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The Goldbugg Report – August 18, 2009

August 18, 2009

WORLD FINANCIAL REPORT ON RADIO AUG 14 2009 SHOW

-Inflation could force gold to be new global currency.

-“Global Equities Melt Down” (Internal memo from PMI)

-China Encourages Silver Bullion for Investment.

“Global Equities Melt Down”

(Internal memo from PMI)

This is the description used by two of our major Wholesale Suppliers in conversation with PMI Traders, early this Morning.

Equity Markets world wide are moving down. The catalyst seems to be, according to the media, “a lack of confidence in China”. We disagree!!

The true culprit is the “lack of confidence in the US Markets and the continued actions of the US Government”.

Commodities, across the board are showing a “Sea of Red”, as traders are scrambling for Cash.

This liquidation is also taking place in Gold, and Silver and for the Precious Metals; we expect this to be a very brief look at lower prices.

This should be an excellent opportunity for buying which could prove out to be very beneficial for your Customers over the longer term.

Trading Department – Precious Metals International, Ltd.

GOLD

-Gold rises 113.8% over five year period. There is an old saying that in the land of the blind, the one-eyed jack is king. Similarly, in the land of little or no yield and plunging asset values, there is something to be said for that which holds its own, as gold did in USAGOLD’s Annual Survey of Investments for 2009.

When viewing the chart, please keep in mind that it covers the 365 days from July through June. In years past, the midyear starting point for our survey has not provided any distinct advantage to our readers, but this year it happens to cover precisely what many believe to be the most destructive period in financial markets since the Great Depression. As a result, what you see here are the performance rankings for key investments since the full inception of the crisis during the summer of 2008.

It was a very bad year for investors. Stocks and real estate fared miserably down 17.05% and 25.58% respectively. Those losses were based on averages. In some cases and locales, the losses were substantially worse. Gold stocks seemed to take their cue from the larger stock market (rather than gold itself) dropping 18.88%.

The best places to be, other than the skyrocketing commodities complex (up 33.09%), were green (as in cash, cd’s and Treasuries) and gold (as in coins and bullion). The trend was away from risk and toward safety. This year’s successful investor kept in mind veteran market analyst Richard Russell’s admonition: “In a secular bear market, he who loses least wins.”

In the five-year survey, gold tops the rankings with a 113.8% return. Of its primary competitors only gold stocks and fine wine* mounted respectable challenges (up 68.5% and 112.86% respectively). Stocks (down 17.79%) and real estate (down 25.03%) were the big losers over the period.

Diversification is the hallmark of the prudent investor, and the past five years have provided ample proof of the principle. A stock purchase of $100,000 in 2005 would have been worth $82,210 in 2009. By contrast, a $100,000 purchase of gold coins and bullion in 2005 would have been valued at $213,800 by 2009 a swing in net worth difficult to ignore. Read more here-

http://news.goldseek.com/GoldSeek/1250003100.php

-Inflation could force gold to be new global currency. Read more here-http://business.asiaone.com/Business/My+Money/Opinion/Story/A1Story20090807-159804.html

-James Turk gold and silver commentary. Read more here-http://goldmoney.com/commentary-back-toward-support.html

-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1249844182.php

-Frank Holmes on why gold is poised to go higher and how he will help get it there. Read more here-http://www.thedailybell.com/bellpage.asp?nid=476&fl;

-’Managed devaluation’ will multiply gold price, report says. Paul Brodsky and Lee Quaintance, principals in QB Asset Management in New York, have published a fascinating report speculating that massive inflation in the United States will be required to restore solvency to the country’s banking system, that other countries will stop facilitating the export of U.S.

dollar inflation, that the “shadow” gold price is really approaching $6,000, and that to achieve the necessary inflation central banks will arrange a “managed devaluation” of the dollar bringing gold closer to its “shadow” price. The QB report thus echoes much of what the British economist Peter Millar of Valu-Trac Investment Research wrote in his own report in 2006. Read more here-http://www.gata.org/node/7673

-Forget the monsoon, India’s gold imports set to bounce. Read more here-http://in.reuters.com/article/businessNews/idINIndia-41684020090811?pageNumber=1&virtualBrandChannel;=11584

SILVER

Gold to silver ratio at 80 to 1 with gold at $2,900 the silver price would be $36.25

Gold to silver ratio at 70 to 1 with gold at $2,900 the silver price would be $41.43

Gold to silver ratio at 60 to 1 with gold at $2,900 the silver price would be $48.33

Gold to silver ratio at 50 to 1 with gold at $2,900 the silver price would be $58.00

Gold to silver ratio at 40 to 1 with gold at $2,900 the silver price would be $72.50

Gold to silver ratio at 30 to 1 with gold at $2,900 the silver price would be $96.67

Gold to silver ratio at 20 to 1 with gold at $2,900 the silver price would be $145.00

Gold to silver ratio at 15 to 1 with gold at $2,900 the silver price would be $193.33

-China Encourages Silver Bullion for Investment. Watch video here-http://news.silverseek.com/SilverSeek/1249958982.php

-David Morgan silver commentary. Read more here-http://news.silverseek.com/SilverInvestor/1249613056.php

-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1249843696.php

-Roland Watson silver market update. Read more here-http://news.silverseek.com/SilverSeek/1249659630.php

-Is Silver Overvalued, Undervalued Or Priced Just Right? Read more here-http://news.silverseek.com/SilverSeek/1250038800.php

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week: Home Prices Collapsing Even Faster. The Case-Shiller has been signalling an improvement in the second derivative of housing prices for a few months, and in the latest report it even showed a sequential increase. But check out the NAR’s numbers for all of Q2. The year-over-year drop in the median sales price of single family homes showed its worst decline ever. They didn’t even have a second derivative gain improvement. Read more here-http://www.businessinsider.com/chart-of-the-day-sales-price-of-existing-homes-2009-8

-Chart of the week: Foreclosures Still Concentrated In The Bubble States. There are some signs that the foreclosure crisis is spreading across the country. Kansas foreclosures doubled, for example. But in the meantime, they still reside in four huge, bubble states California, Arizona, Nevada, and Florida, though they are only now starting to show signs of flattening. Read more here-http://www.businessinsider.com/chart-of-the-day-foreclosures-in-four-states-2009-8

-“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money-power of the country will endeavour to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed.” Abraham Lincoln

-It is well that the people of the nation do not understand our banking system, for if they did, I believe there would be a revolution before tomorrow morning. Henry Ford

-Inflationism is a dreadful cancer that is gnawing at the backbone of the civilized order. Hans F. Sennholz-Bio here-http://en.wikipedia.org/wiki/Hans_Sennholz

-With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people. Friedrich von Hayek-Bio here-http://en.wikipedia.org/wiki/Friedrich_Hayek

-“ With a global recovery unlikely to be smooth, the two main risks to most asset values are inflation and the U.S. dollar both of which are decisively gold positive.” Daniel Sacks, Investec Global Gold Fund manager-Read more here-http://www.theglobeandmail.com/globe-investor/gold-may-hit-record-this-year-on-inflation-fears/article1247874/

-New European gold sales agreement cuts quota. European central banks agreed to a third five-year cap on gold sales and said planned disposals by the International Monetary Fund could be done within the accord.

The European Central Bank and 18 other banks agreed to sell no more than a combined 400 metric tons of the metal a year through September 2014. That’s less than the annual cap of 500 tons in the current agreement, which expires Sept. 26.

“It’s positive for gold,” John Reade, an analyst at UBS AG in London, said by e-mail. The agreement “removes the small chance that European central banks would have dumped gold onto the market in an unconstrained manner.”

Central banks sold 73 percent less gold in the first half and full-year disposals may drop to the lowest since 1994, according to estimates from London-based researcher GFMS Ltd. The IMF wants to sell 403 tons from its reserves of 3,217 tons, the third-largest holding after the U.S. and Germany. Read more here-http://www.gata.org/node/7668 or http://www.gata.org/node/7671 or http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=87265&sn;=Detail

-Tangibles are growing in strength. From the metals, natural resources, energy and food, these markets are rebounding strongly and they’re poised to continue rising in the years ahead. Demand is the driving force, making commodities a powerful market. The Chinese are astute investors. They’re buying up lots of hard assets and commodities for infrastructure, and they’re using their dollar re­serves to buy these goods.

The world is on sale and China is the main buyer. The Chinese have already been focusing on re­source rich developing countries, and less on monetary investments. They’re using their reserves to sup­port and speed up overseas expansion and acquisitions by Chinese companies.

This is a growing tendency, and it’s not just China. Other countries are doing the same to lock in natural resources for the future. China’s economy is showing impressive strength, boost­ing raw materials’ consumption even more. Top Chinese officials have been commenting about this in recent weeks.

A research chief, for example, said China should buy gold and U.S. real estate instead of Treasuries. Another top economic official said China should use more of its $2 trillion reserves to buy energy and natural resources. He also believes their 2% gold reserve is too small, even though China has al­ready increased their gold reserves about 75% over the last five years.

As for gold, its main purpose is money. Gold is the ultimate currency, it’s a safe haven and it thrives during economic uncertainty. Gold and commodities tend to move together in a general wave but it will outperform or underperform the other metals and commodities at times.

China is on the mend and its plans to add more gold to its reserves is very bullish for gold. China could easily overtake India in gold consumption this year, especially since it’s the first nation to rebound from the global recession. Aden Sisters-Read more here-http://www.kitco.com/ind/Aden/aden_aug132009.html

-Marc Faber, why the U.S. has a good chance of hyperinflation. Watch video here-http://articles.moneycentral.msn.com/video/default-ap.aspx?cp-documentid=746c9f1c-e6ce-4fc1-821f-934207a242f5%26tab=Market%20News or http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/a-pessimists-prediction-hyperinflation.aspx?page=all

-The global economy still faces turmoil as government try to figure out how to move out of fiscal rescue packages, which could lead to another two downturns, Deutsche Bank Chief Economist Norbert Walter said Thursday.

In addition, nervousness on the part of major dollar holders could pressure the greenback and lead to a very worrying 2010, Walter said. Norbert said recently in research notes “the world is in trouble.”

“I believe that the rescue packages brought on have been so costly for so many governments that the exit from this fiscal policy will be very painful, very painful indeed,” he said. “Some of us are already talking about a W-shaped recovery. I’d probably talk about a triple-U-shaped recovery because there are so many stumbling blocks here to get out of this.” Read more here-http://www.cnbc.com/id/32396144/

-Taleb: You Fools Don’t Understand That We’re Doomed. Watch video here-http://www.businessinsider.com/henry-blodget-taleb-you-fools-dont-understand-that-were-doomed-2009-8

-Entering the Greatest Depression in History. More Bubbles Waiting to Burst. After the last Great Depression, Keynesian economists emerged victorious in proposing that a nation must spend its way out of crisis. This time around, they will be proven wrong. The world is a very different place now. Loose credit, easy spending and massive debt is what has led the world to the current economic crisis, spending is not the way out.

The world has been functioning on a debt based global economy. This debt based monetary system, controlled and operated by the global central banking system, of which the apex is the Bank for International Settlements, is unsustainable. This is the real bubble, the debt bubble. When it bursts, and it will burst, the world will enter into the Greatest Depression in world history. Read more here-http://www.globalresearch.ca/index.php?context=va&aid;=14680

-Bank of England: recession was deeper than feared and recovery will be slow. The Bank of England warned today that Britain’s recession was deeper than feared and a recovery is likely to be slow and protracted. Read more here-http://www.telegraph.co.uk/finance/financetopics/recession/6015063/Bank-of-England-recession-was-deeper-than-feared-and-recovery-will-be-slow.html

-U.K. Unemployment Climbs to Highest Level in 14 Years. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aqN.ge6TftbY

-UK risks a Japan-style lost decade, BoE will warn. Britain has not yet shaken off the risk of slumping into a Japan-style “lost decade”, the Bank of England will this week indicate as it downgrades its growth forecasts, and casts deflation as a significant threat. Read more here-http://www.telegraph.co.uk/finance/economics/6001261/UK-risks-a-Japan-style-lost-decade-BoE-will-warn.html

-‘Lost Couple of Decades’ Looming for U.S. Economy. The U.S. economy may be just as sluggish during the next 20 years as Japan’s economy was in the last 20, according to Comstock Partners, a money manager founded and run by Charles Minter. Stimulus programs and a surging money supply aren’t likely to “solve a problem of excess debt generation that resulted from greed and living way beyond our means,” the firm wrote yesterday in an unsigned report on its Web site.

“We could wind up with a lost couple of decades.” The U.S. is headed for “a deleveraging period” in which the amount of so-called private debt, including consumer borrowing, collapses as government borrowing explodes, Comstock wrote. Assuming that private borrowers pay down debt at the same pace as they did in Japan after its 1980s economic bubble burst, the savings rate will climb to about 10 percent in 2018, the report said. The estimate was made in a study by the Federal Reserve Bank of San Francisco that Comstock cited.

It’s more than double the 4.6 percent rate for June. Citing the study in addition to its own research, Comstock wrote that reduced borrowing may curtail growth in U.S. consumer spending by 0.75 percentage point annually on average during the next nine years. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aX39_VW6pf3U

-Retail Sales in U.S. Unexpectedly Declined in July. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aqQ7lelIST9g

-Poor sales lead to shuttered U.S. stores. Small business owners say weak spending is their biggest problem, according to a new survey and few see improvement on the horizon. Read more here-http://money.cnn.com/2009/08/11/smallbusiness/poor_small_business_sales.smb/index.htm

-Over 30,000 U.K. firms in danger of failing by end of 2010. Analysts predict that over 30,000 companies could go into liquidation before the end of next year, after official figures showed that company failures have reached their highest ever level. Read more here-http://www.telegraph.co.uk/finance/financetopics/recession/5990424/Over-30000-firms-in-danger-of-failing-by-end-of-2010.html

-Consumer, Celebrity Bankruptcies May Hit 1.4 Million. Consumer bankruptcies show no sign of abating after rising more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get, according to the American Bankruptcy Institute.

More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said in its latest report on Aug. 4. The increase came after a 36.5 percent rise in personal bankruptcies nationwide in the first six months, to 675,351, according to the ABI research group, which interprets data collected by the National Bankruptcy Research Center.

“Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,” ABI Executive Director Samuel Gerdano said in a statement. The group, composed of lawyers, accountants, bankers and judges, is based in Alexandria, Virginia.

Debt problems don’t stop with sub-prime borrowers. Celebrities who filed for bankruptcy in July included movie actor Stephen Baldwin, who sought protection from creditors after lenders began foreclosure procedures against his home. Lenny Dykstra filed for Chapter 11 bankruptcy in a petition that says the former Major League Baseball All-Star owes between $10 million and $50 million. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=au04p.PrHKhA

-IMF puts total cost of crisis at £7.1 trillion. The cost of mopping up after the world financial crisis has come to $11.9 trillion (£7.12 trillion) enough to finance a £1,779 handout for every man, woman and child on the planet. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5995810/IMF-puts-total-cost-of-crisis-at-7.1-trillion.html

or http://www.thedailybell.com/bellpage.asp?nid=479&fl;=1

-A special report on ageing populations. Age is creeping up on the world, and any moment now it will begin to show. The consequences will be scary. Read more here-

http://www.economist.com/opinion/displaystory.cfm?story_id=13888045

-Israeli paper says strike on Iran could delay bomb. A major Israeli newspaper ran a front-page story on Wednesday quoting an unidentified “senior defence official” as saying Israel believed a military strike could disrupt what it says is an Iranian nuclear arms programme.

Under a photograph of Israeli Prime Minister Benjamin Netanyahu sitting the previous day in the cockpit of an F-15I long-range fighter-bomber, mass-selling Maariv quoted the official as saying Israel could carry out such a strike without U.S. approval but time was running out for it to be effective. Read more here-http://in.reuters.com/article/oilRpt/idINLC60776820090812

-10 biggest CEO paychecks. Including salary, bonuses, stock and options, these public company CEOs took home pay packages last year worth up to $104 million. Read more here-

http://money.cnn.com/galleries/2009/news/0904/gallery.biggest_ceo_paychecks/index.html or http://www.reuters.com/article/businessNews/idUSTRE57C5AX20090813?feedType=RSS&feedName;=businessNews&rpc;=23&sp;=true

-Back-to-School Shopping Trip Means $999 Bill. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aj5kO8T.h8Aw

-Vintage Bugatti Le Mans Racer May Fetch $3.4 Million at Auction. One of the earliest Bugatti racing cars is expected to fetch up to 2.4 million euros ($3.4 million) at a sale in France, said auction house Bonhams.

The 5-liter “Type 18” was driven by the manufacturer’s eponymous founder, Ettore, at Le Mans in 1912. It will be a highlight of the inaugural sale by Bonhams at the annual “Weekend de l’Excellence Automobile” at Reims on Sept. 26. Read more here-http://www.bloomberg.com/apps/news?pid=20601088&sid;=acT_DRdmJljk

RARE COLOURED DIAMONDS

-The Rare Colored Diamonds Historical Value Tracker system is the perfect tool for investors to view the potential future value of a rare colored diamond based on the current market trend of a particular type of diamond. Track the potential future value of colored diamonds here-http://www.rarecoloreddiamonds.com/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

-Every Argyle pink diamond is 100% natural in colour and clarity. None are ever altered in any way. The transformation from rough diamond to polished stone is managed by Argyle Pink Diamonds’ artisans, and Argyle remains sole custodian from the day it is unearthed until the day it is sold as a polished diamond. Argylepinkdiamonds.com.au

-The process of preparing an Argyle pink diamond for sale is a specialised one. A team of highly trained artisans spend time ‘listening to the stone’, so to speak, before deciding how best to unlock its colour and brilliance with its cut.

The importance of their judgement can’t be underestimated, as the cut can affect the fire or scintillation of the diamond, while colour may be lost if too much of the diamond is polished away. Polished with such artistry and passion it’s no wonder an Argyle pink diamond fascinates like no other. Argylepinkdiamonds.com.au

-Argyle pink diamonds are rare; in fact they are beyond rare. With just an estimated decade of supply remaining in the mine, as time passes the Argyle pink diamond becomes evermore precious. Exactly what gives a pink diamond its color is largely unknown and the subject of ongoing debate, but it’s this intrigue that adds a delightful inimitability to each stone.

It is thought that pink diamonds obtain their colour as a result of pressure beneath the Earth’s surface. As pressure raises the diamond closer to the surface, it is believed that its structure becomes altered, thus absorbing light and producing color.

What is known is that from one hundred miles deep within the Earth’s surface comes the treasure that is the pink diamond. It is so remarkable that nothing compares to its colour and brilliance, and it is substantially more valuable than its white diamond equivalent.

Although the Argyle mine supplies approximately ninety percent of the world’s pink diamonds, astonishingly, a whole year’s worth of production of stones over half a carat would fit in the palm of your hand. The larger rare violet diamonds would barely fill a teaspoon.

They are highly sought after by investors, jewellers and their customers, celebrities, and diamond aficionados. They are prized by all who possess them and revered for their unique provenance, intrinsic beauty and extreme rarity. Argylepinkdiamonds.com.au

-About Argyle Pink Diamonds. Pink Diamonds, produced at Rio Tinto’s Argyle Mine in Western Australia, are highly coveted as the world’s most sought after gems. The Argyle Diamond mine produces more than 90 per cent of the world’s pink diamonds, which are sold in a broad range of colors and sizes to an international customer base. The best stones are reserved for the annual Pink Diamond Tender.

Rio Tinto’s Argyle Pink Diamonds business is located in Perth, Western Australia, alongside its cutting and polishing factory. Pink diamonds’ value is directly related to their rarity. For every colored diamond, there exist at least 10,000 colorless ones because the physical conditions needed to color a diamond naturally occur very scarcely.

Rio Tinto’s Argyle mine occupies the traditional land of the Gidja and Mirriuwong speaking people and neighboring language groups who have a very different view on how the Argyle diamonds became colored.

The Aboriginal people believe that the Argyle mine was created when three women were trying to trap a barramundi fish, however the barramundi was too clever and jumped through the net and landed at the site where the mine was established. It is believed that the colors of the diamonds come from different parts of the barramundi as the fish wiggled through the net, with the pink diamonds coming from the heart of the barramundi. Diamonds.net-https://www.argylepinkdiamonds.com.au/en/docs/Press%20release%20Pink%20tender%209%20Aug.pdf

-About Rio Tinto’s Argyle Diamond Mine. Rio Tinto’s Argyle Diamond mine (100% owned by Rio Tinto), in Australia, is the world’s only consistent supplier of rare pink diamonds and provides a large proportion of the world’s colored diamonds. Production commenced in 1983 and at its peak the mine produced more than 40 million carats per annum.

The discovery of the Argyle diamond deposit is one of innovation, patience, foresight and meticulous attention to detail in an area that is remote, even for Australians. The search for diamonds in the Kimberley region began in 1972 with a number of exciting finds proving uneconomic. However, in October 1979 diamonds were found embedded in an ant hill in the East Kimberley region of Western Australia.

In a classic exploration exercise these discoveries were followed up along a creek bed and led to what is known as the AK1 pipe, the remnant of an ancient volcano and the site of the vast Argyle deposit. Today most of the valley floor is occupied by the Argyle open pit. The Argyle Diamond mine is currently transitioning from an open pit mine to an underground mine, which on current estimates will extend its life to 2018. Diamonds.net-https://www.argylepinkdiamonds.com.au/en/docs/Press%20release%20Pink%20tender%209%20Aug.pdf

-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.

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

COMMODITIES-OIL

-Credit Suisse forecasts growth period for long-term commodity demand. Credit Suisse analysts say they continue to like the long-term story for metal demand, suggesting demand will remain at strong levels in the next 10-15 years. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page67?oid=87321&sn;=Detail

-Is U.S. ‘cash for clunkers’ program salvaging metals prices. Since the U.S. car scrappage scheme started last month, the spot price for aluminum is up 11%. palladium has increased 5% and platinum’s up 6%. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=87373&sn;=Detail

-Crude Oil May Climb to $95 in Early 2010: Technical Analysis. Crude oil may reach $95 a barrel by early next year after rising to a seven-week high this week, according to technical analysis by Auerbach Grayson.

Oil is set to reach $83 a barrel, which corresponds with the 38.2 percent Fibonacci retracement of the range generated by the September contract’s high of $145.96 on July 14, 2008, and the low of $44.28 touched on Feb. 18. The next target of $95 would be a 50 percent retracement.

“The oil market is in a strong position for a further move to the upside,” Richard Ross, a technical analyst at Auerbach Grayson, a brokerage in New York, said in a telephone interview. “There was a 70 percent pullback from the peak last summer to the trough. A 50 percent retracement brings you right to $95.” Read more here-

http://www.bloomberg.com/apps/news?pid=20603037&sid;=a.iYx2FpVhsc

-T. Boone Pickens: I’m long oil. Oil man turned wind power fan T. Boone Pickens sees the price of a barrel of oil rising slightly to $75 by the end of this year and $85 next year. “I’m long oil,” said Pickens in an interview on the sidelines of U.S. Senate Majority Leader and Nevada Democrat Harry Reid’s National Clean Energy Summit, a meeting of industry leaders and policy makers. Pickens has written a blueprint for U.S. energy policy, called the Pickens Plan, that focuses on converting heavy vehicles like big long-distance trucks, to natural gas. Read more here-http://www.reuters.com/article/ousiv/idUSTRE5795OP20090811

-Pemex Needs Oil at $70/Barrel to Sustain Projects. Petroleos Mexicanos, Mexico’s state- run oil company, needs oil to average above $70 a barrel to sustain a $19.5 billion investment plan this year aimed at developing deep-sea wells, Energy Minister Georgina Kessel said.

“Pemex needs to maintain its current levels of investment to develop its reserves,” Kessel, who is also the oil producer’s chairwoman, said in an interview yesterday. “Prices above $70 to $75 a barrel are appropriate to help develop those projects.”

Latin America’s largest oil producer plans to spend a record amount this year and $20 billion annually next year through 2012 to fund exploration in waters deeper than 500 meters (1,640 feet) and at its Chicontepec development. Output is slumping as production at Cantarell, the company’s largest field, drops at a rate twice as fast as Pemex forecast after last year falling the most since 1942. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=asGzrQaF6XmY

-Suncor Shuts Alberta Refinery for 2nd Time in a Month. Suncor Energy Inc. shut units at its Edmonton oil refinery in Canada for the second time in a month and Royal Dutch Shell Plc reported a fault at its Alberta plant, cutting fuel supply just as the region recovers from shortages.

Suncor shut units yesterday after the facility lost steam and hydrogen, the Calgary-based company said in a message on a community hotline. Black smoke was released from the “upset,” the message said. Hydrogen is essential for diesel production. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aWoZOy1EXd9c

U.S. DEFICIT-DEBT-TRADE GAP

-U.S. Posted Record Year-to-Date Budget Gap in July. The U.S. budget deficit reached a record for the first 10 months of the fiscal year and broke a monthly high for July as the recession curbed revenue and the government ramped up spending to rejuvenate the economy.

The shortfall so far for the fiscal year that ends Sept. 30 totalled $1.27 trillion compared with a $389 billion year-to-date gap in 2008, the Treasury said today in Washington. The excess of spending over revenue for July climbed to $180.7 billion compared with a $102.8 billion gap in July 2008 as the government spent more than in any month in U.S. history.

Tax receipts are sliding and spending is surging even as some economists say the recession may have ended. The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts, infrastructure projects and a goal to create or save 3.5 million jobs. President Barack Obama also is pushing a health-care overhaul that may cost $1 trillion over a decade.

“Spending is bound to increase as the year goes along” and money from the stimulus package is distributed, said Stan Collender, managing director of Qorvis Communications in Washington and a former U.S. House and Senate Budget Committee analyst. “That’s good news given the state of the economy. You want to do that, to get the recovery going.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aFygL0KuxEEo

-Soaring deficit may defy forecasts. Stagnant unemployment, shrinking tax revenue and a struggling economy threaten to quadruple the size of last year’s federal budget deficit, raising more questions about the timing of costly proposals to overhaul health care. As the White House and Congressional Budget Office (CBO) prepare to release new deficit estimates this month, several economists say the news is likely to be as bad as or worse than forecasts.

“This is going to be a very depressing outlook,” predicts former CBO director Douglas Holtz-Eakin, top adviser to Republican John McCain in last year’s presidential election. “They have just a nightmare in terms of these health care bills, which do nothing but make things worse.”

A fiscal year 2009 deficit of $1.8 trillion was anticipated by the White House, $1.7 trillion by Congress. Reaching that level would produce a deficit four times last year’s $459 billion deficit, just as Congress is considering health care overhaul plans that could cost $1 trillion over 10 years.

Lawmakers are struggling to pay for a plan with a mix of tax increases on upper-income people and Medicare spending reductions aimed at doctors, hospitals, drugmakers and insurers. Some town-hall forums across the U.S. this month have been disrupted by protests for and against proposals.

While revenue continues to decline, government spending is rising as a result of the $787 billion economic stimulus plan passed six months ago. Stimulus spending will increase in the next few months, says Treasury chief economist Alan Krueger.

Deficits of $1.8 trillion this year and $1.3 trillion in 2010, as predicted by the White House, would add to the federal debt. The current $11.7 trillion debt already equals about $38,500 for every U.S. resident. The recession, now in its postwar-record 21st month, has dealt a worse blow to the budget than the administration expected:

• The economy is set to shrink by 2.6% this year, more than twice what the White House predicted in February and May.

• As a result, tax revenue is down by $353 billion over 10 months, which is about what the White House thought it would lose for the entire year.

• Unemployment, projected at 8.1% this year by the White House, was 9.4% in July. Spending for jobless benefits, Medicaid and Medicare has soared as people have lost work and health insurance. Jobless benefits are costing more than twice what was spent last year.

“The deficit picture is very challenging,” White House budget director Peter Orszag wrote on his blog last month. Sen. Judd Gregg, R-N.H., top Republican on the Senate Budget Committee, says having a deficit at “previously unthinkable levels shows an incredible lack of fiscal responsibility.”

Former CBO director Robert Reischauer, president of the non-partisan Urban Institute, an economics and social policy think tank, says administrations tend to believe that “the harder and faster one falls, the more rapid and steep the recovery.” Read more here-http://www.usatoday.com/news/washington/2009-08-10-deficit_N.htm

-Drowning in debt: Obama’s spending and borrowing leaves U.S. gasping for air. Read more here-http://www.nydailynews.com/opinions/2009/08/09/2009-08-09_drowning_in_debt_obamas_spending_and_borrowing_leaves_us_gasping_for_air.html?print=1&page;=all

-A runaway deficit may soon test Obama’s luck. Read more here-http://www.ft.com/cms/s/0/c24385ce-85ef-11de-98de-00144feabdc0.html

-U.S. Economy: Trade Gap Widens Less Than Forecast on Exports. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=amQbR0Kx3RjM

-The Biggest Holders of US Government Debt. Watch slideshow here-http://www.cnbc.com/id/29880401?slide=16

-Fiscal Meltdown! Hopefully deficits don’t matter, because if they do, then boy are we screwed. Today’s chart was put together by Diapason Securities analyst Sean Corrigan (via Alphaville), and it shows the stunning rise of outlays and similar collapse in receipts. The blue line is the real killer, though, as it shows just how meagre our tax revenue is compared to outlays. Read more here-http://www.businessinsider.com/chart-of-the-day-fiscal-meltdown-2009-8

GEITHNER ASKS CONGRESS FOR HIGHER U.S. DEBT LIMIT

-U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.

“It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,” Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.

A Treasury spokeswoman declined to comment on the letter. Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner’s letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway.

The latest request comes as the Treasury is ramping up borrowing to unprecedented levels to fund stimulus and financial bailout programs and cope with a deep recession that has devastated tax revenues. It is expected to issue net new debt of as much as $2 trillion in the 2009 fiscal year ended September 30 and up to $1.6 trillion in the 2010 fiscal year, according to bond dealer forecasts. Read more here-http://www.reuters.com/article/newsOne/idUSTRE57706N20090808 or http://online.wsj.com/article/SB124970470294516541.html

BANKING CRISIS-NO END IN SIGHT-TOXIC ASSETS

-U.S. Bank Failures Rise to 72 With Collapses in Florida, Oregon. U.S. bank failures rose to 72 this year with the collapse of two lenders in Florida and one in Oregon amid the worst economic slump since the Great Depression.

Regulators shut First State Bank and Community National Bank, both based in Sarasota, Florida, and Community First Bank in Prineville, Oregon, the Federal Deposit Insurance Corp. said in statements yesterday. The FDIC was named receiver. Closing the lenders, with combined assets of $769 million and deposits of $662 million, will cost the deposit insurance fund about $185 million.

Regulators are closing banks at the fastest pace in 17 years as losses mount from unpaid real-estate debt. The FDIC is offering to share losses with potential buyers, reviving a practice used during the U.S. savings-and-loan crisis in the late 1980s. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3r00w0QCe64

-TARP Panel Says Smaller Banks May Need Fresh Capital. Regional and some smaller U.S. banks may need $12 billion to $14 billion in additional capital to cope with troubled loans still on their books, the Congressional Oversight Panel said today in a monthly report.

The panel, which reports to lawmakers and was created to monitor the $700 billion Troubled Asset Relief Program, said the biggest U.S. banks appear prepared to handle more loan losses, particularly the 19 banks that regulators put through stress tests earlier this year. Banks with assets of $600 million to $100 billion may face bigger challenges, the panel said.

Banks of that size “will need to raise significantly more capital, as the estimated losses will outstrip the projected revenue and reserves,” the report said, citing its own loan analysis. The panel is led by Elizabeth Warren, a law professor at Harvard University. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=ai2h2tlUTCjY

-Bad assets may need more support. The U.S. Treasury Department should consider expanding programs to cleanse troubled assets from bank balance sheets if current efforts fail to restart markets or if economic conditions worsen, a U.S. bailout watchdog panel said on Tuesday.

The Congressional Oversight Panel said in its latest monthly report that toxic loans and securities continue to pose a threat to the financial system, particularly for smaller banks that face mounting losses on commercial real estate loans. These banks may need similar stress tests and capital support afforded to larger institutions, the panel added.

It also advocated that stress tests for the largest 19 institutions be repeated if the economy worsens beyond the worst-case assumptions used in initial tests conducted in April. Despite improved financial market conditions, the panel said a “continuing uncertainty is whether the troubled assets that remain on bank balance sheets can again become the trigger for instability.” Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE57A0JO20090811 or http://money.cnn.com/2009/08/11/news/economy/TARP_report/index.htm?postversion=2009081103

-Next Bubble to Burst Is Banks’ Big Loan Values. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&sid;=a04oVutXQybk

-Old Banks, New Lending Tricks. Lenders haven’t sworn off risky financial products. They’ve come up with a slew of new ones. That didn’t take long. The economy hasn’t yet recovered from the implosion of risky investments that led to the worst recession in decades and already some of the world’s biggest banks are peddling a new generation of dicey products to corporations, consumers, and investors. Read more here-http://www.businessweek.com/print/magazine/content/09_33/b4143020536818.htm

UNEMPLOYMENT

-Beware the government’s job figures. In a phone conversation yesterday, John Williams at Shadow Government Statistics warned me not to read too much good news from the better-than-expected jobs figure. The government’s seasonal adjustments aren’t, well, adjusting properly. They’re still keying off “typical” fluctuations in employment.

But of course today’s economic climate is anything but typical. Yesterday the official unemployment rate ticked down a tenth of a percent to 9.4%, but according to Williams it should have ticked up a tenth of a percent to 9.6%. Read more here-http://blogs.reuters.com/rolfe-winkler/2009/08/08/beware-the-jobs-number/

-The number of Americans filing first-time claims for jobless benefits unexpectedly rose last week, while the number of people on unemployment rolls dropped to the lowest since April, signalling the labour market may be stabilizing as the recession eases.

Applications rose to 558,000 in the week ended Aug. 8 from a revised 554,000 the week before, the Labour Department said today in Washington, while staying under 600,000 for a sixth time. The number of people collecting unemployment benefits fell by 141,000 in the week ended Aug. 1 to 6.2 million. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=azzuTZ4KgoU0

-U.S. State unemployment rates continue to climb. Read more here-http://www.examiner.com/x-2508-Frugal-Family-Examiner~y2009m8d9-State-unemployment-rates-continue-to-climb

-The Labour Department reported that the unemployment rate actually decreased from 9.5% to 9.4% during July. This is the first decrease in the unemployment rate since April 2008. For some perspective on the current state of the labour market, today’s chart illustrates the unemployment rate since 1948.

Today’s chart illustrates that despite this month’s encouraging decline, there was only one general period in the post-World War II era during which the unemployment rate was higher than the current rate of 9.4% (i.e. June 1982 – June 1983).

It is worth noting, however, that a one-month decline in the unemployment rate (even a small decline) after a significant spike (i.e. the unemployment rate spikes by 1.5 percentage points or more) has tended to occur slightly after a recession had ended. Read more here-http://www.chartoftheday.com/20090807.htm?T

Source: www.chartoftheday.com

STOCKS-THE LATEST FED BUBBLE-INSIDER SELLING-PULLBACK COMING

- Are the government programs supporting the financial sector reinflating global stock markets even as economies stumble? The Federal Reserve has spent the past year cleaning up after a housing bubble it helped create. But along the way it may have pumped up another bubble, this time in stocks.

“This is the most speculative momentum-driven equity market since the early 1930s,” Gluskin Sheff economist David Rosenberg wrote in a note to clients Monday. Of course, stocks have rallied in part because investors perceive the worst-case scenario a 1930s-style Depression is off the table. And while the gains have been remarkable, they come after an even bigger decline. The S&P; is still down 16% since Lehman Brothers collapsed in September.

But while most people take the rise in stocks as a hopeful sign for the economy, some see evidence that the Fed has been financing a speculative mania that could end in another damaging rout. Read more here-http://money.cnn.com/2009/08/11/news/economy/bubbly.fortune/index.htm?postversion=2009081114

-History shows that insiders are worth paying attention to, because they’re the ones on the front lines. And insider sales now stand at levels not seen since late 2007, right before the current bear market began. Here’s the big picture:

An insider gauge tracked by Market Profile Theorems, a Seattle research shop, moved into bearish territory on July 31 – for the first time since November 2007.

An insider sell-buy ratio tracked by Thomson Reuters has been hovering around bearish levels not seen for years. It recently registered a 53, meaning insiders pulled $53 out of the market for every $1 in stock they purchased.

Another insider sell-buy ratio, tracked by Vickers Stock Research, is now “well within the bearish range,” says David Coleman, who analyzes insider activity for Vickers. It hasn’t been so high since November 2007.

Also consider the Barron’s “Insider Spotlight,” a weekly rundown of the top 10 insider purchases and sales. In the past two weeks, the buyers have accumulated $53.9 million in stock. Meanwhile, the sells amount to $640.2 million. That’s a historically very high ratio of 1:11.9.

Although the level of insider selling is alarming, it’s important to note that the very low levels of buying are particularly alarming. Insiders sell stock for many reasons, but they generally only buy stock for one reason: they believe the stock is going up.

Despite the fact that the media is reporting an end to the recession, a bottom in housing, and a trough in earnings, we are witnessing a vote of zero confidence from the people who know these companies better than anyone else. Could this be a sign that the underlying economy is still in fact very weak? We think so. Chris Wood Casey Research

-RBS uber-bear issues fresh alert on global stock markets. Three-month slide could hit record lows, Royal Bank of Scotland chief credit strategist Bob Janjuah predicts. “We are now in the middle of a parabolic spike up,” he said in his latest confidential note to clients.

“I expect this risk rally to continue into and maybe through a large part of August. What happens after that? The next ugly leg of the bear market begins as we get into the July through September ‘tipping zone’, driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets.”

The key indicators to watch are business spending on equipment (Capex), incomes, jobs, and profits. Only a “surge higher” in these gauges can justify current asset prices. Results that are merely “less bad” will not suffice. He expects global stock markets to test their March lows, and probably worse. The slide could last three months. “A move to new lows is highly likely,” he said. Read more here-http://www.telegraph.co.uk/finance/markets/6018076/RBS-uber-bear-issues-fresh-alert-on-global-stock-markets.html

-Templeton’s Mobius Says Stocks Face 30% ‘Correction’. Mark Mobius said global stocks may drop as much as 30 percent following their recovery from last year’s rout as companies take advantage of the rebound to sell more shares.

“When you have these rapid increases, almost without correction, you will definitely have a correction at some point, so we can expect a lot of volatility,” Mobius, the executive chairman of Templeton Asset Management Ltd., said in an interview in Kuala Lumpur today. “Increases of 70 percent can be followed by decreases of 20 to 30 percent.” Read more here-

http://www.bloomberg.com/apps/news?pid=20603037&sid;=a2uzw71az3O0

-Dow Theory shows buy signal but pullback due. Read more here-http://www.reuters.com/article/ousiv/idUSTRE57932P20090810

-VIX Signals S&P; 500 Swoon as September Approaches. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aK8qWUROcAn4

REAL ESTATE-MORTGAGES-FORECLOSURES

-As homeowners head ‘underwater,’ another housing crisis looms. Almost half of homeowners with a mortgage could be underwater by 2011, says Deutsche Bank. We asked how that will play out. Read more here-http://money.cnn.com/2009/08/12/real_estate/housing_mortgages_underwater.fortune/index.htm?postversion=2009081212

-Home price declines in the U.S. accelerated in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosures weighed on values. The median price of an existing single-family home dropped to $174,100, the most in records dating to 1979, the National Association of Realtors said today.

Total sales rose 3.8 percent to a seasonally adjusted annual rate of 4.76 million from the first quarter and fell 2.9 percent from 2008’s second quarter. Prices fell in 129 out of 155 metropolitan areas from a year ago and 39 states experienced sales increases from the first quarter, the Chicago-based realtors group said. Sales in U.S. housing market at the heart of the global recession are beginning to stabilize, said Patrick Newport, an economist for Lexington, Massachusetts-based IHS Global Insight.

“I don’t think we’re at a bottom yet in home prices,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. “There’s also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there’s a pent-up supply out there.” Home prices are falling even as a survey of economists indicates that the U.S. economy is recovering from the worst recession since the 1930s. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=axsovog3CuAE

-U.K. Housing Market Showed Signs of Improvement. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aWUfCAKhqg5A

-Almost one-quarter of U.S. mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb, Zillow.com said.

Homeowners are being hurt by price declines. The estimated median value for single-family houses slid to $186,500 in the period, a 12 percent drop from a year earlier and the 10th consecutive quarterly decrease, the Seattle-based real estate data service said in a report today.

“The negative-equity rate will rise and spin off more foreclosures,” Stan Humphries, Zillow’s chief economist, said in an interview. “I see a substantial downside risk to prices and don’t think we’ll see a bottom until the middle of next year.”

The U.S. housing market is being hindered even as the pace of job cuts and price declines slows. Payrolls fell by 247,000 in July, after a 443,000 loss in June, the Labor Department said. Home prices in 20 major cities declined 17 percent in May from a year earlier, the smallest drop in nine months, according to the S&P;/Case-Shiller index.

Home values dipped in the second quarter from a year earlier in almost 90 percent of the 161 U.S. metropolitan areas surveyed by Zillow, the company said. Twenty-three percent of mortgage holders were underwater at the end of June, Zillow said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=arpJHI9U42Rs or

http://www.reuters.com/article/ousiv/idUSTRE57A0K720090811

-Foreclosure filings in the U.S. climbed to a record for the third time in five months in July as falling home prices and the recession left more homeowners unable to keep up payments or refinance.

A total of 360,149 properties received a default or auction notice or were seized last month, according to data seller RealtyTrac Inc. One in 355 households got a filing, the highest monthly rate in RealtyTrac records dating to January 2005, the Irvine, California-based company said in a statement.

“We’re in a deep hole,” Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., said in an interview. “There is a whole new wave of foreclosures tied to the cyclical dynamics of the economy.”

Foreclosures increased as the U.S. recorded another 247,000 job losses in July and home prices fell, leaving an increasing number of mortgage holders owing more than their properties were worth. The median price of an existing single-family house dropped 15.6 percent to $174,100 in the second quarter, the most in records dating to 1979, the National Association of Realtors said yesterday. Almost one-quarter of U.S. mortgage holders are underwater, property data firm Zillow.com said Aug. 11.

“There are a slew of factors showing fundamental weakness on the demand side: tighter underwriting, job loss, investors who’ve been badly burned,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate in Los Angeles. “We have not seen the bottom of the housing market.” Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aGAr2pZ9UC1o

-These luxury homes have been stuck on the market for months. Read more here-http://money.cnn.com/galleries/2009/fortune/0908/gallery.unsold_million_dollar_houses.fortune/index.html

-The incredible shrinking home. The size of newly built homes fell in 2008 for the first time in almost 15 years. Is the McMansion era on the wane? Read more here-

http://money.cnn.com/2009/08/07/real_estate/shrinking_home/index.htm?postversion=2009081115

© 2010, Worldwide Precious Metals.
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The Goldbugg Report – August 18, 2009
Posted by Worldwide Precious Metals on Tuesday, August 18, 2009

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