,” Merrill predicts that the unintended consequence of the bailouts will be a return of inflationary pressures to the commodity markets. If the Fed fails to keep foreign capital interested in financing its twin deficits, the U.S. dollar could spiral downward, providing strong support to commodity prices. The weaker dollar will then help gold break through to new record price levels of $1200-$1500 per ounce.

“Morgan Stanley’s analysts are divided on which threat is worse for the global economy, deflation or inflation, but say that gold is a safe bet in either outcome,” Doyle noted. “Morgan Stanley looked at the possibility of hyperinflation hitting the U.S., and their conclusion is an interesting one.”

“With policymakers around the world throwing massive conventional and unconventional monetary and fiscal stimuli at their economies, we think that it is worth exploring the black swan event of very high inflation or even hyperinflation. While such an outcome is clearly not our main case, the risk of hyperinflation cannot be dismissed very easily any longer, in our view.” Morgan Stanley research note, via Financial Times

Doyle added that gold is renowned as a hedge against inflation as inflation goes up, the price of gold goes up along with it. The five highest years of inflation in the U.S. from the end of World War II were 1946, 1974, 1975, 1979, and 1980. During those five years, the average real return on stocks, as measured by the Dow, was minus 12.33 percent, while the average real return on gold was 130.4 percent. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=87109&sn;=Detail

-Why Gold Could Clear $1,300 by Year-End. Gold may be nearing its next major leg up. No investment ever goes straight up or straight down. During the last bull market in gold, the precious metal rose 2,329% from a low of $35 in 1970 to a high of $850 in 1980. However, during that time, there was a period of 18 months in which gold fell nearly 50% (see the chart below).

As you can see, from mid-1971 to December 1974, gold rose 471%. It then fell 50%, from December ’74 to August ’76. After that, it began its next leg up, exploding 750% higher from August ’76 to January 1980.

Now, in its current bull market (2001 to March 2008), gold rose over 300% from $250 to a little over $1,000. And just like in the mid-70s, it began showing signs of weakness after its first big rally up to $1,014 in March ’08. At one point, it even fell to $700, a 30% retraction.

Granted, it wasn’t a full 50% retraction like the one that occurred from 1974-76. But we are experiencing a financial crisis. And gold is the most common catastrophe insurance. If we were to go by the historic pattern of the gold market in the ‘70s, gold should experience upwards resistance for 19 months after its first peak today. Gold’s recent peak was $1,014 in March ’08 (roughly 17 months ago).

If this bull market parallels the last one, then gold should renew its upward momentum in a very serious way starting in October 2009. And this next leg up should be a major one (the biggest gains came during the second rally in gold’s bull market in the ‘70s). The chart certainly forecasts a major move.

As you can see, gold has formed a long-term inverse head and shoulders formation (two smaller collapses book-ending a major collapse). Typically a head and shoulders predicts a massive collapse. However, when the head and shoulders is inverse, as is the case for gold today, this typically predicts a MAJOR leg up.

Indeed, any move above the “neckline” of 1,000 would forecast a MAJOR move up to $1,300 or so. Going by history, this is precisely the move we should expect: remember based on historical trends (the gold bull market of the ‘70s) gold should begin its second and largest leg up in September or October 2009.

Watch the gold chart closely over the next month or so. If gold makes a move above $980 perhaps add to your current positions. If it clears $1,000, hold on tight, cause the next leg up in this secular bull market has begun. Graham Summers-Read more here-http://www.kitco.com/ind/Summers/aug042009.html

-Gold Near Summer Doldrum Lows Prior to Traditional Strong Autumn and Winter. Read more here-http://news.goldseek.com/GoldSeek/1249394049.php

-There is no denying gold’s store-of-value relevance throughout the history of the world. It has been and will always be the ultimate form of currency. Even today gold’s alluring and timeless qualities transcend every political, social, and monetary boundary that man puts into place. Gold’s core fundamentals will forever be rock solid.

Another key element to gold’s fundamentals is simple economics. And it is economics, supply and demand, that will always dictate gold’s price over time. On the demand side we have seen a big increase over the years due in large part to population growth and ease of access.

Gold is not just a metal for kings anymore. Over time a large global distribution network has been built that sells gold, in small or large quantities, to anyone who wants to buy it. And with such a rapidly growing world population, especially in the last 100 years, a greater number of people want to own this precious metal.

On the supply side, the onus is on the miners to bring enough gold to market to meet demand. But the miners can’t just turn a spigot and spew gold at will. One of the many reasons why gold is precious is its rarity. Simply put, this metal is hard to find. And when it is found, economically extracting it from the earth presents its own challenges.

So far the miners have been able to supply gold to the people. But they’ve really had to ramp up their efforts in the last century to meet skyrocketing demand. Interestingly over 80% of the gold mined in the history of the world has happened since 1900, with over two-thirds of this volume in just the last 50 years. We’ve also seen a double in world production just since 1980. This massive production increase is driven by the demand of a growing populace hungry for gold!

But will the mining industry constantly be able to keep up with growing demand? I’ll give my opinion on the answer to this question in a bit, but in the mean time I’ll say it will continue to be a growing challenge. Mining gold is not as simple as harvesting a crop. This yellow metal is finite, once it is mined there is that much less remaining hidden in the earth.

And these miners have the same geological landscape to work with today as those miners thousands of years ago. The only difference is the low-hanging fruit has already been picked. Gold producers must now search for and mine their gold in locations that may not be very amenable to mining. Many of today’s gold mines are located in parts of the world that would not have even been considered in the past based on geography, geology, and/or geopolitics.

And these factors among many are attributable to an alarming trend we are seeing in global mined production volume. According to data provided by the US Geological Survey, global gold production is at a 12-year low. And provocatively this downward trend has accelerated during a period where the price of gold is skyrocketing. Scott Wright-Read more here-

http://www.321gold.com/editorials/wright/wright073109.html

-According to the diligent statistical elves of Barron’s Market Lab, the amount of U.S. Treasury Gross Public Debt outstanding is $11.611 trillion. A year ago, according to the same elite statisticians, that value was $9.533 trillion. In one year, the true deficit of the U.S. government was therefore $2.0178 trillion. That, my fellow Gold bugs, is a true accomplishment! How does one spend Two Trillion Dollars more than one receives in a single year?

Now, the deficit reported by the U.S. government will be less than that value due to something called the unified budget. Essentially what that means is that the money going into such schemes as the Social Security System is used to buy U.S. government debt. Such transactions are used to mask the true deficit from the public. Now, those of you in the U.S. should not worry about this. You will indeed get all the green pieces of paper upon retirement you have been promised. They just may not buy anything.

Two essential problems now exist. First, the Presidential Approval Index for the Obama Regime is negative, and has been so for some time. Despite massive spending by the U.S. government, voters are discovering that change can mean many things. The Obama Regime, facing fading popularity, has only one policy choice. That choice is to spend more money. Clearly, not enough money is going to people to maintain their support. So, look for more deficit spending from the U.S. government.

Policies of the Obama Regime and U.S. Federal Reserve should make $Gold one of the better investments for the years ahead. Once debt monetization occurs, no political will is going to develop to remove it! A strong dollar is not likely to emerge from these policies. Investors just need to make purchases of gold with calm thinking.

Rushing to buy Gold when some analysts are promoting a rumor on dollar devaluation before year end in order to sell newsletters may not be calm thinking. Should you feel compelled to buy Gold this week, do so knowing that the Federal Reserve and the Obama Regime will be doing all they can to make your purchases profitable! Ned W. Schmidt-Read more here-

http://www.kitco.com/ind/Schmidt/aug032009.html

-Central Bank net gold sales show huge drop in first half 2009. A report by GFMS for Societe Generale suggests the volume of Central Bank gold sales this year is likely to be among the lowest on record.

In a report released Monday, precious metals consultancy GFMS, for Societe Generale, looked at the recent rate and volume of gold sales from official sources and concluded that in the first half of the current year the net sales volume was a relatively minuscule 39 tonnes down a massive 73% year on year. Indeed in the second quarter, GFMS estimates that banks were net buyers of gold after being net sellers in the first quarter. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=87094&sn;=Detail

-Gold scrap sales could undermine a late-year gold price surge GFMS. Looking at fundamentals, GFMS chairman reckons that a late surge in gold scrap sales if the gold price takes off could stop it in its tracks. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=86995&sn;=Detail

-U.K. Royal Mint Doubles Gold Output as Demand Swells. The U.K.’s Royal Mint, established in the 13th century, doubled production of gold coins in the second quarter as demand surged for bullion to diversify investments.

Output climbed to 16,910 ounces from 8,030 ounces a year earlier, according to data obtained by Bloomberg News under a Freedom of Information Act request. First-half production jumped 86 percent to 45,406 ounces, the figures show.

Demand for physical gold as a store of value and hedge against inflation has increased as governments spend trillions of dollars to combat the worst recession since World War II. Bullion holdings in gold-backed exchange-traded products rose to records in the second quarter. Gold is trading about 7 percent lower than the record $1,032.70 an ounce reached in March 2008.

“There’s still interest in gold as a safe-haven asset,” said Stephen Briggs, an analyst at RBS Global Banking and Markets in London. Read more here-

http://www.bloomberg.com/apps/news?pid=20603037&sid;=aF3LXxMlYpJ8

-Peter Brimelow: Is gold gearing up (again) to break $1,000? Read more here-http://www.gata.org/node/7655

-Today’s chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 9.8 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces it took back in 1999.

When priced in gold, the US stock market has been in a bear market for the entire 21st century and is currently trading 78% off its 1999 highs. The recent five-month rally, however, has the Dow (priced in gold) putting in a significant test of resistance of an accelerated downtrend that began in mid-2007. Read more here-http://www.chartoftheday.com/20090731.htm?T

Source: www.chartoftheday.com

-When Chow Sang Sang opened its third jewellery megastore in Hong Kong in April, it was not a quiet affair. The 464-square-meter space was packed with publicists, fashion models, art installations, drummers and a diamond necklace priced at 5.7 million Hong Kong dollars.

Vincent Chow, the grandson of the company’s founder and now its general manager, was at the 5,000-square-foot store to oversee the proceedings — and to take a hand at banging on the drums himself.

But although Mr. Chow, 62, is overseeing a rapid expansion in the family jewelry business, he is staying firmly focused on the commodity that made his family’s fortune. “We started as goldsmiths,” Mr. Chow said in a recent interview. “Today gold still makes up half of our sales.” Gold, is solid and eternal. “In hard times,” he said, “people cling to it.” Read more here-

http://www.gata.org/node/7648

SILVER

Gold to silver ratio at 80 to 1 with gold at $2,800 the silver price would be $35.00

Gold to silver ratio at 70 to 1 with gold at $2,800 the silver price would be $40.00

Gold to silver ratio at 60 to 1 with gold at $2,800 the silver price would be $46.67

Gold to silver ratio at 50 to 1 with gold at $2,800 the silver price would be $56.00

Gold to silver ratio at 40 to 1 with gold at $2,800 the silver price would be $70.00

Gold to silver ratio at 30 to 1 with gold at $2,800 the silver price would be $93.33

Gold to silver ratio at 20 to 1 with gold at $2,800 the silver price would be $140.00

Gold to silver ratio at 15 to 1 with gold at $2,800 the silver price would be $186.67

-New use for silver could send the metal soaring. Pure Bioscience Looks For Silver Lining. Pure Bioscience, a El Cajon, Calif., company has a silver-based molecule it thinks can be used in a whole range of products, from cleaning products to agriculture to lotions and cosmetics and, perhaps someday as a drug.

The company is expected to announce Thursday that one of its development partners, FTA Therapeutics, will team with the Cleveland Clinic to develop Pure’s molecule for several applications, such as treating wounds and acne. Last month, the U.S. Environmental Protection Agency approved the use of Pure’s molecule for sanitizing surfaces that come in contact with food. Read more here-http://www.forbes.com/2009/07/30/silver-pure-bioscience-technology-breakthroughs-silver.html?partner=dailycrux

-As I have been writing about for the past month or so, I think that big change is coming to the silver market. I believe that this change will be historic in nature. Since there are never any guarantees, I will present my reasons for expecting this great change in silver and leave it for you to decide on the merits of my argument.

The first thing I see is a change in the pattern of investment accumulation of physical silver over the past few months. While pure retail demand appears to have cooled off from an anecdotal viewpoint given the overall choppy price action, actual demand statistics remain remarkably strong. In other words, reports from retail dealers indicate sluggish new buying interest, yet the official numbers indicate otherwise.

For instance, despite a sharp $3.50 decline from the $16 level in early June, no metal was liquidated in the combined holdings of the silver EFTs. This was very much at odds with the normal pattern of some liquidation in past price declines. Instead, combined silver holdings rose to new records. Plus, a number of new investment vehicles buying physical silver were introduced during this period.

By my count, as many as 15 million ounces of silver may have been accumulated by existing and new ETF vehicles in the past month, adding to the hundreds of millions of ounces accumulated and taken off the market over the past few years. This contrasted with a notable liquidation in gold ETF holdings, even though the gold price declined in much smaller percentage terms over the same time period.

In addition, Silver Eagle sales from the US Mint have accelerated over the past two months, with July recording the second largest monthly sales of the year. Gold Eagle sales, while still very strong for the year, recorded the second lowest monthly sales for the year in July. The Mint is on a pace that could result in more than 28 million ounces of Silver Eagles being produced and sold this year, the most in history and roughly three times larger than the average for the past decade.

To put this number in perspective, the 28 million ounces potentially consumed in new Silver Eagles would represent more than 75% of all the silver mined annually in the US, the world’s eighth largest producer. This takes silver off the market and tightens physical supply. For comparison purposes, Gold Eagle sales, on the current pace, will consume 15% of gold mine production in the US, the world’s fourth largest producer.

I reference these statistics to make a point. It would appear to be a contradiction for there to be weak anecdotal retail demand combined with strong actual demand data. If retail buyers are not responsible for the strong actual silver buying, then who is? My conclusion is that there may be big and determined institutional type silver buying underway.

Perhaps some big investors have discovered what many retail investors have previously known, namely, the great investment silver represents. If my guess is accurate, the entry of new large investors could bring big change to the silver market. Read more here-http://news.silverseek.com/TedButler/1249414304.php

-Two days is a short time in gold and silver price prediction. A stutter in gold and silver prices in late July had some analysts predicting the end of the gold bull market, but an equally rapid recovery shows the monetary precious metals may have life in them yet. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=87014&sn;=Detail

CHART OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week-Shades Of 1929. We’ve put together an amazing, fool-making rally since the market hit its lows in early March. Of course, before you break out the champagne, remember that a strong bull run can happen during a long-term decline. We have eclipsed most such precedents. But we did have one big bull run of nearly the exact same length and magnitude between November, 1929 and April, 1930. And you know what happened after that. Read more here-http://www.businessinsider.com/chart-of-the-day-history-repeating-2009-7

-The economic miracle that has been the United States was not produced by socialized enterprises, by government-upon-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures, as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline. Milton Friedman

-”The modern mind dislikes gold because it blurts out unpleasant truths.” Joseph Schumpeter-Bio here-http://en.wikipedia.org/wiki/Joseph_Schumpeter

-No currency can hold up in the face of an economy that survives on borrowed money and debt. Richard Russell

-The big money is made if you catch a major trend and stick with it long enough to make substantial gains. Our premise is that the era of paper assets peaked in the year 2000, and commodities were at the bottom. We also believed that the paper money time bomb was ticking and astute investors around the world would seek the safety and time-tested soundness of real money gold and silver.

These two precious metals silver and gold represent the top tier of all commodities, because they are readily accepted around the world as a means of final payment. Additionally, in times of financial stress, the metals are a store of value. David Morgan-Read more here-http://news.silverseek.com/SilverInvestor/1249012084.php

-Gold will revisit $1,000 as investment demand and jewellery purchases rebound and supply decreases annually, a senior World Gold Council official said. “On the supply side, gold mining production has been decreasing at a rate about 4 to 5 percent per year after reaching a peak production in 2001,” Jason Toussaint, managing director of exchange traded gold, said today. “Even if demand stays the same, prices must go up.” He declined to give a timeframe for the increase.

Gold, traditionally a popular hedge against financial turmoil due to its store of value, has risen 5.7 percent this year and briefly traded above $1,000 in February. It reached a record $1,032.70 on March 17, 2008. “Investors are much more focused on wealth preservation than upside returns because they are much more focused on risk management within portfolios,” Toussaint said in an interview at a Singapore conference. “We will see that continue.”

Demand for gold will also rise as pension funds, sovereign funds and other asset managers seek to preserve their wealth against inflation, Toussaint said. Only 3 percent to 5 percent of assets at large institutions are allocated to gold, he said. “Many pension funds around the globe do not have any exposure to gold currently,” he said. “The feedback that we’ve got so far is positive,” he said without elaborating. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=aPmTV_Se5jJw

-The global credit crunch has cost governments more than $10 trillion, the International Monetary Fund (IMF) says. Read more here-http://news.bbc.co.uk/2/hi/business/8177814.stm

-We predict the Dow to land on 10,400 to 10,800 as a maximum high before selling this year. This was our month’s ago forecast. When the selling becomes a crash our forecast sees a 5600 to 6500 Dow. Roger Wiegand-Read more here-http://www.kitco.com/ind/Wieg_cor/roger_jul302009.html

-Tudor Investment Corp., the $10.8 billion hedge fund firm run by Paul Tudor Jones, told clients that the gain in U.S. stocks in the past 100 days is a “bear- market rally.” “Investor psyche is still fragile,” Greenwich, Connecticut-based Tudor said.

Slowing growth in China and the return of front-page stories on swine flu are “further catalysts for global equity markets to pause in September,” the letter said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aRxNALRApIoY

-The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation’s plate and struggling to find money to pay the tab.

The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion. Read more here-http://news.yahoo.com/s/ap/us_plummeting_taxes

-Martin Armstrong, How ALL Systems can Collapse Overnight. Subtitled, “The 3rd Century economic collapse. Are there lessons from the past that equal solutions for the future?” Martin takes us on a 3rd century history lesson and combines his knowledge of cycles, waterfall collapses, rule of law, history of money and how it influences the political arena to say, YES, it can and is happening to us now. BUT if we are smart we can learn from history to avoid repeating our mistakes. Read more here-

http://economicedge.blogspot.com/2009/07/martin-armstrong-how-all-systems-can.html

-Boomers, some 80 million strong, accounted for 47% of national spending and now they are saving. They provided 78% of spending growth up until recently. What we find of special interest is that boomers aged 54 to 63, even though told over and over again to prepare for retirement only 31% are prepared.

If the Dow falls to 4,000 and house prices fall another 20%, how much smaller will the percentage shrink? The number of plus 55 year olds re-entering the workforce to survive, is cutting off jobs for younger members of society. In addition about 50% of corporations are now looking for new college graduates.

This is the situation that existed during the late 1940s, 50s and into the 1960s. Those who got jobs were lucky and they kept them. If you can believe it these grads were fortunate to make $400 a month. This is where we are again headed. Bob Chapman

-For the first time, more than 34 million Americans received food stamps, which help poor people buy groceries, government figures said on Thursday, a sign of the longest and one of the deepest recessions since the Great Depression. Enrolment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in May, the latest month for which figures are available. Read more here-http://www.forbes.com/feeds/reuters/2009/08/06/2009-08-06T152646Z_01_N06328040_RTRIDST_0_FOODSTAMPS-USA.html

-Will China keep buying U.S. bonds? Read more here-http://www.gata.org/node/7644

-Nobel Prize-winning economist Joseph Stiglitz said he expects a “very slow recovery” in the U.S. economy and that a replacement for Federal Reserve Chairman Ben S. Bernanke should be considered. “There are lots of potholes in the road,” Stiglitz, a Columbia University economics professor, said in an interview today with Bloomberg Television today. “There are problems in commercial real estate. We know that there will be more foreclosures in the mortgage market” and “we know we don’t know the state of the banks.”

Policy makers are seeing the first signs of a recovery from the worst economic slump in the post World War II era, and the risk of further shocks as unemployment approaches 10 percent. Credit markets are improving and yet “the fundamental problem of lack of aggregate demand is still there,” Stiglitz said. “It’s going to be a slow, very slow recovery,” said Stiglitz, 66, formerly chief economist at the World Bank and chairman of the White House Council of Economic Advisers under Bill Clinton.

When asked whether Bernanke should be reappointed so he can remain Fed chief after his current term expires Jan. 31, Stiglitz replied: “That’s a hard question.” A replacement is “something we ought to consider,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a2qn.Qd82fDw

-Weather experts on Wednesday reduced the number of projected hurricanes in the north Atlantic this season to four, two of them major hurricanes with winds above 178 kilometers (111 miles) per hour. Read more here-http://au.news.yahoo.com/a/-/world/5776793/experts-predict-quieter-atlantic-hurricane-season/

-Quick tests for swine flu are accurate almost 70 percent of the time at best, suggesting doctors shouldn’t rely on the results alone to make treatment decisions, the U.S. government reported. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aXoTEabd_r5U

-WHO maintains 2 bln estimate for likely H1N1 cases. Read more here-http://www.alertnet.org/thenews/newsdesk/L4634663.htm

-Plague-Spreading Fleas Gain Ground, May Spur Deadly Human Cases. Plague-spreading fleas are expanding their territory, putting more people at risk of catching the lethal illness, a World Health Organization official said.

Three people in China were reported the past week to have died from pneumonic plague, the pneumonia-causing form of the bacterial disease. Centuries after bubonic plague, the most common form, killed millions in medieval Europe, the scourge remains entrenched in parts of Africa, Asia and the Americas. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aPOXqMh_fzr4

-U.S. Child Born in 2008 May Cost $221,190 by Age 18. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aU.K_V4cjcxo

-Senators, Advisers Urge Obama to More Than Double Afghan Forces. Read more here-http://www.bloomberg.com/apps/news?pid=20601070&sid;=avtKW.636Q6Y

-Government map shows dire Afghan security picture. Almost half of Afghanistan is at a high risk of attack by the Taliban and other insurgents or is under “enemy control,” a secret Afghan government map shows, painting a dire security picture before presidential elections.

The threat assessment map, a copy of which was obtained by Reuters, shows 133 of Afghanistan’s 356 districts are regarded as high-risk areas with at least 13 under “enemy control.” Read more here-http://www.reuters.com/article/newsOne/idUSSP43015420090805

-Iran’s Khamenei Endorses Ahmadinejad for Second Term. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZeDoVurlz4g

-Iran fuel imports possible target in nuclear standoff. The United States and Israel are discussing the feasibility of curbing Iran’s imports of gasoline and other refined oil products if Tehran refuses to enter negotiations over its nuclear program, an Israeli official said on Monday.

U.S. officials refused to say whether they were considering such a curb, which would represent a critical escalation of existing sanctions against the Islamic state and would hit the average Iranian hard in the pocket book. Read more here-http://www.alertnet.org/thenews/newsdesk/N03523563.htm

-Iran is ready to build an N-bomb it is just waiting for the Ayatollah’s order. Read more here-http://www.timesonline.co.uk/tol/news/world/middle_east/article6736785.ece

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/HistoricalPriceTrackingsystem.html

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html

-Rare “vivid pink” diamond could break sale record. A rare, 5-carat pink diamond will be sold in Hong Kong this December by Christie’s, which expects the stone to hover near world record prices, thanks in part to the buying prowess of top Asian jewellery collectors.

The stone, set in a so-called “cushion-cut” ring by famed jewellers Graff Diamonds, is expected to fetch between $5-$7 million, in reach of the current world auction record for a pink diamond a 19.66-carat stone that sold in Geneva for $7.4 million in 1994.

While just a quarter the size of the record-holding pink gem and not quite flawless, the stone’s “vivid pink” is considered near perfect and the auction house has touted it as one of the best colored stones to appear in recent years.

“There are pink diamonds and then there are pink diamonds,” said Francois Curiel, the international head of Christie’s jewellery department. “It is extremely rare for a stone of such top quality to appear on the market with top notes in color, cut, clarity and carat weight. This 5-carat vivid pink gem combines the best of all criteria,” Curiel added.

While the South African-mined diamond isn’t quite rated flawless given minor blemishes, Christie’s said that these could be removed by minor repolishing. Christie’s has a track-record of putting rare polished stones up for sale in Asia, given its confidence in the depth of the Asian market for the world’s top gemstones and artwork.

Last May, before the financial crisis began to bite the global auction market, Christie’s sold a squash-ball-sized, 101.27-carat diamond in Hong Kong for $6.2 million. “Asian collectors rank among our most important group of buyers. Hong Kong is firmly alongside New York and Geneva as a top center for the best jewels,” said Kate Malin, a spokeswoman for Christie’s in Asia.

Despite this, some major gems have disappointed in Asia, including a 72.22-carat “D” flawless white diamond that failed to hit its reserve price in a Sotheby’s Hong Kong sale last April, falling short of its 10-12 million pre-sale estimate.

While the world’s most expensive jewel ever sold at auction is the “Wittelsbach” blue diamond, a 17th-century deep greyish-blue stone that fetched $24 million last year, top red and pink gemstones are also known for stratospheric valuations. “In the fascinating realm of natural color diamonds, those of a distinct pink hue are among the rarest and most sought after,” Christie’s said. Read more here-http://www.reuters.com/article/lifestyleMolt/idUSTRE5720ZO20090803 or http://www.diamonds.net/news/NewsItem.aspx?ArticleID=27409

OIL-GASOLINE-NAT GAS

-Warning: Oil supplies are running out fast. Catastrophic shortfalls threaten economic recovery, says world’s top energy economist. The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.

Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr. Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.

In an interview with The Independent, Dr. Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years at least a decade earlier than most governments had estimated. Read more here-

http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html

-Oil May Set 2009 High, Won’t Fall Below $66: Technical Analysis. Crude oil remains in a technical rally that may bring prices to a new 2009 high above $73 a barrel, while keeping the market from falling below $66, according to National Australia Bank Ltd.

Oil may extend its three-week uptrend as long as it can settle above $72 a barrel in New York, according to Gordon Manning, a Sydney-based technical analyst. Such a move would also raise the market’s support level, potentially offering traders an entry point in case of a decline. Read more here-http://www.bloomberg.com/apps/news?pid=20601072&sid;=a5_LfbnfFLPg

-FTC Issues Rules to Block Oil Market Manipulation. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aoin33r5A_sI

-Petro-Canada Short Gasoline at Over 50 Outlets, Sends Rail Cars. Petro-Canada dispatched rail cars from Montreal after a storm-related power outage July 18 shut units at its refinery near Edmonton, Alberta, causing a shortage of the fuel at more than 50 of the company’s filling stations.

“We are doing a number of things to alleviate the supply situation,” said Sneh Seetal, a company spokeswoman, in a telephone interview. Between July 20 and July 24, the company loaded 32 rail cars in Montreal with fuel to augment the shortage, she said.

Following a shutdown of units due to the storm, the company completed repairs on a catalytic cracker and on July 27 began production at its 135,000-barrel-a-day refinery. “Really we’ve moved from a production problem to an inventory and delivery problem, Seetal said.

More than 50 Petro-Canada stations have run out of supply, mainly in the province of Alberta. A “handful of sites” in Saskatchewan, Manitoba and British Columbia also have been affected, she said. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aEG2FHlb08m0

-Business Books: Costly gas is good for you. The rising price of fuel will slash school busing, nearly empty the skies of airplanes, and turn many resorts into ghost towns. But Americans will become fitter, breathe cleaner air, and eat healthier food.

That’s the future Christopher Steiner paints in “$20 Per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better.” Read more here-http://www.reuters.com/article/newsOne/idUSTRE56M59Y20090723

-Natural Gas Falls Most in Two Months on Bulging Stockpiles. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=arWlQHRYs1HI

BAD LOANS ARE NEXT WAVE OF CRISIS

-Rising delinquencies among consumer and corporate borrowers are the “next wave” of the financial crisis and may affect banks that have avoided losses so far, said Deutsche Bank AG Chief Executive Officer Josef Ackermann.

“This crisis has consisted of a series of earthquakes, with changing epicenters,” Ackermann said late yesterday at an event in Zurich. “Bad loans are the next wave. Banks that have fared relatively well so far will also be affected by this.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUKAk1bKBVl8

CONSUMERS HIT HARD

-American Incomes Head Down, Threatening Recovery in Spending. Household income in the U.S. is weakening as the influence of the government’s stimulus plan wanes, prompting economists, Federal Reserve officials and a Nobel laureate to warn that consumer spending may struggle.

“Consumers have started to change their behavior and they are going to save more,” said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. “You have pressure on wages, you have employment still declining.”

Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released yesterday. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression.

Personal incomes, which include interest income, dividends, rents and other payments as well as wages, tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, yesterday’s Commerce report showed. Excluding the effects of the stimulus plan, June incomes would have dropped 0.1 percent after no change in May, according to the report. In May, one-time additional payments to Social Security recipients boosted incomes 1.3 percent.

One of every 10 American workers will be without a job by early 2010, economists project, shaking the confidence of those still on payrolls and discouraging spending. It may take as long as 15 years for consumers to fully repair finances battered by the decline in home values, stocks and employment, said Edmund Phelps, winner of the Nobel prize in economics in 2006. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aRU6ZUwzT9iA or http://www.bloomberg.com/apps/news?pid=20601087&sid;=av57GRI3gom0

-Consumer bankruptcies jump 34%. Bankruptcy filings spike in July as households are squeezed by unemployment. Read more here-http://money.cnn.com/2009/08/04/pf/consumer_bankruptcy_filings/index.htm?postversion=2009080417

BANKS STILL HAVE MAJOR PROBLEMS AHEAD

-No end in sight for bank bailouts. Even as the industry recovers, winding down last year’s rescue programs and new ones put in place by the Obama administration may be easier said than done. Read more here-http://money.cnn.com/2009/08/04/news/economy/banks_programs/index.htm

-Banks still getting sicker. The economy may have turned, but banks will be cleaning up after their lending mistakes for years. Several big banks may already be doomed to fail. The economy may have pulled out of its plunge, but you’d never know by a look at many big banks.

Even after a rousing market rally that spurred new capital into giant institutions such as Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500), numerous large banks around the country are still struggling with deteriorating finances.

Two dozen banks with at least $5 billion in assets get the lowest one-star rating on Bankrate.com’s safety and soundness test, which is based on an assessment of regulatory filings for the quarter ended March 31.

More than half of those banks are ranked “troubled” or worse by research firm Bauer Financial, using the same data. Three of these banks, with a total of $45 billion in assets, have made public statements indicating they could soon collapse.

“There are some big ones in fairly dire straits,” said Karen Dorway, director of research at Coral Gables, Fla.-based Bauer. “If you see some of these fail, it could add to the stress on local economies.” Read more here-http://money.cnn.com/2009/08/05/news/economy/banks.gruesome.fortune/index.htm

-U.S. banks may need to boost reserves for potential losses on home-equity loans after the Federal Deposit Insurance Corp. issued guidance in response to a slump in property prices from their peak in 2006. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aTBXy1zSZvr4

-Big Texas bank on verge of failure. Guaranty Bank, which counts Carl Icahn as one if its backers, is teetering on the edge of insolvency. But it may not be easy for regulators to find a buyer. Read more here-http://money.cnn.com/2009/07/31/news/companies/guaranty.headache.fortune/index.htm

-Five More U.S. Banks Are Shut Down, Bringing 2009 Tally to 69. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3KVKk_i5_cM

-U.K. banks swamped by a wave of personal debt. The banks are braced for big losses on mortgages and personal loans. Read more here-http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6736009.ece

FDIC IN TROUBLE

-As we all know, the Federal Deposit Insurance Corporation (FDIC) guarantees depositors that they’ll get their money back if a bank fails, at least up to a certain amount. To fund its operations, the FDIC collects small fees from the banks that are held in reserve for the purpose of taking over troubled banks and paying off depositors.

Since the Great Depression, a period marked by widespread runs on banks, the FDIC has done a good job of fulfilling its mandate. So how are they doing in this crisis? In a nutshell, they are in trouble. The FDIC insures 8,246 institutions, with $13.5 trillion in assets. Not all of them are going bankrupt, of course.

Yet as of late July, a disturbing 64 banks had gone belly up this year the most since 1992 costing the FDIC $12.5 billion. At the end of Q1, the agency was already asking for emergency funding. And worse, much worse, is likely yet to come. The following chart shows the total assets on the books of the FDIC’s list of 305 troubled banks.

The list doesn’t include the biggest banks that are considered too big to fail, as they are being separately supported with bailouts. By contrast, if the banks on this list fail, the FDIC is on the hook to have to step in and take them over and, of course, make depositors whole. Read more here-http://www.kitcocasey.com/articles/2901/the-fdic-is-in-trouble/

U.S. DOLLAR

-The Greenback Is Broken. The U.S. dollar index, which tracks the dollar against other major currencies, fell below its important June low of 78.33 late last week. On Monday morning, it was trading at an 11-month low. The bear trend from March continues with no meaningful support in sight.

Roughly two years ago, when the dollar was in its previous bear market run, the dollar index had moved under a multidecade support level at 80 (see Chart 1). At the time, the subprime-mortgage crisis was just unfolding. Read more here-http://online.barrons.com/article/SB124931281428701713.html?mod=BOLFeed

INTEREST RATES

-ECB holds rates at 1 percent, sees downturn slowing. The European Central Bank kept interest rates on hold at a record low on Thursday and said the euro zone economy would remain weak over the rest of the year, although the rate of contraction is slowing down. Read more here-http://www.reuters.com/article/ousiv/idUSTRE5752AO20090806 or

http://www.bloomberg.com/apps/news?pid=20601087&sid;=a91GN1kRjTFM

-The Bank of England expanded its bond purchase program beyond its original limit in an effort to spur lending and fight a recession that’s deeper than previously anticipated. Bond yields plunged after the Monetary Policy Committee, led by Governor Mervyn King, kept the key interest rate at 0.5 percent and increased its purchase program by 50 billion pounds ($84 billion) to 175 billion pounds.

The European Central Bank left its rate at 1 percent and President Jean-Claude Trichet said officials are “satisfied” on the ECB’s own purchase plan. The Bank of England’s move suggests policy makers, who based the decision on quarterly forecasts prepared this month, assessed that their stimulus plan and record low interest rates weren’t enough to quell the threat of deflation.

While services grew at the fastest pace in 1 1/2 years in July, unemployment is rising and banks have kept restricting access to credit. “These are exceptional amounts of money being pumped into the economy,” said Nick Kounis, an economist at Fortis Bank Nederland Holding NV and a former U.K. Treasury official. “Their forecasts are probably worse then we thought, at least for inflation.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aPwLrU0E47xI

-The Bank of Canada may extend a commitment to leave its main interest rate at a record low if a stronger currency threatens to prolong the country’s recession, said Derek Holt, economist at Scotia Capital in Toronto.

Governor Mark Carney kept the benchmark rate at 0.25 percent last month. At the time, he said the currency is a major risk to economic growth, adding he has the “flexibility” to deal with it. Finance Minister Jim Flaherty yesterday echoed Carney, saying “steps could be taken to dampen” the dollar. Read more here-

http://www.bloomberg.com/apps/news?pid=20601082&sid;=arAakOGBblVI

INFLATION

-Nobel Prize-winning economist Gary Becker said he is concerned that Federal Reserve Chairman Ben S. Bernanke may bend to political pressure and fail to raise interest rates quickly enough to contain inflation.

Becker, a University of Chicago professor, warned that there is a “big risk” of inflation as the economy recovers, largely because of the hundreds of billions of dollars in excess reserves that banks have on deposit at the Fed. He said Bernanke “has the tools” to control inflation, by selling Treasury bonds rather than by purchasing them, and by reversing the central bank’s emergency programs expanding credit.

Since March 2008, the Fed has taken steps to combat the credit crisis that included increasing lending to banks, support for the commercial-paper market and a lifeline to insurer American International Group Inc. Bernanke announced in June that the Fed will begin winding down the programs this year, letting a plan expire in October and trimming the size of the Term Auction Facility and Treasuries-lending programs.

“Will he do that if that has a risk of slowing down the recovery? He’ll be under political pressure not to do so, so that’s a big uncertainty,” Becker said in a July 31 interview. “I think he’ll do something, surely to try and control that, but I’m not sure he’ll have the will to do it sharply enough.” Becker won the Nobel Prize for economics in 1992. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aE5ENFwffyIg

-China’s central bank warned that monetary easing by developed nations threatens to cause “severe” inflation and currency volatility. “Failure to manage the degree of easing may lead to concerns about mid- and long-term inflation and exchange-rate stability,” the People’s Bank of China said in a quarterly monetary policy report, posted on its Web site yesterday.

China, the owner of $801.5 billion of Treasuries, pressed the U.S. at a summit in Washington last month for economic polices to protect the dollar’s value. The Bank of England is poised to end a five-month program of bond purchases, part of so-called “quantitative easing,” according to a Bloomberg News survey of firms bidding at government debt auctions.

“The discussion about quantitative easing and the reversal of it is going to capture the market’s attention for the rest of this year,” said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore.

“The fact that China is talking about it, again, is reflecting its concern about its holdings of U.S. Treasuries.” Quantitative easing is the creation of new money to purchase government or private assets, including bonds, to encourage new bank lending. Read more here-http://www.bloomberg.com/apps/news?pid=20601013&sid;=aJw_ze9izVj0

CURRENT ECONOMIC DOWNTOWN IS WORST SINCE GREAT DEPRESSION

-U.S. Economy Is in a Multiple-Dip Depression. The grand benchmark revision of the national income accounts on July 31, 2009 confirmed that the U.S. economy is in its worst economic contraction since the first down-leg of the Great Depression, which was a double-dip depression. The current economic downturn increasingly will be referred to as a depression, and it is far from over.

There will be intermittent blips of new activity, such as the current cash-for-clunkers automobile giveaway program that appears to be generating a one-time spike in auto sales. Yet, this downturn will continue to deteriorate, proving to be extremely protracted, extremely deep and particularly non-responsive to traditional stimuli.

As discussed in recent writings, the economy suffers from underlying structural problems tied to consumer income, where households cannot keep up with inflation and no longer can rely on excessive debt expansion for meeting short-falls in maintaining living standards.

The structural issues are not being addressed meaningfully and cannot be addressed without a significant shift in government economic and trade policies, which under the best of circumstances still would drag out economic woes for many years. John Williams-Read more here-http://www.321gold.com/editorials/williams/williams080509.html

-U.S. Recession Worst Since Great Depression, Revised Data Show. The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.

The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said yesterday in Washington. Gross domestic product has shrunk 3.9 percent in the past year, the report said, indicating the worst slump since the Great Depression. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a5_5Vq2hV3EQ

BOB CHAPMAN-THIS IS NOT A RECOVERY

-The stock market continues its bear market rally, which is very similar to the rallies in 1930 and 1932. What we are seeing at this stage of the rally is the shares of smaller companies and companies with low ratings outperforming better issues on low volume. 85% of the market has broken out above its 50-day moving average, but the quality of leadership is very questionable.

After 50 years of observing markets we know from experience that these kinds of rallies at this stage end the overall rally. This is a low-quality rally and it is very overbought. That is enunciated by low volume and short covering. The gains at this juncture should be miniscule leaving those who are still long a chance to exit what will end up being a trap.

Keep in mind as well that the depression is not ending and unemployment is still climbing. We see no signs of a sustainable recovery. Most of the important earnings reports have been made and absorbed by the market. As long as companies are laying off and cutting back on hours they won’t be increasing inventory, especially with retail sales continuing to slide.

There are no signs of a sustainable recovery. Even if inventories are increased it will be a one shot deal. The recovery, if there is to be one, will be production led. How can that happen as layoffs continue and banks continue to cut back on lending? Any recovery is contingent on bank lending. Plus, we are seeing continued deleveraging in all sectors.

The credit is not available to support higher production. Capacity utilization is hanging around 85, which means there is already major idle capacity. Consumers are simply not buyers. That happened in the last recession in 2002, but that lack of participation was supplanted by the real estate bubble. We are seeing twice as much asset deflation and triple the job losses of the last slowdown.

That means recovery is a long way off. All stimulus packages do is prolong the agony, worsen and distort the systemic problems. Forty percent of total disposable income is coming from government programs, whereas the remainder, wages and salaries from the private economy, are declining at a 3.1% rate. If you add in inflation, which no one seems to talk about anymore, you have at least a 10% annual loss in purchasing power.

Even $3 billion in rebates in “cash for clunkers” is not going to have any lasting economic effect. It is just a prolongation of the problem although workers deserve a break, after the Treasury and the Fed commit American taxpayers for $23.7 trillion, most of it going to bail out Wall Street, banks and insurance companies.

The administration just threw the workers a $3 billion bone. It should also be noted that what amounts to zero financing has been going on for nine years. The market was saturated and to keep the assembly lines working and workers employed to fend off recession. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1249492124.php and http://news.goldseek.com/InternationalForecaster/1249245364.php

-Bob Chapman On Gold, Silver, A Bank Holiday And The Monetary Elite. Read interview here-http://www.rightsidenews.com/200908025787/editorial/bob-chapman-on-gold-silver-a-bank-holiday-and-the-monetary-elite.html

PETER SCHIFF-HAPPY DAYS ARE NOT HERE AGAIN

-Have you heard the great news? The recession is over! It’s true; I saw it on TV. Why fret about growing unemployment lines when banks are paying big-time bonuses again? Proof of the turn was apparently revealed by the 2nd quarter GDP figures that showed that the economy declined by only 1%.

After four consecutive quarters of negative GDP, the green shoots now assume that growth will resume over the summer. But before we pop the corks, it may be worthwhile to ask, “what really has changed, and what is responsible for our new lease on life?”

In truth, because of the continued profligacy of the government and Federal Reserve, the imbalances that caused the current recession have actually worsened. We are now in an even deeper hole than when the crisis began. Rather than wrapping up a recession, we are actually sinking into a depression. If things look better now, it’s just because we are in the eye of the storm. Read more here-http://www.321gold.com/editorials/schiff/schiff080109.html

-Peter Schiff on the Glenn Beck show, July 31 2009 “Depression is beginning.” Watch video here-http://www.youtube.com/watch?v=dfjgWx3zQ6Q&eurl;=http%3A%2F%2Fgoldismoney.info%2Fforums%2Fshowthread.php%3Ft%3D395717&feature;=player_embedded

U.S. UNEMPLOYMENT

-U.S. Initial Jobless Claims Fall More Than Projected. The number of Americans filing claims for jobless benefits fell more than economists predicted, a sign some employers have stopped paring staff as the recession eases.

Applications dropped by 38,000 to 550,000 in the week ended Aug. 1, figures from the Labor Department showed today in Washington, the fifth straight time claims were under 600,000 after being above that level since January. The total number of people collecting unemployment insurance rose.

The pace of job cuts isn’t slowing fast enough to keep unemployment from rising. A report tomorrow will show the jobless rate jumped to the highest in 26 years in July, economists surveyed by Bloomberg News predict. Stagnating wages and falling home values also mean consumer spending, about 70 percent of the economy, will be slow to recover.

“These numbers signal the worst is behind us, but we are not out of the woods yet,” said David Semmens, an economist at Standard Chartered Bank in New York. “We are not going to see strong consumer spending with numbers that look like this.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aDOKOhrVP9f8

-ADP Says U.S. Companies Decreased Payrolls by 371,000. Companies in the U.S. cut fewer jobs in July as the worst recession since the Great Depression eased, a private report based on payroll data showed today. The estimated 371,000 drop, higher than economists had forecast, followed a revised 463,000 decline the prior month, figures from ADP Employer Services showed today. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=atpkMd27KY44

-The price of U.S. recession is paid in jobs. Long after President Barack Obama’s first term ends in 2013, millions of U.S. families will still be paying the price for the recession.

From auto workers in Detroit too old for retraining, to Hispanic migrants in Arizona with no homes to build, to new college graduates competing with experienced workers for scarce jobs, more and more people are facing long-lasting unemployment.

Since the recession began in December 2007, the jobless rate has climbed 4.6 percentage points to 9.5 percent, the biggest jump since the Great Depression. Worse, the mean duration of unemployment is now almost 6 months, the highest on record. Read more here-http://www.reuters.com/article/newsOne/idUSTRE5720J120090803

-Job options narrow as U.S. recession bites. Former corporate executive Don Yows took an entry-level job that set his career in information technology back by two decades.

Rick Cumins is selling off his gun collection to make ends meet as his real estate business falters. Options are dwindling in the United States even for those with experience, skills and education as the world’s largest economy sheds jobs in the face of recession.

A loss of 467,000 more jobs in June pushed the unemployment rate to 9.5 percent. Economists expect official data coming out on Friday to show another 320,000 jobs lost in July. Read more here-http://www.reuters.com/article/newsOne/idUSTRE5745RU20090805

-Silicon Valley Unemployment Skyrockets. Unemployment in the Valley is now higher than it was after the dotcom bust. The job market is so bad that some folks are giving up, quitting the tech industry, and going into healthcare (and green-tech, which isn’t exactly thriving right now, either). Read more here-http://www.businessinsider.com/chart-of-the-day-silicon-valley-unemployment-2009-7

-Finance Jobs Vanish Into Thin Air. The severe bloodletting in the construction industry is slowly waning. The pace of layoffs is coming well off its peak, according to ADP, probably since companies don’t have much more room to cut. But financial services? Despite the improved picture, the layoffs continue at a steady clip, with little month-over-month improvement. Read more here-http://www.businessinsider.com/chart-of-the-day-construction-vs-financial-sector-employment-2009-8

MAPPING THE GLOBAL RECESSION

-Moody’s Economy.com has mapped the geographic spread of the worst global downturn since the Depression. All of North America is in recession now. In Europe only Norway, Slovenia and Slovakia have avoided a similar fate, although Moody’s reckons these countries are on the brink of a downturn.

Emerging Asia looks cheerier, although the small export-led economies of Singapore and Hong Kong are shrinking, as are Malaysia and Thailand. Even the BRICs are looking a bit diminished, with downturns in both Brazil and Russia. At least India and China are growing (the latter at a pace that is causing worries about overheating).

Data for Africa are spotty but the continent’s biggest economy, South Africa, is in recession. The IMF expects global GDP to shrink by 1.4% this year, with rich countries’ economies contracting by around 3.8%. Read more here-http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=7933596&story;_id=14119302

ROUBINI-RECESSION WON’T END UNTIL YEAR END-COMMODITY PRICES MAY RISE IN 2010

-The global economy is still in a recession that won’t end until the end of the year, said Nouriel Roubini, the New York University economist who predicted the global financial crisis.

“There is now potentially light at the end of the tunnel,” Roubini said today at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia. Roubini was dubbed Dr. Doom for predicting the crisis. “I don’t think this recession will be over until the end of the year.”

Roubini, chairman of Roubini Global Economics and a professor at NYU’s Stern School of Business, predicted on July 23 that the global economy will begin recovering near the end of 2009 before possibly dropping back into a recession by late 2010 or 2011 because of rising government debt, higher oil prices and a lack of job growth. Read more here-

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

-Commodity prices may extend their rally in 2010 as the global recession abates, said Nouriel Roubini, the New York University economist who predicted the financial crisis. “As the global economy goes toward growth as opposed to a recession, you are going to see further increases in commodity prices especially next year,” Roubini said today at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia. “There is now potentially light at the end of the tunnel.” Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aUZbo8LjO3kw

THANK GOD FOR GOVERNMENT SPENDING

-The better-than-expected -1% GDP was tempered, somewhat, by the staggering 11% spike in Federal Government spending (hello stimulus!). Today’s chart looks back at the Y/Y GDP change with the same number sans government spending. As you can see from the divergence, the government boost provides a big help. Read more here-

http://www.businessinsider.com/chart-of-the-day-gdp-vs-government-spending-2009-7

THANKS CASH FOR CLUNKERS

-It wasn’t pretty, and it wasn’t by much, but Ford managed to report year-over-year sales growth in July. It was the first such gain since 2006, and they were helped in large part by Cash-For-Clunkers, which powered blistering car sales in the final week of the month. Of course, all those sales will come out of future sales but that’s another problem. Read more here-

http://www.businessinsider.com/chart-of-the-day-fords-sales-2009-8

AFTER RESCUE NEW WEAKNESS SEEN AT A.I.G

-The dozens of insurance companies that make up the American International Group show signs of considerable weakness even after their corporate parent got the biggest bailout in history, a review of state regulatory filings shows.

Over time, the weaknesses could mean trouble for A.I.G.’s policyholders, and they raise difficult questions for regulators, who normally step in when an insurer gets into trouble. State commissioners are supposed to keep insurers from writing new policies if there is any doubt that they can cover their claims. But in A.I.G.’s case, regulators are eager for the insurers to keep writing new business, because they see it as the best hope of paying back taxpayers.

In the months since A.I.G. received its $182 billion rescue from the Treasury and the Federal Reserve, state insurance regulators have said repeatedly that its core insurance operations were sound that the financial disaster was caused primarily by a small unit that dealt in exotic derivatives.

But state regulatory filings offer a different picture. They show that A.I.G.’s individual insurance companies have been doing an unusual volume of business with each other for many years investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good.

Insurance examiners working for the states have occasionally flagged these activities, to little effect. More ominously, many of A.I.G.’s insurance companies have reduced their own exposure by sending their risks to other companies, often under the same A.I.G. umbrella. Read more here-http://www.nytimes.com/2009/07/31/business/31aig.html?_r=2&partner;=rss&emc;=rss&pagewanted;=print or http://finance.yahoo.com/banking-budgeting/article/107445/after-rescue-new-weakness-seen-at-aig.html?sec=topStories&pos;=5&asset;=&ccode;

-After $182 billion taxpayer rescue, is AIG on the verge of collapse? To summarize, AIG’s core insurance companies seem to be like a shell game which AIG was able to continue operating because it was able to keep the cash moving from the affiliate that one state regulator had just examined to the one that another state regulator was about to examine.

Unfortunately, it would not surprise me if this was happening and continues to happen at all big U.S. insurance companies. Moreover, I would be shocked if former AIG CEO Hank Greenberg who has heaped scorn on his successors was unaware of this practice. Is it too early to write off that $182 billion? Peter Cohan-Read more here-

http://www.dailyfinance.com/2009/07/31/after-182-billion-taxpayer-rescue-is-aig-on-the-verge-of-colla/

-AIG breakup nets Wall Street $1 billion bonanza: report. Wall Street banks and lawyers could collect nearly $1 billion in fees from the Federal Reserve Bank of New York and American International Group Inc to help manage and break apart the insurer, The Wall Street Journal said on Wednesday, citing its own analysis. Read more here-

http://www.reuters.com/article/newsOne/idUSTRE57508M20090806

REAL ESTATE-MORTGAGE-FORECLOSURE

-”Shadow” inventory lurks over U.S. housing recovery. The storm may have subsided, but clouds continue to hover over the U.S. housing market as homeowners waiting for prices to rise get ready to flood the market with fresh inventory. Many home owners held off selling during the housing market’s downturn, but with the market showing signs of stabilization, they may now be ready to sell.

Many analysts agree the market may have turned an important corner after Case-Shiller home price index for May rose for the first time in nearly three years, but a massive supply of unsold homes is waiting in the wings and could easily swamp the recovery before it can gather speed.

“The number of homes listed officially on the market, while still at historically high levels, might be only the tip of the iceberg,” said Stan Humphries, chief economist at real estate website Zillow.com in Seattle, Washington. Read more here-http://www.reuters.com/article/ousiv/idUSTRE56U5YZ20090731

-‘Underwater’ U.S. Mortgages May Hit 48%, Deutsche Bank Reports. Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said. The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.

As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.

“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote. Seven markets in states with the fastest appreciation during the five-year housing boom including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas may find 90 percent of borrowers underwater, according to the report.

The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Weaver and Shen. Home prices will decline another 14 percent on average, the analysts wrote. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=adBYDzUMt68k or http://www.reuters.com/article/ousiv/idUSTRE5745JP20090805

-U.S. foreclosures spreading to regions formerly spared. The U.S. foreclosure crisis is spreading, and areas that previously appeared immune are now seeing the numbers rise, according to a report yesterday from RealtyTrac Inc., of Irvine, Calif., which tracks filings nationwide.

Some high-foreclosure states (California and the Midwest) saw their numbers drop. But states relatively untouched in the past (Oregon, Idaho, Utah, and South Carolina) experienced increases in foreclosure filings, which RealtyTrac chief executive officer James J. Saccacio suggested may be more directly related to growing unemployment than fallout from subprime and adjustable-rate loans.

Nationally, one in every 84 homes had a foreclosure notice filed against it in the first six months of the year, RealtyTrac said. In the Philadelphia region, it was one in every 168 houses. Read more here-http://www.philly.com/philly/business/20090731_U_S__foreclosures_spreading_to_regions_formerly_spared.html

-Homebuilders Eliminate Frills as First-Time Buyers Drive Sales. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=akCaYx29BrI8

-Pending Sales of Existing Homes in U.S. Surge 3.6%. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5QWWeMXezCw

-No sector of U.S. real estate has been spared from the wrath of the credit crisis. The USDA recently reported the national average price of farm real estate (includes land and buildings) declined 3.2 percent in 2009 from a year earlier. While crop and real estate prices soared at the peak of the bubble, farm values were jumping on average by 13% per year.

But global demand for U.S. agriculture may not be enough to curb weak farm prices. Following the “golden age of American agriculture,” nominal farmland prices fell from a 1920 high of $69 per acre to a Great Depression low of $30 per acre in 1933. Then again, following the inflationary commodity boom of the 1970s, the nominal per-acre price of farmland fell 27 percent from 1982 to 1987.

It took until 1951 for nominal farmland prices to exceed the 1920 peak, and until 1995 for prices to rebound after the 1980s collapse. Can demand for food from developing countries continue its rapid growth? Will inflationary forces on crop prices return in time to prevent another disaster for U.S. farmers? Casey Charts

-U.S. Farmland Values Fall for First Time Since 1987. U.S. farmland values declined last year for the first time since 1987 as the country suffered the worst housing crisis since the Great Depression.

The value of all land and buildings on farms averaged $2,100 an acre at the start of this year, down 3.2 percent from a revised $2,170 a year earlier, the U.S. Department of Agriculture said today in an annual report. The change compares with a 19 percent drop in urban home prices.

Agricultural commodities including corn, wheat and soybeans plunged from records last year, as the recession worsened and the world’s farmers increased production of some crops. The USDA expects net-farm income to drop 20 percent this year to $71.3 billion from last year’s record. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJGBaR9SyOjQ

© 2010, Worldwide Precious Metals.
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The Goldbugg Report – August 11, 2009
Posted by Worldwide Precious Metals on Tuesday, August 11, 2009

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