Newsroom
The Goldbugg Report – August 25, 2009
August 25, 2009
WORLD FINANCIAL REPORT ON RADIO AUG 21 2009 SHOW
-Barclays, JPMorgan Case and four other financial companies predict big gains in precious metals in the next four months…
-Chinese investment in silver could push prices higher. Watch the video.
-“The Week in Review” from PMI
The Week in Review
Another week of “unexpected” events is behind us.
It was all over the media that China’s stock market had topped and was heading back down. On Monday they were down 20% over the last two weeks. The US market, after a sharp downward turn on Monday, “unexpectedly” moved higher the rest of the week.
The Cash for Clunkers program ends on Monday, much to the relief of the auto dealers. It seems the US government has yet to pay many of the dealers who have submitted their paperwork for the reimbursements. Next up? Dollars for Dishwashers! Rumor has it that a rebate program is in the works for appliances to try to nudge consumers into spending to upgrade their appliances. We’ll see if the consumer will take the “buy now, save later” stance the government is trying to push them into.
The annual Fed conference in Jackson Hole is underway this week so Mr. Bernanke has the week off from campaigning to keep his job. The media has been having a field day speculating on whether or not he will remain as Fed Chairman. Wall Street wants him to remain, but political pressure appears to be ramping up to remove him.
Warren Buffett, in an op-ed piece in the New York Times, appears to see the inflation graffiti on the wall. Key statements from his piece: “With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.” And regarding politicians: “Since they will “correctly perceive” that raising taxes or cutting spending will hurt their re-election chances, legislators may instead “opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes.” He went on to compare the massive amount of money being printed to global warming, saying “Unchecked greenback emissions will certainly cause the purchasing power of currency to melt.”
First time applications for unemployment benefits “unexpectedly” rose again. Continuing claims for unemployment also moved higher again.
As we mentioned in our August 14th memo, foreclosures set a record in July. On Thursday, the Mortgage Bankers Association said that late payments on US mortgages also increased to a record with one in eight homeowners delinquent or already in the foreclosure process. Many of these delinquent loans are prime fixed rate loans and can be attributed to unemployment. With unemployment numbers still rising, there is a potential for another large wave of home foreclosures in the near future only this time it will be on prime loans, long considered to be relatively low risk loans.
The dollar index moved down for the week, as the dollar fell against the euro and yen once again.
Oil “unexpectedly” rose on Monday, even as the stock market was on its way down. It continued to trade above 70 dollars and began moving higher. On Friday the price of oil touched its high for the year.
Volatility should be expected to continue. We continue to feel that precious metals are poised to move higher from their current levels. Nobel Prize – winning economist Joseph Stiglitz added his voice to the call for a new global reserve currency to replace the US dollar on Friday and as the calls to replace the dollar continue, its value could slide even further. The stock market continues to trade on emotion, rising higher despite fundamentals that should have caused a dip back downward. Central banks are holding on to their gold and in many cases, increasing their holdings. There were no central bank gold sales this week at all. Taking advantage of any price dips at these levels to add to or start a precious metals portfolio could help you achieve the goal of long term profitability in precious metals. Remember that the key to profitability through the ownership of precious metals is to own and hold for the long term. The key to owning and holding is never to overextend yourself.
Trading Department – Precious Metals International, Ltd.
GOLD
-Barclays, JPMorgan Case and four other financial companies predict big gains in precious metals in the next four months: http://www.bloomberg.com/apps/news?pid=20601012&sid;=au9vWBOfMd9g
-The longer term view is more positive for the price of $Gold as the U.S. economic policy situation is so bleak. The reason for that is politics. The Obama Regime will take action in an attempt to bolster its collapsing political power. Second, Chairman Bernanke is in reelection mode as his appointment as Chairman is up for renewal in January. Together, these factors mean more U.S. government spending and the Federal Reserve monetizing the U.S. deficit created by that spending.
Slowing money supply growth in the U.S. translates into slower economic growth, regardless what the statistics for the last six months might suggest. Without aggressive monetization of the U.S. government deficit, U.S. money supply growth will continue stagnating. Slower money supply growth translates into lackluster U.S. economic growth which does not fit the political agenda of either the Obama Regime or Chairman Bernanke.
No government, and that includes the U.S., can make a money supply grow without direct monetization of the national debt. Federal Reserve policy is clearly headed in that direction. As money is fungible, whether the Federal Reserve buys U.S. Treasury debt directly or around about by buying other debt in the U.S. market makes no difference. Consequences are the same, and the discussion on the matter is trivial.
The Federal Reserve has no choice but to move toward direct financing of the Obama Deficit. The equivalent of cash delivery from the Federal Reserve to the Treasury is about to begin. The U.S. money supply will again grow as that is done. Owning Gold may be the only way to protect wealth from the political agenda of the Obama Regime and the Federal Reserve “printing” dollars without restraint in order fund that agenda. Ned W. Schmidt-Read more here-http://news.goldseek.com/NedSchmidt/1250575440.php
-We are in the optimum seasonal buying time for Gold. “So of the six months between early August and early February, gold’s massive seasonal autumn rally, fully four are gold’s biggest months of the calendar year. You absolutely want to be long gold, and indeed the entire PM-complex since everything PM-related ultimately follows gold’s lead, in September, November, December, and January. Seasonal-demand-driven price increases are very compelling then. Adam Hamilton
-John Embry August gold commentary. All things considered gold’s been spectacular. Read more here-http://www.sprott.com/Docs/InvestorsDigest/2009/Aug_21_2009.pdf
-Why Gold Will Break US$1,000. Read more here-http://www.321gold.com/editorials/charnock/charnock081709.html
-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1250520134.php
-Middle East investors join flight to safety of gold. Read more here-http://www.reuters.com/article/reutersEdge/idUSTRE57G1UK20090817
-King World News interviews GATA’s Adrian Douglas. Listen here-http://www.gata.org/node/7690
-Adrian Douglas: Central banks are NOT ordinary gold investors. Read more here-http://www.gata.org/node/7697
-Last Friday, the central banks of Europe extended their landmark agreement on gold sales. 18 national central banks, along with the European Central Bank itself, signed the third Central Bank Gold Agreement. CBGA 3, like its two predecessors, has major implications for gold that investors need to understand. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton081409.html
-Adrian Douglas: GFMS cooks books to make gold look bad. Read more here-http://www.gata.org/node/7699
-Gold Demand Shrinks to Six-Year Low on Recession, Council Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601102&sid;=ayr30bHgFXQE or http://uk.reuters.com/article/idUKTRE57I0U020090819
-Panning for gold makes a comeback in bad economy. Read more here-http://www.usatoday.com/money/markets/2009-08-17-panning-gold-economy_N.htm
-Mounties still mulling mint’s missing millions. Read more here-http://www.canada.com/Mounties+still+mulling+mint+missing+millions/1900030/story.html
SILVER
Chinese investment in silver could push prices higher:
Video: http://www.youtube.com/watch?v=PqFpl31UwPI
Gold to silver ratio at 80 to 1 with gold at $3,000 the silver price would be $37.50
Gold to silver ratio at 70 to 1 with gold at $3,000 the silver price would be $42.86
Gold to silver ratio at 60 to 1 with gold at $3,000 the silver price would be $50.00
Gold to silver ratio at 50 to 1 with gold at $3,000 the silver price would be $60.00
Gold to silver ratio at 40 to 1 with gold at $3,000 the silver price would be $75.00
Gold to silver ratio at 30 to 1 with gold at $3,000 the silver price would be $100.00
Gold to silver ratio at 20 to 1 with gold at $3,000 the silver price would be $150.00
Gold to silver ratio at 15 to 1 with gold at $3,000 the silver price would be $200.00
-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1250519310.php
-Silver market analyst Ted Butler interviewed by King World News. Listen here-http://www.gata.org/node/7694
-Silver: the Future of Jewelry. Read more here-http://seekingalpha.com/instablog/407380-jeff-nielson/23365-silver-the-future-of-jewelry
-Silver Outperforms Gold, So Should I Sell My Metals or Buy More? Read more here-http://news.goldseek.com/GoldSeek/1250489040.php
-David Morgan interviewed on the gold-silver ratio. Tom Jeffries: David Morgan is one of the world’s foremost experts on silver. I would like you to check in with David’s excellent Web site, silver-investor.com. That’s where you can check out David’s monthly investment newsletter, The Morgan Report. And there is a ton of excellent resources for the investor of all stripes.
You talk many times in your lectures, and you’ve talked in The Morgan Report recently, about something called the gold/silver ratio and where it’s going. Can you talk a little bit about that?
David Morgan: It is a controversial subject. There are a lot of people who don’t put any credence into it at all, there are some people who put a whole lot of credence into it, and then there are people, like me, who absolutely put some credence into the ratio.
The basics of it are this and I like to go for the long-term version, so starting at the 12th century or so and going to present time, if you looked at every one foot in length being 100 years (or one century), you would see throughout the entire timeframe that you would have several feet in length and it would only be in the last 19 inches of that chart where the ratio got above 16 to 1. (Note: a discussion of this is done by Franklin Sanders in his book Silver Bonanza.)
In fact, the ratio from the 12th century to roughly the 17th century was about 12 to 1, which is what I call the “natural ratio” at that time, and I define the natural ratio as the amount of silver to gold in the earth’s surface. Right now it’s less than 12 to 1, having dropped down to about 8 to 1, which means that there’s about eight ounces of silver in the earth’s surface for every ounce of gold.
So that’s the natural ratio, and that ratio held for hundreds and hundreds of years with the free market making the determination—amazing! Then, Sir Isaac Newton monetized it at a ratio of 15.5 to 1 after England was having a terrible time with their fiat money system. Newton came in and put them on a gold standard and then, with his brilliance, he picked a number basically based on the marketplace (at that time), which determined that the correct ratio of silver to gold was 15½ ounces of silver to 1 ounce of gold.
And that’s what we called the monetary of the classic ratio, and that held roughly from the 17th century for hundreds of years through about the 1873 timeframe. Then there was The Crime of 1873, which we don’t have time to go into, but that was roughly where silver was demonetized in the United States, and after that, you’ve seen the ratio undergo some really wide swings.
It’s gone up as far as 100 to 1 a couple of times, and we’ve seen it just kiss the classic ratio of 16 to 1 for a day. In modern times, meaning during the last big run-up in January of 1980, it got back to classic ratio, but again, it was only for a day or two at the most. And then the ratio dropped off.
So having given you all that background, what does it mean? For some it means you can trade the ratio, which is something that I do personally. Secondly it’s a good indicator for the overall direction of the market as far as I’m concerned. When silver’s leading gold, we’ve got more momentum in the metals than when it’s not, and silver has basically outperformed gold since 2003 until recently. In other words, in the ratio from 2003, the bottom of the silver market, and when gold was at $252 in 2000, silver went from the 80 to 1 ratio down to about 55. Currently it is around the 65 to 1 level.
And it was working its way even lower when we had this credit crisis surface, which didn’t surprise me. We got a big spike on the ratio and actually it got to around 90 to 1—again, very temporarily, maybe for a day or two.
I think it shows that silver is still undervalued to gold, but I’m open-minded enough to think that maybe something else is going on. In an absolute all-out deflation, which would be the better gold or silver? The preponderance of evidence is that gold does better. I wrote a paper on this; it was in The Morgan Report, and I also did a couple of speeches on this subject. The record is mixed as far as how silver does in a deflation.
Gold is pretty much known to do well in deflations, and this is all history. And because it is history, it doesn’t absolutely guarantee you that the next time around gold will do great in a deflation, but it certainly implies that it will.
As far as silver is concerned, there have been times that silver did better than gold in a deflation, and many times where it did not. But overall it’s done fairly well and it held its purchasing power, so even in a deflationary scenario I wouldn’t give up on silver. But as far as what will it do, if we look at it today we would say gold has actually done better than silver here in the last several months, because the ratio has gone from the 55 to 1 back to around the current 65 level.
Regardless, the overall perspective would be, how is silver doing against all other financial assets, including gold? And the answer to that is, essentially, gold has done best against all other financial assets, the general equities, the mining stocks, housing sector, bonds; and silver has done better than the base metals and most other sectors.
Silver is partly industrial and partly monetary and you can argue all day if it’s both or not. I’m absolutely convinced that it’s both. I’ve never argued that silver is just money. I have argued very strongly that silver is money but it’s not only money; it’s certainly an industrial metal as well.
In summary, if our readers think as I do that the main problem ahead is a currency crisis with the U.S. dollar, then I would urge you to study what silver did during the last period (most recent) during a prelude to a currency crisis. Basically, it outshone almost everything! The problem is people are too shortsighted and look out only so far, not realizing that once everyone understands that the death of the dollar is imminent, there will be a mad rush for the precious metals both gold and silver! Read more here-http://news.silverseek.com/SilverInvestor/1250255996.php
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week-Credit May Crunch Again Before Getting Back To Normal. It would be very unusual if we emerged from a credit crisis with a simple V-shaped recovery. (Or A-shaped if we think in terms of credit spreads) Going back to the Great Depression, we experienced a few sucker’s rallies before credit markets ultimately normalized.
As this chart from Econompic Data shows, while credit spreads have recovered from their recent spike, they may still get worse before getting better. Read more here- http://www.businessinsider.com/chart-of-the-day-corp-spread-2009-8
-Chart of the week-Americans Still Deluding Themselves About Their Homes. Americans either don’t know or don’t want to admit how much money they’ve lost in their homes. Real estate website Zillow.com has what it calls its “Misperception Index,” which measures the gap between the percentage of homeowners whose homes have dropped in value, and the percentage who say their homes have dropped in value.
As you can see, in Q109, it was a very tiny gap. The horrible economy forced people to be realistic. But here we go again, just as things start to turn around, and the housing market shows the tiniest signs of life, people are deluding themselves about their homes once again. Read more here- http://www.businessinsider.com/chart-of-the-day-zillow-index-2009-8
-“There are indications that the severest phase of the recession is over.” Harvard Economic Society (HES) January 18, 1930
-It is impossible to maintain a free society when more and more people look to the state to provide what Americans used to provide for themselves. Warren Pollock
-It may be true that you can’t fool all of the people all of the time, but you can fool enough of them to rule a large country. Will Durant-Bio here-http://en.wikipedia.org/wiki/Will_Durant
-You can fool some of the people some of the time and some of the people all of the time. But that’s usually enough. Uncle Milte-Bio here-http://en.wikipedia.org/wiki/Milton_Berle
-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
-“Always love your country but never trust your government! “That should not be misunderstood. I certainly am not advocating civil disobedience, must less insurrection or rebellion. What I am advocating is to not expect too much from government and be wary of it power, even the power of a democratic government in a free country.
“Ours is one of the mildest, most benevolent governments in the world. But it too has the power to take your wealth and forfeit your life. A government that can give you everything can take everything away.” Bob Novak-Bio here-http://en.wikipedia.org/wiki/Robert_Novak
-”If it goes down I’ll buy some more, and if it goes up I’ll buy some more. I periodically buy some gold. I don’t have a method to it. I just buy it.” Jim Rogers
-U.S. Stocks Are ‘Dramatically Overpriced,’ Tice Says. U.S. stocks are “dramatically overpriced” because the fallout from the financial crisis will continue to hurt consumer spending, said David Tice, Federated Investors Inc.’s chief portfolio strategist for bear markets.
The Standard & Poor’s 500 Index has climbed 50 percent from a 12-year low on March 9 on speculation the economy is recovering from the worst contraction since the Great Depression. The rally pushed the index’s price relative to trailing 12-month operating earnings to 18.65, the most expensive since December 2004, according to weekly data compiled by Bloomberg.
“I’d love for prosperity to return, unfortunately I think you need to be realistic and it takes time to work off these excesses” from a bubble in credit markets, Tice said in an interview with Bloomberg Television.
Tice, who predicts that the S&P; 500 will eventually slump to 400 points, said he would add to short positions should the rally continue. The S&P; 500 rose to a 10-month high of 1,012.73 last week. The main benchmark for American equities hasn’t closed below 400 since 1992. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=avmwu6UfHB4o
-PIMCO’S El-Erian: U.S. stock rally has hit a wall. Mohamed El-Erian, the chief executive of top bond fund manager PIMCO, on Tuesday said the rally in U.S. stocks had topped out because valuations have shot up too quickly. Asked if U.S. stocks have hit a wall, El-Erian told Reuters Television: “I think we have, and I think what you are seeing is a massive tug of war going on.”
“On the one hand, pushing stocks higher are powerful technicals, the fact that very low yields on the front end have pushed cash out of the money market segment and into the risk assets,” El-Erian said. “But on the other hand, the fundamentals are such that valuations are ahead of fundamentals. What you have seen over the last couple of days is a recognition that fundamentals matter.”
The global equities rally has been tempered by surprisingly weak economic data. On Tuesday, data showed U.S. housing starts unexpectedly fell in July, while the inventory of total houses under construction fell to a record low. Last week the Reuters/University of Michigan consumer sentiment survey showed a growing number of Americans were increasingly worried over jobs and wages.
El-Erian, who oversees $850 billion in assets for Pacific Investment Management Co, including equities, said U.S. stock markets have been on a “sugar high” as recent corporate earnings have surpassed expectations. But for the most part profitability has been driven by cutbacks in layoffs and capital spending, he said.
Moreover, the nascent economic recovery in the United States faces massive headwinds, including high unemployment, which translates into a vulnerable consumer, and weak private demand. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE57H3F420090818
-Pacific Investment Management Co. strategic adviser Richard Clarida said growth of about 2 percent paired with an elevated unemployment rate will likely be the “new normal” as the U.S. economy recovers. “We don’t see the V-shaped recovery” experienced in past rebounds from recessions that featured higher rates of growth, as consumption remains low, Clarida said in an interview with Bloomberg Radio in New York.
“Normally when you come out of recession, the best performing sectors tend to be the early cyclicals, retailers, homebuilders, airlines,” he said. “That was true in the first part of this rally, and I don’t think it’s going to be sustainable.” The economy is “really dependent” on sectors driven by public spending, said Clarida, who teaches economics at Columbia University in New York.
Officials at Pimco, the world’s largest bond fund manager, are using the phrase “new normal” to characterize a global economy that will include heightened government regulation, lower consumption and slower growth. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a4T3ElyiwpMA
-Taking Wall Street Advice in Rally Means Owing $6,000. Anyone who did what Wall Street analysts advised last March has only losses after the biggest stock market rally in seven decades. Citigroup Inc., Bank of America Corp. and more than a dozen other firms told clients to purchase European energy producers and U.S. drugmakers while selling banks and retailers, according to combined rankings compiled by Bloomberg.
An investor who used $10,000 to buy companies in the highest-rated industries and bet on declines in the lowest since the advance began on March 9 lost everything and would owe as much as $6,000 to cover bearish trades, the data show. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a8bE_SJ1WAiI
-The pound’s biggest five-month rally in 24 years is ending as the Bank of England floods the shrinking U.K. economy with newly printed cash and slowing inflation precludes higher interest rates to lure investors. The currency soared 23.5 percent from March 10 to Aug. 5 on speculation U.K. assets would rise as the worst financial crisis in six decades eased.
The sharpest increase since 1985 ended Aug. 6 after policy makers said the recession was deeper than anticipated and moved to spur the economy by expanding its purchases of U.K. debt 40 percent to $290 billion. Six days later, central bank Governor Mervyn King said inflation will probably fall below the Bank of England’s target. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=avULD0BWfzPM
-Pension Funds Pare Stocks, Ignoring Economic Rebound. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=amowlMWZN_dc
-Idled cash: more fuel for stocks, or fire hazard? One of the stock market’s favorite accepted nuggets of wisdom is the notion that there’s a pile of money waiting in the wings, itching to jump back into the market. Investors should be careful what they wish for: Such a move is more likely to signal a topping-out in the recent rally than a sign that it will ignite a new run in the market.
In addition, the long-term outlook is clouded. The amount of money investors have liquid when compared with their share holdings is right around the post-World War II average, suggesting that there is no guarantee of a new wave of money into stocks as a result of a pronounced shift in investing preferences. Read more here-
http://www.reuters.com/article/hotStocksNews/idUSTRE57G3SX20090817
-Nassim Taleb told CNBC that the economy will get worse because nothing has changed: “It is a matter of risk and responsibility, and I think the risks that were there before, these problems are still there. We still have a very high level of debt, we still have leadership that’s literally incompetent. They did not see the problem, they don’t look at the core of problem.
There’s an elephant in the room and they did not identify it.” Nassim Taleb, principal of Universa Investments and author of ‘The Black Swan,’ discusses, the markets, the economy and whether Fed Chairman Ben Bernanke should be reappointed. Watch video here-http://www.cnbc.com/id/15840232?video=1212567075&play;=1?__source=CNBC|newsnow|vid4|2009|
-The “Second American Revolution” Has Begun By Gerald Celente. Read more here-http://yonkerstribune.typepad.com/yonkers_tribune/2009/08/the-second-american-revolution-has-begun-by-gerald-celente.html
-Gerald Celente interview. Listen here-http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2009/8/14_Gerald_Celente_files/Gerald%20Celente%2008%3A14%3A2009.mp3
-Martin Armstrong’s August 7, 2009 Cycles & pattern projections. Armstrong talks about the market probably crashing here in this September 2009 cycle & then on to Dow 20,000 through inflation, Gold is in consolidation here then to explode to $2500-$3000.00 with a peak of about $5000.00! Read more here-
http://goldsilver.com/news/newsID/6135/tPath/3/
-U.S. Economy Faces ‘Bumpy’ Recovery, Economist Mickey Levy Says. The U.S. economy faces an uneven recovery from the deepest recession since the Great Depression rather than a rapid rebound, said Mickey Levy, chief economist at Bank of America Corp. in New York.
“My hunch is it’s going to be a bumpy recovery” because of temporary government efforts to boost growth, Levy said today in an interview on Bloomberg Radio. The “cash for clunkers” auto trade-in program, for example, is “borrowing from future auto sales” and “probably borrowing from current non-auto sales” as well, he said. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=amiCPCGx.OJw
-U.S. Initial Jobless Claims Rose by 15,000 to 576,000. More Americans unexpectedly filed claims for jobless benefits last week, indicating companies are trying to cut costs further even as the economy stabilizes.
Applications rose to 576,000 in the week ended Aug. 15 from a revised 561,000 the week before, the Labor Department said today in Washington. The number of people collecting unemployment benefits the week earlier was little changed at 6.24 million.
Companies may keep paring staff in coming months, albeit at a slower pace, and hiring linked to the government’s recovery effort may not gain speed until 2010. While the unemployment rate dipped last month, economists project it will reach 10 percent by early next year, restraining consumer spending.
“The improvement in the labor market has stalled,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto, who had forecast claims would rise to 570,000, “Consumer spending will be pushed back on its heels for a longer time than markets are expecting.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aMhGnVzXaSfM
-Social Security crunch coming fast. Here’s a frightening prediction: The public pension system’s trust fund could go into the red in the next year, far sooner than expected. Will it get the next huge bailout? Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/social-security-crunch-coming-fast.aspx?page=all
-Social Security could face a deficit within two years, according to U.S. Rep. Spencer Bachus. “The situation is much worse than people realize, especially because of the problems brought on by the recession, near depression,” said Bachus. Read more here-http://www.tuscaloosanews.com/article/20090818/NEWS/908189977/1007?Title=Bachus-discusses-Social-Security-health-care
-Pension Plans’ Private-Equity Cash Depleted as Profits Shrink. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=acWVaiPjU5iw
-Europe won’t fully recover from the worst recession since World War II until 2013 even if it returns to a “moderate” pace of economic growth, Morgan Stanley says. Read more here-
http://www.bloomberg.com/apps/news?pid=20601109&sid;=aESlrDgefSAo
-U.K. Has Record July Deficit as Recession Curbs Taxes. Britain had an 8 billion-pound ($13.2 billion) budget deficit in July, the largest for the month since records began in 1993, as the recession ravaged tax revenue and the cost of unemployment benefits surged. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aupHa8rR0Or4
-Darling Says U.K. Recovery at Risk, Treasury Must Keep Spending. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aQ3dscO2N1gk
-Germany in the Era of Hyperinflation. During the hyperinflation in Germany of 1920s, the country’s currency, the mark, went crazy. The government of the Weimar Republic may have been able to clear its debts, but it came at the cost of the citizens’ savings. It’s an era that is still part of the national psyche today. Read more here-
http://www.spiegel.de/international/germany/0,1518,641758,00.html
-Off the Deep End: A Look at the Decline of Dubai. Read more here-http://www.fastcompany.com/multimedia/slideshows/content/dubai.html?page=4
-Swine flu jab link to killer nerve disease: Leaked letter reveals concern of neurologists over 25 deaths in America. Read more here-
-U.S. Workplace Suicides at Record in 2008; Overall Deaths Down. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=auRRpbDk9BYc
-CIA Hired Blackwater for Assassination Program, NY Times Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJDlySvx3aIY
-Israel says UN covering up Iran’s nuclear arms drive. Read more here-http://www.breitbart.com/article.php?id=CNG.40d68219c5c73123c3b3b6ae91c0b1c5.421&show;_article=1
-Iran Gives UN Inspectors Wider Access, Official Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aUqTybhNy6ew
-Blackstone Group LP Chief Executive Officer Stephen Schwarzman’s $702 million compensation made him the highest-paid executive in the U.S. last year, the Corporate Library reported. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ap6saKW9XWVI
-Food Is New Real Estate as Cooking Shows Soar in Cable Ratings. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=agY50CybFhzo
-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
-Hope Diamond to get new setting for anniversary. The Hope Diamond is going bare to celebrate a half-century at the Smithsonian. The mysterious blue gem was donated to the National Museum of Natural History more than 50 years ago and the museum is celebrating by having a new setting designed. Starting in September, the 45.52 carat diamond will be exhibited as a stand-alone gem with no setting.
New York jeweler Harry Winston donated the fabled diamond to the museum and his firm is designing three possible new settings. Starting Wednesday the public is being invited to vote online for their favorite, at http://www.smithsonianchannel.com/hope The winning setting will be announced this fall and the gem will be shown in the setting starting in May, to mark the premiere of a Smithsonian Channel documentary on the diamond.
The Hope has been removed from its setting for cleaning from time to time, but this is the first time it will be on public view by itself. Previously it has been shown in a platinum setting, surrounded by 16 white pear-shaped and cushion-cut diamonds, suspended from a chain containing forty-five diamonds. The Hope will return to this original setting in late 2010.
“This is a rare and exciting opportunity for people to see the Hope Diamond as it has never been seen before,” said museum director Cristian Samper. Formed more that a billion years ago, the diamond was mined in India and later is believed to have been part of the French crown jewels, having been stolen during the French Revolution. It later came into the possession of Henry Philip Hope, whose name it carries.
The Hope Diamond was long thought to have a curse, bringing bad luck to its owners, but Smithsonian officials say it has been kind to them, drawing throngs of visitors. Read more here-http://www.google.com/hostednews/ap/article/ALeqM5j8zd_NkS7nbnC33unIu0oc5M-YSwD9A5NI900
COMMODITIES-OIL-GASOLINE-NAT GAS
-Commodities supercycle still with us and stronger than ever. In 2007, she claimed the current commodities super-cycle would last another 20 years. But given the economic implosion since that time, could it still be true? “Absolutely,” says Carmel Daniele, founder, CEO and CIO of CD Capital. Interview with The Gold Report. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=87737&sn;=Detail
-The U.S. Commodities Futures Trading Commission and the U.K. Financial Services Authority said they are boosting cooperation in their supervision of energy markets. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a8AYMPJAd4Dc
-China, unfazed by failures to invest in Rio Tinto Group and Unocal Corp., will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aTZisOrCq1BY
-China: The new Big Oil. The country is snapping up oil fields from Africa to South America to the Middle East. Soon it may be able to rival the Western giants. Read more here- http://money.cnn.com/2009/08/17/news/international/china_oil/index.htm
-One positive outcome of the financial crisis was that gasoline prices did plunge from their record highs down 60% peak to trough. Beginning at the end of 2008, however, gasoline prices have surged and are currently 61% above their December 2008 lows.
Today’s chart provides some perspective on the recent spike with a long-term view of the average US price for a gallon of unleaded gasoline. It is interesting to note that most gasoline price spikes were a result of Middle East crises and often preceded or coincided with a US recession.
So while gasoline prices are currently well below the record high levels of 2007, this recent rally has brought prices to a level well above what was witnessed from 1984-2004 a two decade span of relative energy price stability. Read more here-http://www.chartoftheday.com/20090814.htm?T
-Natural Gas Falls Below $3, 1st Time Since 2002, on Supply Glut. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aEyz8aqs0q2A
U.S.-CANADIAN DOLLAR
-Pimco Says Dollar to Weaken as Reserve Status Erodes. Pacific Investment Management Co., the world’s biggest manager of bond funds, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy. The dollar will drop the most against emerging-market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. The greenback is losing its status as the world’s reserve currency, he said.
“Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.
The Dollar Index, which tracks the greenback against a basket of currencies. It has fallen 12 percent from this year’s high in March as U.S. authorities pledged $12.8 trillion to combat the recession. China, the world’s largest holder of foreign-currency reserves, and Russia have both called for a new global currency to replace the dollar as the dominant place to store reserves.
“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a3shh_XJwwH8
-Goldman Says Short Dollar Versus Loonie on Growth. Goldman Sachs Group Inc. said to short the U.S. dollar against its Canadian counterpart with a robust economic recovery unlikely and rising oil prices expected to benefit the Canadian currency.
The firm recommended establishing a short position, or bet that the U.S. currency will decline, with a target price of C$1.06. The position should be closed if the Canadian dollar weakens to about C$1.11. One Canadian dollar purchases 91.93 U.S. cents.
The U.S. dollar will remain weak as the economy does “not improve sufficiently this year for foreign investors to consider sizable” investments, according to a Goldman research note today. Canada’s currency will appreciate as oil prices rise, the note said. Crude oil for September delivery climbed above $70 a barrel this week and traded near the highest since June. Crude is Canada’s largest export.
The Canadian dollar has appreciated 12 percent against its U.S. counterpart so far this year. Bank of Canada Governor Mark Carney said at a July 23 conference that “the dollar is an important brake on the pace of growth right now” and that the bank “retains considerable flexibility” to use it “if necessary.” A stronger Canadian dollar squeezes exporters’ profits.
Canada’s central bank has not intervened in foreign- exchange markets to affect the dollar’s value since 1998 and Goldman is betting that will continue. “We doubt Canada as a G-7 nation will actively intervene to directly influence the exchange rate near current levels,” the note said. The Canadian currency is overvalued by 6 percent or 7 percent, the firm wrote, which is “not excessively strong.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aSfRYurrkWvw
WHAT’S DRIVING STOCKS HIGHER?
-Attempting to prevent a collapse of the financial markets, the Fed continues its program of quantitative easing (QE) with aggressive injections of money into the economy by purchasing over a trillion dollars worth of Treasury and agency debt and mortgage-backed securities.
The Fed intended to increase lending activity, yet the banks are simply building cash reserves. Like Japan’s experiment with QE, a massive injection of money into the banking system was almost simultaneous with a bounce in the country’s stock market.
Are investors really encouraged by economic reports and quarterly earnings that are “less bad” than anticipated? Or are false signs of recovery from government intervention propping up the stock market? With last week’s FOMC announcement that Fed purchases of Treasury debt will finish by the end of October and agency debt by year’s end, we may soon find out. Read more here-http://caseyresearch.com/displayCcs.php?e=true
BANKING CRISIS
-Toxic Loans Topping 5% May Push 150 Banks to Point of No Return. More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.
The number of banks exceeding the threshold more than doubled in the year through June, according to data compiled by Bloomberg, as real estate and credit-card defaults surged. Almost 300 reported 3 percent or more of their loans were nonperforming, a term for commercial and consumer debt that has stopped collecting interest or will no longer be paid in full.
The biggest banks with nonperforming loans of at least 5 percent include Wisconsin’s Marshall & Ilsley Corp. and Georgia’s Synovus Financial Corp., according to Bloomberg data. Among those exceeding 10 percent, the biggest in the 50 U.S. states was Michigan’s Flagstar Bancorp. All said in second- quarter filings they’re “well-capitalized” by regulatory standards, which means they’re considered financially sound.
“At a 3 percent level, I’d be concerned that there’s some underlying issue, and if they’re at 5 percent, chances are regulators have them classified as being in unsafe and unsound condition,” said Walter Mix, former commissioner of the California Department of Financial Institutions, and now a managing director of consulting firm LECG in Los Angeles. He wasn’t commenting on any specific banks.
Missed payments by consumers, builders and small businesses pushed 72 lenders into failure this year, the most since 1992. More collapses may lie ahead as the recession causes increased defaults and swells the confidential U.S. list of “problem banks,” which stood at 305 in the first quarter. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aTTT9jivRIWE
-Myron Scholes and Robert Merton shared the 1997 Nobel price for economics, and they are now united in calling for banks to give more accurate valuations on their illiquid assets. Financial institutions should use mark-to-market accounting or list the hard-to-value securities on public exchanges whenever possible, Scholes said in a Bloomberg Radio interview yesterday.
Scholes, winner of the Nobel with Merton for helping invent a model for pricing options, said investors need better data on prices to accurately value the debt and equity securities of banks. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=arI9M7cuFWjI
-Fed Says Banks Tightened Lending in Second Quarter. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=afw0L8L7C2UI
-FDIC May Add to Special Fees as Mounting Failures Drain Reserve. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aqxHLAHU_m2k
COLONIAL BANK-BIGGEST FAILURE SINCE WASHINGTON MUTUAL
-Colonial BancGroup Inc., the Alabama lender facing a criminal probe, had its banking operations closed by regulators and taken over by BB&T; Corp. in the biggest failure since Washington Mutual Inc. collapsed last year. Regulators also shut two companies in Arizona, one in Las Vegas and one in Pittsburgh, pushing the tally of failed banks this year to 77. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aOTAckySeznw or http://money.cnn.com/2009/08/14/news/companies/colonial_bancgroup/index.htm
DELINQUENCIES AT BANKS JUMPED IN THE LAST QUARTER
-On August 17, the Fed released its report on charge-offs and delinquencies that showed big jumps in all categories. The numbers are expressed as a percentage of the loans that are impaired. Delinquencies are loans where payment is over 30 days late. The chart below shows the delinquencies percentage for all loans to the second quarter of 2009. The number jumped to 6.49% and looks to be rising more. The level has exceeded the savings and loan crisis of 1991 when 745 were closed down.
To get an idea of just how serious this might be, I looked at the size of all loans in all banks, which is $6.9 trillion (Federal Reserve report H.8). Multiplying by the percentage of loans that are delinquent yields $448 billion. If half these loans are complete losses and the rest is completely recovered, then only half is the realized loss. That would be $224 billion. The difference between assets and liabilities of the banks is $1.2 trillion. The ratio of losses to this book value is just under 20%.
Some banks cannot afford to lose 20% of their capital base. If a bank already is highly leveraged, this loss could make them undercapitalized and too weak to continue. Obviously others will do just fine. Sometimes it is said that if a bank has 5% charge-offs, it may be ready for takeover. Hundreds of banks will likely be closing in the year ahead. And we start with a bankrupt FDIC to cover hundreds of billions of losses. Casey’s Daily Dispatch
U.S. DEFICIT AT RECORD $1.5 TRILLION-BALANCE SHEET
-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. Read more here-http://www.usatoday.com/news/washington/2009-08-10-deficit_N.htm
-Buffett Says Federal Debt Poses Risks to Economy. The U.S. must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency, billionaire Warren Buffett said.
The “gusher of federal money” has rescued the financial system and the U.S. economy is now on a slow path to recovery, Buffett wrote in a New York Times commentary yesterday. While he applauds measures adopted by the Federal Reserve and officials from the Bush and Obama administrations, Buffett says the U.S. is fiscally in “uncharted territory.”
The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts and infrastructure projects, while the Treasury and the Fed have spent billions more on separate programs to rescue financial institutions and resuscitate the banking system. The U.S. budget deficit is forecast to reach a record $1.841 trillion in the year that ends Sept. 30.
“Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects,” Buffett, 78, said. “For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”
The “greenback emissions” will swell the deficit to 13 percent of gross domestic product this fiscal year, while net debt will increase to 56 percent of GDP, Buffett said. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=a9mG8NMzMGTw
-The size of the Federal Reserve’s balance sheet rose 2.3 percent as the central bank bought more U.S. Treasuries and mortgage-backed securities. Fed assets gained $46.2 billion to $2.06 trillion in the week that ended yesterday, the central bank said today in Washington. Holdings of mortgage-backed securities jumped $66.6 billion to $609.5 billion, and the Fed’s portfolio of U.S. Treasury securities increased $7.1 billion to $736.1 billion. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a0WcpWt3hD.s
FOREIGN PURCHASES OF U.S. ASSETS SLOW
-China reduces holdings in US debt. China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury. China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June.
Japan and the UK second and third largest holders of US debt increased their holdings over the same period. China’s holding of US debt is about 7% higher than at the turn of the year. Read more here-http://news.bbc.co.uk/2/hi/business/8207174.stm or http://www.gata.org/node/7703
-Cross-border flows of capital investments of all kinds have dramatically fallen off. The big picture, as reported in the United States Treasury’s International Capital (TIC) System, shows a decline in the 12-month sum of flows through June.
The annual sum peaked in August 2006 at just under $1.2 trillion of foreign capital flows. That number has collapsed to under $200 billion. The 12-month sum gives a better indication of the situation than the latest monthly data, because numbers jump around surprisingly. The data here were reported August 17, 2009. A big component of flows, investments in all long-term securities over the last 12 months, has dropped almost to zero.
And the composition of investments has shifted, with the world moving away from riskier assets towards Treasuries and government-supported agency debt.
An even closer look into the Treasury debt investment by foreigners shows a dramatic shift from longer-term paper of over one year duration to shorter-term T-bills:
The shift to three-month Treasury bills as the investment vehicle of choice is probably due to foreigners fearing that higher interest rates on the longer-term paper could cause their investments to decline. Perhaps investors also want the flexibility of redeploying their money in other places within a short period of time.
It could be from a lack of confidence in the long-term prospects for the U.S. dollar. Then there is even some speculation that excess dollars created by the Federal Reserve in swap transactions could perhaps be reinvested in short-term U.S. Treasuries to provide liquidity for the U.S. government. An important reason for slowing investments is that the U.S. trade deficit is becoming less negative.
That means foreigners have less money to reinvest in the U.S. from their trade surpluses. The investments of choice, away from the less secure and longer-term and into shorter-term, government-supported debt, suggest that the appetite of foreigners for U.S. investment is waning. Casey Daily Dispatch
BIS-VIEW OF THE FINANCIAL CRISIS
-Increasingly, it seems, we are not alone in our steady pessimism about how long it will take for this crisis be resolved. Bud Conrad, chief economist of Casey Research sent over the annual report from the Bank for International Settlements, along with a snippet summing up their view of the outlook for the economy.
So far, the crisis has developed in five more or less distinct stages of varying intensity, starting with the subprime mortgage-related turmoil between June 2007 and mid-March 2008 (Graph II.1). Following this first stage, during which the primary focus was on funding liquidity, bank losses and writedowns continued to accumulate as the cyclical deterioration slowly translated into renewed asset price weakness.
As a result, in the second stage of the crisis, from March to mid-September 2008, funding problems morphed into concerns about solvency, giving rise to the risk of outright bank failures. One such failure, the demise of Lehman Brothers on 15 September, triggered the third and most intense stage of the crisis: a global loss of confidence, arrested only after unprecedented and broad-based policy intervention.
Stage four, from late October 2008 to mid-March 2009, saw markets adjust to an increasingly gloomy global growth outlook amid uncertainties over the effects of ongoing government intervention in markets and the economy. Stage five, beginning in mid-March 2009, has been marked by signs that markets are starting to show some optimism in the face of still largely negative macroeconomic and financial news, even as true normalization the end of the crisis still appears some way off. Read report here-http://www.bis.org/publ/arpdf/ar2009e2.pdf
A NATION OF PART TIME WORKERS
-Here’s another vivid reason why the unemployment rate and the “10% question” is meaningless. The percentage of workers not working full time for “economic reasons” is nothing like it has been in the past. Today’s chart, put together by the Atlanta Fed, show how many of these forced part-time workers exist compared to the start of the recession. As you can see, we’ve almost doubled this number, which represents vastly higher numbers than in past recessions. Read more here-http://www.businessinsider.com/chart-of-the-day-part-time-for-economic-reasons-2009-8
REAL ESTATE-MORTGAGES-FORECLOSURES
-U.S. Homeowners Cut Asking Prices $27.8 Billion, Led by Nevada. U.S. homeowners cut their asking prices by $27.8 billion with some of the biggest reductions in Nevada and Florida, states hardest hit by the property slump, Trulia Inc. said.
Owners slashed prices by 15 percent in Nevada and by 13 percent in Florida and Arizona in the year through Aug. 1, the San Francisco-based real estate data provider said today. A quarter of home sellers lowered prices at least once, by an average of 10 percent.
“Sellers are resetting their expectations in line with falling prices,” Pete Flint, Trulia’s chief executive officer, said in an interview. “We’re still clearly in a downturn even though we’re coming out of it.”
The median U.S. price of an existing single-family house dropped a record 15.6 percent to $174,100 in the second quarter, according to the National Association of Realtors, whose figures date to 1979. Sales increased 11 percent for new homes and 3.6 percent for existing homes, Commerce Department and Realtors data show, as buyers took advantage of discounts.
Idaho had the second-biggest average reduction at 14 percent, while prices were trimmed 13 percent in Hawaii. The combined value of reductions was $27.1 billion in the year through July 1, Trulia said in its previous monthly report. Sellers of higher-priced properties in states that haven’t been hard-hit during the housing recession may be “catching up with the rest of the country,” Flint said. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid;=av0pts0otNRc
-Southern California Home Prices Fall on Foreclosures. Southern California house and condominium prices fell 23 percent in July from a year earlier as foreclosures dominated sales, MDA DataQuick said. The median price dropped to $268,000 from $348,000 a year earlier, the San Diego-based research company said today in a statement.
The number of homes sold increased almost 19 percent from a year earlier to 24,104 for Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. “There’s still quite a bit of distress out there,” John Walsh, Dataquick’s president, said in a statement. “Even if we are at or near bottom, history suggests we could bounce along that bottom for quite a while.”
Foreclosures accounted for 43 percent of sales, down from 45 percent in June and from a peak of 57 percent in February, MDA DataQuick said. Foreclosures as a proportion of all sales hit the lowest since June 2008. Homes priced at $500,000 and above were 20 percent of transactions, compared with 15 percent in March.
The July median price rose 1 percent from June, the third consecutive monthly increase, according to MDA DataQuick. That was due in part to a larger share of home purchases financed with loans of more than $417,000. About 15 percent of transactions involved such loans, the highest in 11 months. Values are likely to fall more in expensive coastal areas as employers cut jobs in the recession and homeowners reduce asking prices, said MDA Dataquick analyst Andrew LePage. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aN3quz_Z5r8U
-Fed Extends TALF Program for Commercial Real Estate. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aGPi.Lptz2cE
-Manhattan Office Sales Ground to Halt in First Half, CBRE Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aqOtTXdNGV6Y
-U.S. Commercial Property Values Fall as Rent Declines Forecast. Commercial real estate values in the U.S. fell 27 percent in the year through June and rents for offices, shops and warehouse space may continue to drop through 2010 as the recession saps jobs and consumer spending.
The Moody’s/REAL Commercial Property Price Indices fell 1 percent in June and are down 36 percent from their October 2007 peak, Moody’s Investors Service said in a report today. A rebound isn’t likely until the second half of next year, the National Association of Realtors forecast in a separate report.
Unemployment of 9.4 percent, falling industrial production and a drop in consumer spending curbed property demand, NAR said. Falling rental income and scarce credit are hurting both landlords and investors in securities backed by commercial property loans. Defaults and late payments on commercial mortgage-backed securities may surpass 7 percent by year-end, according to research firm Reis Inc.
“It’s too soon to call the bottom,” said Connie Petruzziello, a Moody’s analyst and co-author of the commercial property price report. The 1 percent drop in Moody’s index is the smallest monthly decline since February, when it fell by 0.6 percent. The measure fell more than 7 percent in both April and May. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aQ9I9q6Z0DaM
-Mortgage Delinquencies Rise as U.S. Home Prices Fall. Americans fell behind on their mortgage payments at a record pace in the second quarter as job losses and falling real estate prices thwarted government efforts to stabilize the housing market.
The share of loans with one or more payments overdue rose to a seasonally adjusted 9.24 percent of all mortgages, an all- time high, from 9.12 percent in the first quarter, the Mortgage Bankers Association said in a report today. The inventory of homes in foreclosure increased to 4.3 percent, the most in three decades of data, and loans overdue by at least 90 days, the point at which foreclosure proceedings typically begin, rose to 7.97 percent, the highest on record.
“We’ve seen a significant drop in the problem with subprime loans and we’ve moved now to a problem with prime fixed-rate loans,” Jay Brinkmann, the Washington-based trade group’s chief economist, said in an interview. “Job losses are driving it, and we expect that to continue into next year.”
Homeowners fall behind on their mortgage payments when they lose their jobs, and declining prices mean they can’t sell to pay off loans, Brinkmann said. Companies have shed 5.7 million jobs since January 2008, the biggest employment loss since the Great Depression. The median U.S. home price fell 16 percent in the second quarter from a year earlier, the steepest drop on record, according to the National Association of Realtors. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a6Mmclxw1JSQ
-47 percent of South Florida homeowners underwater on mortgages. Read more here-http://www.miamiherald.com/news/breaking-news/v-print/story/1182855.html
-Florida’s population declined for the first time since 1946 as the housing-market collapse cut migration, research shows, making it harder for the state to balance a budget dependent on sales taxes. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aZOI02HF8V80
-U.K. home sellers lowered asking prices in August by the most in eight months as banks kept up the squeeze on credit, Rightmove Plc said. The average cost of a home fell 2.2 percent to 222,762 pounds ($367,808) after gaining 0.6 percent in July, the owner of the U.K.’s biggest residential property Web site said today in a statement. Prices in London dropped 3.8 percent.
“In spite of pent-up demand, the market and pricing is boxed in by restrictive lending criteria put in place to ration mortgages given the lack of funds available to lenders,” Miles Shipside, Rightmove’s commercial director, said in the statement. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aDaiwk_06wCc
© 2012, Worldwide Precious Metals Canada Ltd.
www.wwpmc.com
The Goldbugg Report – August 25, 2009
Posted by Worldwide Precious Metals on Tuesday, August 25, 2009
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