Newsroom
The Goldbugg Report – October 06, 2009
October 6, 2009
-Important Memo from Precious Metals International Ltd.
- Gold hits record high with dollar under pressure
- GOLD: BREAKOUT ALERT – POWERFUL UPTREND IMMINENT – target and trajectory… By: Clive Maund
October 5th, 2009
6:00 p.m. NYT
Memo to All Retail Dealers
Topic: Dollar ↓ Precious Metals ↑
For those who saw this coming back in 2000, 2001 and started accumulating Gold & Silver within the Gold $260.00 range and Silver in the $3.80 range, to-days price levels of $1,000.00 plus Gold and $17.00 plus Silver are not a surprise.
Now the storyline for Precious Metals is becoming even more serious than anyone could possibly have foreseen eight or nine years ago. The case is building for a major upward move in prices that will make the price movement since 2000 seem moderate at best.
Never before in our modern world, has there been a more compelling justification for the ownership of Gold and Silver.
Most foreign governments whose reserves are US Dollar based are terrified of a collapse in the US Dollar and the impact it would have on their economies.
Central Banks are now demonstrating that they are “Net Buyers” not “Net Sellers” of Gold.
The total unfunded US. Dept. obligations is now approaching 150 Trillion Dollars and the Fed just keeps printing & printing & printing – ultimately flooding the market with paper money and devaluing the US Dollar.
US Interest Rates are so low now that Treasury Auctions are not attractive to Foreign Governments and therefore must be supported by the Fed.
US Government Gold reserves, (if they even exist, The Government refuses to have those reserves audited) are worth less than 300 Billion at to-days prices. That won’t go very far towards paying down 150 Trillion.
There appears only one direction for the US Government to take
Raise Interest Rates
Create Inflation
(Remember the late 70’s and early 80’s)
All the above and now, China, Russia, Japan, France, Saudi Arabia, Abu Dhabi, Kuwait, and Qatar are rumored to be finalizing plans to eliminate the pricing of Middle East Oil in US Dollars, no later than 2018 ( Don’t be surprised to see these rumors denied by all concerned). The transitional currency in the move away from the dollar may well be Gold, according to Chinese banking sources. The plan calls for the new currency (petrol money) to be based on a basket of currencies including the Japanese yen, Chinese yuan, the euro, gold and a new unified currency planned for nations in the Gulf Co-Operation Council.
This now tells us why countries like Germany, France, China, and the Middle East have been increasing their Gold reserves and taking Delivery from New York, and London Depositories.
It would appear from all of the above that the smart money should be headed in to Gold and Silver A.S.A.P.
It certainly seems as though the potential for any serious downside movement in Precious Metals Prices from here is “Slim to none and Slim just left Town”, as the potential for a massive “Short Squeeze” is building.
Perhaps we are now approaching the crossroads, where a major breakout in Prices is about to take place, One that has been in the making since the early 1990’s.
The Long Term money is placed for the upside – is yours?
We quote Mr. Ed Steer of Casey Research “Its time to get Long & Strong”.
Trading Department – Precious Metals International, Ltd.
This is not a solicitation to Buy or Sell.
GOLD
- Gold hits record high with dollar under pressure, http://www.marketwatch.com/story/gold-hits-record-high-with-dollar-under-pressure-2009-10-06?siteid=bnbh
-GOLD: BREAKOUT ALERT – POWERFUL UPTREND IMMINENT – target and trajectory… By: Clive Maund, http://news.goldseek.com/CliveMaund/1254841200.php
-Peter Schiff: U.S. Rally Is Doomed, Gold Will Hit $5000. Unlike the “legitimate bull markets” of many foreign markets, Peter Schiff believes the U.S. is merely experiencing a “rally in a bear market,” and is lagging the rest of the world “for a reason.”
The worst is not over, according to Euro Pacific Capital’s Schiff, who predicts the Dow will fall another 90% from current levels when measured against gold. A longtime dollar bear and gold bull, he foresees gold hitting $5000 per ounce “in the next couple of years,” and predicts the Dow and gold will trade on a one-to-one ratio vs. the current level of around 9.7-to-1.
Schiff believes gold is currently “climbing a wall of worry” but will eventually become as hot as tech stocks in 1999 and start moving up $100 per day.
Schiff’s forecast is based on his view the U.S. dollar is going to collapse under the weight of our massive deficit and reckless policies of the Obama administration, which he compares to the massive spending programs of the 1960s, which paved the way for gold’s ascent in the 1970s. “Obama is making the same mistakes as Bush, but he’s doing them on a grander scale,” says Schiff. Read more here-http://finance.yahoo.com/tech-ticker/article/342802/Peter-Schiff-U.S.-Rally-Is-Doomed-Gold-Will-Hit-5000 or http://www.321gold.com/editorials/schiff/schiff092509.html or http://finance.yahoo.com/tech-ticker/article/342659/Bernanke-Is-Wrong!-The-Economy-Is-Getting-Worse-Not-Better-Schiff-Says
-Peak gold and weak dollar means $2,000+. A highly regarded resource sector expert who discusses his field fervently, Byron King is unconvinced that the recession is behind us, he is equally sure that the “bottomless pit” mentality of stimulus spending will wreck the dollar. Those are among the reasons he sees $2,000-per-ounce gold on the not-too-distant horizon. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=90003&sn;=Detail or http://news.goldseek.com/GoldSeek/1254253200.php
-An important event occurred September 30th. Though it has received little attention, it warrants mention, and for this reason, I now highlight it. Gold closed on the Comex in New York at $1,008.00. It was gold’s highest ever monthly close, as we can see on the following chart.
New records are always important. In this case, it confirms that gold’s uptrend in US dollars continues. Think about the significance of this event. Everyone who measures the value of the gold they own in terms of the US dollar is now showing a gain in their gold holding.
Though gold has not made a new monthly record high against other currencies, I suggest being patient. It will happen soon enough, given that central banks around the world continue to debase national currencies. Every currency is falling against gold, some are just falling faster, and the US dollar in this regard is ‘leading’ the pack I should say, falling the fastest. James Turk-Read more here-http://goldmoney.com/commentary-another-new-record.html
-Preserve Your Wealth with Precious Metals Updated. It’s time to preserve your portfolio’s purchasing power. A minimum 10 percent allocation in precious metals is considered adequate in a bull market, but a much larger allocation of 20 percent or more is suggested for protection in a secular bear market. If you have not already done so, now is the time to rethink your investment strategy and preserve your hard-earned wealth.
Physical bullion will keep its value regardless of whether the economy is headed for inflation, deflation or hyperinflation. For the first time in history, the central banks have an unlimited ability to print as much money as they need. Precious metals are the only currency that will survive intact in this environment, because while governments can print infinite amounts of money, they cannot “print” more precious metals.
More and more investors and institutions are turning to precious metals, because this secular bear market is expected to last for many years, eating away at investors’ hopes and dreams and portfolios along the way. Don’t let your portfolio be one of them. Now is the time to make an investment in your future, because the future is precious metals bullion. Nick Barisheff-Read more here- http://www.321gold.com/editorials/barisheff/barisheff092909.html
-Asset Class of the Decade: Gold. Read more here-http://news.goldseek.com/GoldSeek/1254031740.php
-Gold Price Consolidation periods. Read more here-http://www.321gold.com/editorials/schwensen/schwensen100109.html
-Pricing U.S. homes in gold reveals that housing has fallen by two-thirds from its 2005 peak. Priced in gold, the median house bought 460 ounces of gold in 2001 and 490 ounces at the peak in 2005 a gain of 6%, considerably less than the nominal price in dollars.
Had a homeowner eschewed the blandishments of the housing bubble in 2001 and sold his/her home for 460 ounces of gold and rented for eight years, he/she could now buy a home for 160 ounces of gold and have 300 ounces in hand. Read more here-http://www.oftwominds.com/blogsept09/housing-gold09-09.html
-Gold to go above $1,100 in 2010 Deutsche Bank. A weaker dollar and government deficit fuelled inflation should help push the yellow metal to a new high. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=90106&sn;=Detail
-RCR reckons more gold price downside than upside short term. Australian research consultancy RCR takes a cautious fundamentals-based view on gold price prospects looking for a trading range of $950-$1,000 in next half year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=90010&sn;=Detail
-The case for inflation and gold. Top investors in precious metals are waiting for a pullback to buy, but they say gold looks like a promising inflation hedge well into the future. China is hungry for it, too. Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/the-case-for-inflation-and-gold.aspx?page=all
-Gold Tells You U.S. Bubble Hasn’t Popped Yet. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&sid;=ajPCIYcGX8t4
-Schmidt’s Gold Thoughts. We can expect near full monetization of the Obama Regime’s massive deficits in the future. Ultimately, the Federal Reserve will be forced to “deliver cash by trucks” to the U.S. Treasury to finance that deficit. That will get us back on the glory road for $Gold to US$1,700+. Read more here-
http://news.goldseek.com/NedSchmidt/1254204180.php
-Gold: Hyperinflation: Millions, Billions, Trillions And Then? John Ing-Read more here-http://www.gold-eagle.com/editorials_08/ing092409pv.html
-Peter Grant: Gold is a bargain, even above $1,000. Read more here-http://www.gata.org/node/7848
-Indians own more gold than the citizens of any other country. They use the glittering metal as ornaments to flaunt family wealth, as a source of retirement savings and as insurance against calamities.
But lately, gold has become something else: collateral, and the basis of one of the country’s fastest-growing businesses, gold loans. While pawning the family jewels would be a sign of distress in the West, trading gold for cash increasingly is viewed in India as the equivalent of taking out a home equity loan to expand a business or simply to buy things.
“This is the rural credit card,” said V. P. Nandakumar, chairman of the Manappuram Group, one of the country’s biggest gold loan companies. “This is the only way really that someone gets an instant loan within three minutes.” Read more here-http://www.nytimes.com/2009/09/29/business/global/29gold.html?_r=2&ref;=business&pagewanted;=print
-New Central Bank Gold Agreement went live on Sunday. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89833&sn;=Detail
-Bundesbank won’t sell gold in first year of new sales agreement. Read more here-http://www.gata.org/node/7828
-Fed chairman’s 1975 memo explains need for gold price manipulation. Read more here-http://www.gata.org/node/7839
-Paul asks Fed: Are you in the gold market? Read more here-http://www.gata.org/node/7841
-Numismaster’s Heller notes GATA’s disclosure about Fed. Read more here-http://www.gata.org/node/7842
-Zero Hedge: The CIA chimes in on gold control. Read more here-http://www.gata.org/node/7833
-The hero of ‘Zero,’ Dan Ivandjiiski. Read more here-http://www.gata.org/node/7843
-On CNBC: ‘When you own gold, you’re fighting every central bank.’ Read more here-http://www.gata.org/node/7835
SILVER
Gold to silver ratio at 80 to 1 with gold at $1,500 the silver price would be $18.75
Gold to silver ratio at 70 to 1 with gold at $1,500 the silver price would be $21.43
Gold to silver ratio at 60 to 1 with gold at $1,500 the silver price would be $25.00
Gold to silver ratio at 50 to 1 with gold at $1,500 the silver price would be $30.00
Gold to silver ratio at 40 to 1 with gold at $1,500 the silver price would be $37.50
Gold to silver ratio at 30 to 1 with gold at $1,500 the silver price would be $50.00
Gold to silver ratio at 20 to 1 with gold at $1,500 the silver price would be $75.00
Gold to silver ratio at 15 to 1 with gold at $1,500 the silver price would be $100.00
-Kiyosaki: Silver is My No. 1 Investment. Robert Kiyosaki, author of “Rich Dad, Poor Dad,” recommends investing in real estate and commodities, but he tells Dan Mangru of Newsmax TV that silver is now his top investment. “If you’re afraid of inflation, which you should be, I would think silver is the No. 1 investment today.”
“To protect against inflation, do what the Chinese are doing,” he says. “The Chinese are buying commodities: copper, oil, gold, silver, land.” For those who are poor, Kiyosaki has this advice: “Change what you think. If you’re expecting the economy to come back, I think you’re in a dream land.”
Some people believe in the following myth, he says: “This idea that the U.S. is the greatest country on earth, and Obama is here to save you, and the government is going to take care of you. That’s called socialism.” “And I think you really better start changing your thinking, because they’re not going to save you. They’re going to save themselves.”
Investors must be self-reliant, Kiyosaki says. “I got financially educated when I was a kid. I don’t expect anybody to take care of me. I don’t turn any money over to a retirement account. I don’t trust mutual funds. I don’t trust banks. I trust myself.” The solution is to “get educated and get smart with my money,” he says. “We’ve been trained like Pavlovian dogs to turn our money over to Wall Street.”
To become rich, especially in the wake of financial crisis, “you’ll have to stop thinking the way you think and start thinking differently and start doing things differently.” He says that as long as we have a middle class, we’ll be an advanced nation. But, “the problem with the middle class is that they’re not moving from middle class to rich. The middle class is now moving from middle class to poor.” Read and watch video interview here-http://moneynews.newsmax.com/streettalk/silver_investment_kiyosak/2009/09/25/264718.html
-In July, state-run China Central Television (CCTV) began a campaign that pushes the purchase of silver bullion as investment opportunity. Analysts say silver has been undervalued in the last few years, and is a good investment for individual investors, according to CCTV.
“The investment threshold [for silver] is not high, and is more suitable for the general public,” said Want Chunli, GM of Beijing’s Caibai Shopping Mall, the first to offer silver as an investment opportunity. “Silver is much cheaper than gold.”
Silver’s investment potential is best measured by the silver-gold ratio, or the price of gold divided by the price of silver. Over the past five years, the ratio has held fairly steady, requiring 55 ounces of silver to buy an ounce of gold. Earlier this year, as gold increased at a faster rate than sliver, the ratio skyrocketed to 80 to 1. It has since corrected to around 60.
Money Morning’s Krauth says that when this relative price ratio does correct, it tends to overshoot. “I see it going to 50 at least,” Krauth said. “With gold at $1,000, that means silver could trade to $20 or even higher, which is another 20% from [the current price].”
Krauth sees China returning to an asset-backed currency and says ownership of silver could help the average citizen, even if its central bank is unable to diversify out of the U.S. dollar fast enough. The more Chinese citizens who own silver, “the stronger the country will be in the eventuality that the world establishes a new world reserve currency backed by (most likely) precious metal(s).”
China’s middle class is estimated at 300 million roughly equal to the entire U.S. population. And that consumer group in China is growing. As those incomes continue to rise, so, too, will the demand for silver. China’s use for silver goes beyond jewellery or as a safeguard against inflation. Thanks to the antibacterial properties of silver ions, the white metal is used for everything from socks to wash machines, to name a few. Read more here-http://www.moneymorning.com/2009/09/28/silver-upstages-gold/
-The Silver Shortage Will Come. I think Ted Butler spoke the truth in a recent speech he gave: “The supply/demand set up in silver, which has evolved over an incredibly long period of time, has been one continuous process promising to culminate in an explosion in price at some point.
Quite simply, we are rapidly approaching that defining moment when there just won’t be enough physical material to go around at anything but rapidly escalating prices. Those escalating prices will encourage and drive others, including industrial consumers, to enter what should become a buying frenzy.
Superimpose upon that the sudden destruction of a decades-old downward price manipulation and you have all the necessary ingredients for a price event that will be referred to forever.” Read more here-http://news.silverseek.com/SilverSeek/1254150488.php
-Perfect storm for silver brewing as antibiotics substitute Silver Institute. Silver may soon replace antibiotics as an alternative for healing, and is increasingly gaining ground in the burgeoning field of nanotechnology. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=89805&sn;=Detail
-One Unique Silver Fundamental. Roland Watson-Read more here-http://news.silverseek.com/SilverSeek/1254022821.php
-Sprott’s Embry warns investors to make sure ETFs backed by precious metals. Investors should confine their exposure to actual physical metal or only to paper products with regular audits that support precious metals backing.
“I’ll stick to a target of $1,500 in the next six months but I am comfortable with the notion of it trading at several multiples of the current price before the bull market runs its course.”
Embry forecasts that the gold-silver ratio, which is currently just under 60, to decline precipitously as the bull market in precious metals gathers steam.” Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=89796&sn;=Detail
-Silver market analyst Ted Butler interviewed by King World News. Listen here-http://www.gata.org/node/7831
-Jim Sinclair interviewed by King World News. Listen here-http://www.gata.org/node/7829
-GATA’s Murphy and Powell interviewed by King World News. Listen here-http://www.gata.org/node/7830
-Just look at this hoard of Anglo Saxon gold found in Staffordshire in England last week, weighing more than five kilograms along with 2.5 kilograms of silver. It is one of the greatest archeological finds of recent times, and was discovered in a field with a metal detector.
How it got there is a mystery. It is not burial gold but appears to be a private hoard of precious metals. It could have been stolen and hidden or just hidden, perhaps by royalty judging from the exquisite workmanship. For historians it is a clue to the past of a time for which almost all written records have vanished. But for monetarists surely the hoard also has huge significance.
Doubtless in Anglo-Saxon times there were many rich people. Where is their wealth today? Put your money into gold and silver and it seemingly lasts forever, and that is what has been so special about precious metals over the centuries. At today’s price this hoard would be worth around $250,000 for the gold and $1,500 for the silver. Spot the undervalued precious metal!
However, it does also highlight the security aspect of storing precious metals. Be careful if you bury your treasure that you note its location or your wealth might not be uncovered for 1,300 years still at least it will still be worth something. How much will stock in Microsoft be worth in 1,300 years or a dollar banknote? Peter Cooper
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Massive Housing Overhang Will Swamp The Market. The latest Case-Shiller reading showed another sequential uptick in July, which is all fine and well, but watch out: There’s a huge flood of houses being held back from the market, either due to bank-ownership, or loan delinquency.
Check out the chart below, from Amherst Securities. It shows the number of delinquent mortgages that have yet to be liquidated a number that Amherst puts at a shocking 7 million (135% of the number of houses sold in a year right now). Eventually the houses attached to these loans have to hit the market. When they do, expect them to go at a firesale.
Read more here-http://www.businessinsider.com/chart-of-the-day-housing-overhang-2009-9
-Chart of the week: What, You Think The Savings Rate Can’t Go Higher? This chart should give chills to anyone hoping that Americans will stop saving and start spending again. For one thing, we’re way below the personal savings rate we saw in the early 70s, let alone the savings rate in the pre-Greenspan era.
Plus, as David Goldman points out, demographics isn’t on our side. With the recent wealth shock and the aging population, there are a lot of folks eager to hold on to every last dollar they’ve got. Read more here-http://www.businessinsider.com/chart-of-the-day-personal-saving-rate-2009-9
-Do we really want the people who created $40 trillion of unfunded liabilities in Social Security and Medicare in charge of our health care? Faceless bureaucrats, power-lusting politicians, and people spending other people’s money are a recipe for disaster. Edward Crane-Bio here-http://en.wikipedia.org/wiki/Ed_Crane
-”Fish see the bait, but not the hook; men see the profit, but not the peril.” Chinese Proverb
-The same government that requires a taxpaying citizen to document every statement on his tax return, decrees that questioning a welfare applicant demeans and humiliates him. Ronald Reagan
-Whenever there is some trouble in any area of the economy, the simplest solution to many people is ‘Let the government fix it.’ Yet every time the government uses its money or its power to favour this group or that the net result is such a web of supports, subsidies, interventions and controls, that it is almost impossible for a nation to find its way back into a dynamic system of really free enterprise. Lawrence Fertig-Bio here-http://en.wikipedia.org/wiki/Lawrence_Fertig
-”The most important thing for us is to find Osama bin Laden. It’s our number one priority and we will not rest until we find him.” Sept 13, 2001 President George W. Bush
-”I don’t know where he is. I have no idea and I really don’t care. It’s not that important. It’s not our priority.” Mar 13, 2002 President George W. Bush
-’The ultimate result of shielding men from the effects of folly,’ said the Victorian philosopher Herbert Spencer, ‘is to fill the world with fools’. Read more here-
-“Bernanke, Geithner and Summers didn’t see the crisis coming so why are they still there?” Bernanke is like “a pilot who didn’t see a hurricane.” Nassim Taleb, author of “The Black Swan” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ajnBClVe3IrM
-I invest for inflation. In 1971 President Nixon took the world off the gold standard, which means the world’s central banks can print as much money as they want. I was in Vietnam in 1972 and saw what happens when people do not trust paper money. Rather than try to live below my means and save money, I invest in gold, silver, and oil commodities that go up in price as the government prints more money.
When investing for inflation, I am not investing for cash flow. In this case, I am investing to protect my wealth from the predatory practices of the Federal Reserve Bank, the U.S. Treasury, and the ultra rich manipulating the world economy.
China does not trust the U.S. dollar. Today China is using U.S. dollars to buy commodities such as oil, copper, gold, and silver. The good news is silver is still inexpensive. In 2007 gold was approximately 50 times more expensive than silver. In 2009 the gap is 60 times which means silver is a bargain.
Silver is used in the electronics industry and is consumed daily; stock piles of silver are dwindling. On top of that, for the first time in modern history, there is more gold in the world than silver. In other words, silver is more valuable than gold. The good news is, at less than $20 an ounce, almost anyone can afford to start preparing for the worst and building their own house of silver. Robert Kiyosaki-Read more here-http://finance.yahoo.com/expert/article/richricher/192575
-Since those in control of the US have demonstrated their unwillingness to allow recessionary forces to do their necessary work of correcting the extreme imbalances within the economy, there are only two options left default and deflationary implosion ruin, or a comprehensive takeover of the country by its creditors, both of which options probably occurring after a period of runaway inflation as the Fed and government desperately try to stop the inevitable.
If the former occurs the shockwaves will reverberate around the world, like last year, and we can expect a collapse in commodity and stock markets. Until that happens it will be case of inflate and inflate, to forestall rising rates and liquidity problems, which will make gold and silver probably the best investments around, but you sure don’t want to be around once the music stops.
It is therefore to be hoped for the common good that the US authorities make the right decision and surrender to the mercy of their creditors before it’s too late. Either way the American Empire is finished. Clive Maund-Read more here-http://news.goldseek.com/CliveMaund/1253887200.php
-Money figures show there’s trouble ahead. Private credit is contracting on both sides of the Atlantic. The M3 money data is flashing early warning signals of a deflation crisis next year in nearly half the world economy. Emergency schemes that have propped up spending are being withdrawn, gently or otherwise. Read more here-
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6234939/Money-figures-show-theres-trouble-ahead.html or http://www.gata.org/node/7832
-Japan tips ever deeper into deflation. Japan is sliding into the deepest deflation since the Second World War, forcing the new-broom Democrats to abandon their strong yen policy within weeks of taking office. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6244429/Japan-tips-ever-deeper-into-deflation.html
-Pacific Investment Management Co.’s Bill Gross says investors should expect total returns on equities of about 5 percent annually as consumers curb spending and increase savings.
“Returns mimic nominal” gross domestic product, Gross, manager of the world’s biggest bond fund, said in an interview yesterday with Bloomberg Radio.
“Nominal GDP is the growth rate of wealth on an annual basis. The new normal is 2 to 3 percent GDP and real growth of 1 to 2 percent.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aG7VszWk.pBA
-Pacific Investment Management Co. strategic adviser Richard Clarida said the U.S. savings rate may exceed 8 percent, hurting consumer spending and weighing on the economic recovery. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aHM.2Uhxnnr4
-IMF’s Strauss-Kahn Seeks Recovery First, Then Inflation Fight. Former U.S. Federal Reserve Chairman Alan Greenspan expressed concern over inflation, while Dominique Strauss-Kahn, the International Monetary Fund’s managing director, speaking to the Yalta European Conference in southern Ukraine, suggested first securing an economic recovery.
“Going out of the crisis will have consequences, we need to discuss an exit strategy,” said Strauss-Kahn during the video link. “But we need to secure the recovery before we address the problem” of inflation. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=acVqrXjLdOP4
-IMF Cuts Forecast for Global Losses to $3.4 Trillion. The tally, released in a semi-annual report today, was based on a new methodology after criticism of an April estimate of about $4 trillion. Banks’ losses on bad assets are projected to increase from July 2009 through next year by $470 billion in the euro area, $420 billion in the U.S. and $140 billion in the U.K., the report said. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aCHss4gvkku8
-The U.S. has lent, spent or guaranteed $11.6 trillion to bolster banks and fight the longest recession in 70 years, according to data compiled by Bloomberg. Read more here-
http://www.bloomberg.com/apps/news?pid=20601109&sid;=ahys015DzWXc
-Atlanta’s Georgian Bank became the 95th bank failure of the year, according to the Federal Deposit Insurance Corp. on Friday. First Citizens Bank and Trust Company Inc. of Columbia, S.C., will assume all of the deposits of Georgian Bank, estimated at about $2 billion as of July 24.
Georgian Bank also had total assets of $2 billion, which First Citizens agreed to purchase. The cost of the failure to FDIC’s deposit-insurance fund is $892 million. Georgian Bank also marks the 19th bank failure in the state this year. Read more here-http://www.marketwatch.com/story/story/print?guid=A70453E1-9478-44D9-8050-A527434EEFBD
-US large-loan bank losses triple to $53 billion. U.S. regulators said total losses from large loans at banks and other financial institutions nearly tripled to $53 billion in 2009, due to a deteriorating economic environment and continued weak underwriting standards. Read more here-http://finance.yahoo.com/news/US-largeloan-bank-losses-apf-3121886908.html?x=0&.v=3
-FDIC Proposes Banks Prepay Fees Through 2012, Raise $45 Billion. The Federal Deposit Insurance Corp. proposed asking banks to prepay three years of premiums to replenish reserves dented by a rash of bank failures that the agency said will cost $100 billion through 2013. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aS7aI40OeGLI
-The Federal Deposit Insurance Corp.’s plan to rebuild its reserves may cost Bank of America Corp. and three of the largest U.S. banks more than $10 billion. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=auEG9sH4Cs2g
-Social Security strained by early retirements. Big job losses and a spike in early retirement claims from laid-off seniors will force Social Security to pay out more in benefits than it collects in taxes the next two years, the first time that’s happened since the 1980s.
The deficits $10 billion in 2010 and $9 billion in 2011 won’t affect payments to retirees because Social Security has accumulated surpluses from previous years totalling $2.5 trillion. But they will add to the overall federal deficit.
Applications for retirement benefits are 23 percent higher than last year, while disability claims have risen by about 20 percent. Social Security officials had expected applications to increase from the growing number of baby boomers reaching retirement, but they didn’t expect the increase to be so large.
What happened? The recession hit and many older workers suddenly found themselves laid off with no place to turn but Social Security. “A lot of people who in better times would have continued working are opting to retire,” said Alan J. Auerbach, an economics and law professor at the University of California, Berkeley. “If they were younger, we would call them unemployed.”
Job losses are forcing more retirements even though an increasing number of older people want to keep working. Many can’t afford to retire, especially after the financial collapse demolished their nest eggs. Read more here-http://apnews.myway.com/article/20090927/D9AVHRDG0.html
-US Faces Retro 70s Inflation: Jim Rogers. The US faces high inflation because of the weak dollar and the Federal Reserve’s policy of printing money to counter the effects of the crisis, legendary investor Jim Rogers told CNBC Thursday.
Price rises in the US are already steeper than the inflation rate reported by the government, Rogers added. “There’s no question the US is vulnerable to hyperinflation down the road or certainly the inflation we saw in the 1970s, I would expect that to come back in the foreseeable future, certainly in the next few years,” he said.
“The true inflation rate in America? It’s certainly at least 6 or 7 percent, the US government lies about it, as you know, everybody who shops knows that prices are up, everybody except the US government, and I wish we knew where they shopped so we can shop there too and get good prices.”
Rogers repeated his view that the Fed’s quantitative easing program is “debasing the currency” and said he was “extremely worried” about the fate of the dollar over the long term. Read more here-http://www.cnbc.com/id/33114243 Watch video here-http://www.cnbc.com/id/15840232/?video=1281408467&play;=1&#
-U.S. Consumer Confidence Unexpectedly Fell to 53.1 in September. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=arJNVLWMwak0
-Spain tips into depression. Spain is sliding into a full-blown economic depression with unemployment approaching levels not seen since the Second Republic of the 1930s and little chance of recovery until well into the next decade, according to a clutch of reports over recent days. Read more here-http://www.telegraph.co.uk/finance/economics/6228390/Spain-tips-into-depression.html
-U.S. Northeast May Have Coldest Winter in a Decade. The U.S. Northeast may have the coldest winter in a decade because of a weak El Nino, a warming current in the Pacific Ocean, according to Matt Rogers, a forecaster at Commodity Weather Group. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a3xIDCXcK5kc
-Swine Flu May Cause $20 Billion Damage to Businesses, U.S. Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a7zYwBPKGkpA
-Values of Collector Cars Soar. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=anPL3PNpi94Y
-Mercedes, Ferrari Lots Top at $4 Million Auction. Read more here-http://www.bloomberg.com/apps/news?pid=20601088&sid;=aTOGpc6FqebA
-How is the economy doing? Look in your underwear drawer. It looks like 2009 was a bad year for men’s underwear. Mintel, a consumer research firm, says that sales of men’s skivvies dropped 2.3 percent from 2008. Meanwhile, NPD Group, another firm, argues that the decline was more on the order of 12 percent. Either way, it’s a fair bet that many underwear drawers are looking a bit ragged. Read more here-http://www.dailyfinance.com/2009/09/29/how-is-the-economy-doing-look-in-your-underwear-drawer/
-The man in charge of recovering assets from Bernard Madoff says there is about $18 billion still out there that he hopes to recover for victims of the scam. But it won’t be easy. Morley Safer reports. Read and watch more here-http://www.cbsnews.com/video/watch/?id=5345013n&tag;=contentMain;cbsCarousel
-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
-Diamonds aren’t forever, the pipes are running dry. According to Rio and BHP Billiton analysis, most existing mine resources for rough stones will be gone within 15 years. This is because new diamond discoveries are becoming increasingly rare. According to Rio, annual discoveries of kimberlite ”pipes” kimberlite is a host rock for diamonds have fallen (on a five-year moving average basis) to little more than 100.
And history shows that only one in 10 kimberlite pipes contain diamonds and only one in 100 of those are economic to mine. The lack of new discoveries since the mid-1980s means the world’s mine reserves of rough diamonds have fallen from 80 years’ supply to the 15 years that Rio now forecasts. Read more here-
http://www.smh.com.au/business/diamonds-arent-forever-the-pipes-are-running-dry-20090923-g2sp.html
-Petra Unearths Diamond the Size of a Chicken Egg. Petra Diamonds Ltd., a miner of the stones in Africa, said it unearthed a gem the size of a chicken egg at the Cullinan mine that may be among the 20 largest “high quality” rough diamonds discovered. “Initial indications are that it is of exceptional color and clarity, which suggest extraordinary potential for its polished yield,” Chief Executive Officer Johan Dippenaar said in a statement today.
The 507.6-carat stone, weighing more than 100 grams (3.53 ounces), may sell for more than $20 million, Brock Salier, an analyst at Ambrian Partners Ltd. in London, wrote in a note. “That would probably be a guide,” Dippenaar said, when asked about the estimate on a conference call. “We certainly hope it’s not that little.”
The world’s biggest certified diamond is the 3,106-carat Cullinan, found at the mine near Pretoria, South Africa in 1905. It was cut to form the Great Star of Africa and the Lesser Star of Africa, set in the Crown Jewels of Britain. Petra sold a 7.03-carat blue diamond, cut from a 26.58-carat rough stone found at the mine, for $9.48 million in May. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=atAnHWtM_vL0
-Less Diamonds From Australia in 2009-10. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=32983
-Sans Setting, Smithsonian Diamond Bares Its Beauty. Read and watch more here-http://www.washingtonpost.com/wp-dyn/content/article/2009/09/23/AR2009092302062.html
-Suite101.com reports that people are looking to surpass traditional diamond engagement rings, and are now going for colored diamonds. Blue diamond engagement rings are currently a very popular choice. According to the website, blue diamond engagement rings are becoming a new trend.
However, natural colored diamond engagement rings are a rare find and are thus pretty costly. It has been said that one in every 10,000 diamonds produces color, although modern technology has ways to enhance the natural process of producing colored diamonds.
Blue diamond engagement rings are available for a wide range of prices. The choices are broad, making it easy to find a unique blue colored diamond according to the lady’s preference.
According to Suite101.com, people are getting bored with traditional engagement rings and are searching for something that will make them stand out. Blue diamond rings achieve just that sense of uniqueness. Read more here-http://www.israelidiamond.co.il/english/News.aspx?boneId=918&objid;=5886
-Skinner, Inc., one of the nation’s leading auction houses, today announced the stunning success of its Tuesday, September 15th Fine Jewelry sale. Rare and impressive colored diamonds and gemstones from two collections one from the famed ballroom dancer, Verna E. Winegar and other from an All My Children’s actress were hotly contested by a number of bidders.
The sale’s overall theme was “big and bold” with one-of-a-kind pieces fetching considerable prices. With buyer’s premium, the auction took in $2,148,915.00, nearly a half million dollars over the pre-sale estimate high of $1.3M.
The top seller of the day was a fancy twin-stone diamond ring, set with an intense blue pear shaped diamond weighing 1.26 cts., and a brownish pink diamond weighing 1.20 cts. (lot 308) estimated at $80,000 to $120,000, but selling for an astounding $225,150. Other top sellers included a vivid yellow diamond solitaire weighing 3.65 cts. (lot 390) estimated at $15,000 to $25,000, but going for $68,730.00. Read more here-http://www.prnewswire.com/news-releases/skinner-fine-jewelry-auction-nets-over-2m-61158142.html
U.S. DEBT CRISIS MAY CAUSE “FALL OF ROME” SCENARIO
-U.S. budget deficits will continue to pile up in the next decade, eventually reaching an unsustainable level that may result in an economic collapse, according to Richard Duncan, author of “The Dollar Crisis.”
The U.S. has little chance of resolving its deteriorating financial position because the manufacturing industry continues to shrink, leaving the nation with few goods to export, said Duncan, now at Singapore-based Blackhorse Asset Management.
In “The Dollar Crisis,” first published in 2003, Duncan argued that persistent current account deficits by the U.S. were creating an unsustainable boom in global credit that was destined to break down, resulting in a worldwide recession.
“The bad news is at the end of a 10-year period we’re still not going to have fixed the problem,” Duncan said in an interview in Hong Kong yesterday. “Eventually it will lead to high rates of inflation well down the line and really destabilize things to the point where there may be irreparable damage. A kind of ‘Fall of Rome’ scenario.”
The federal budget deficit will total $1.6 trillion this year, while combined shortfalls are forecast to total $9.05 trillion in the next 10 years, according to projections from the nonpartisan Congressional Budget Office.
The U.S. has run a current account deficit every year since 1982 except one, with a peak of $788 billion in 2006. Foreign purchases of U.S. debt has propped up the dollar and allowed a credit-fuelled spending boom by the nation’s consumers, according to Duncan. Read more here-http://bloomberg.com/apps/news?pid=20601083&sid;=aJ6jnKWHrQgI
U.S. DOLLAR-EURO-INTEREST RATES
-World Bank says don’t take dollar’s place for granted. World Bank President Robert Zoellick said the United States should not take the dollar’s status as the world’s key reserve currency for granted because other options are emerging.
In excerpts released on Sunday from a speech that he is to deliver on Monday, Zoellick said global economic forces were shifting and it was time now to prepare for the fact that growth will come from multiple sources. “The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” he said. “Looking forward, there will increasingly be other options.” Read more here-http://www.reuters.com/article/businessNews/idUSTRE58Q1YU20090927
-Dollar Share of Reserves Drops as Euro Allocation Hits Record. The dollar’s share of global currency reserves fell in the second quarter to the lowest level in a decade as the holdings of euros rose to a record, according to the International Monetary Fund.
The U.S. currency’s portion dropped to 62.8 percent in the period ended June 30, from 65 percent in the prior quarter and 62.9 percent a year earlier. The euro’s share rose to a record 27.5 percent from 25.9 percent while the pound and yen gained. The increase in the euro’s shares may encourage more criticism of the dollar’s role as the world’s main reserve currency. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=adlcCx_aGFBU
-Federal Reserve General Counsel Scott Alvarez said audits of monetary policy by the U.S. Congress could lead to higher interest rates and reduced confidence in central bank policy.
Congressional audits of monetary policy could “cause the markets and the public to lose confidence in the independence of the judgments of the Federal Reserve,” Alvarez told the House Financial Services Committee today in response to a question from Representative Dennis Moore, a Kansas Democrat. Alvarez said in his prepared remarks the audits would probably “chill” the central bank’s discussions on interest rates. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=adDANopNzewM
-Kohn Says Low Fed Rates Likely Warranted for ‘Extended Period.’ Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aIgFCM8BbP24
U.S. UNEMPLOYMENT
-Bernanke Says Jobless Rate May Be Above 9% in 2010. Federal Reserve Chairman Ben S. Bernanke said U.S. economic growth next year probably won’t be strong enough to “substantially” bring down the jobless rate, which may remain above 9 percent at the end of 2010. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aGF8BaePGjJg
-ADP Says U.S. Companies Cut 254,000 Jobs This Month. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ahgZLX4E7w8M
-U.S. Initial Jobless Claims Rose 17,000 to 551,000. The number of Americans filing first-time claims for jobless benefits rose more than forecast last week, a sign companies are still cutting workers as the economy pulls out of the recession.
Applications rose by 17,000 to 551,000 in the week ended Sept. 26, from a revised 534,000 the week before, Labor Department data showed today in Washington. The total number of people collecting unemployment insurance fell in the prior week to 6.09 million, the least since April. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aK.lfBMa.8hk
-The unemployment rate for young Americans has exploded to 52.2 percent a post-World War II high, according to the Labor Dept. meaning millions of Americans are staring at the likelihood that their lifetime earning potential will be diminished and, combined with the predicted slow economic recovery, their transition into productive members of society could be put on hold for an extended period of time. Read more here-http://www.nypost.com/p/news/business/the_dead_end_kids_AnwaWNOGqsXMuIlGONNX1K
-Nearly half the nation’s 25 biggest retail chains expect to hire fewer holiday workers this season than they did last year, another sign that retailers aren’t counting on recession-strained shoppers to relax the tight grip on their pocketbooks this year.
About 40% of stores surveyed across a broad swath of retailing, including consumer-electronic chain Best Buy Inc., teen-retailer American Eagle Outfitters Inc., and luxury-goods seller Saks Inc., told the Hay Group, a human resources consulting firm, that they expect to hire between 5% and 25% fewer temporary workers this year than last, when the recession forced many retailers to trim staff in response to falling sales.
That’s a grimmer outlook than the Hay survey found a year ago, when 29% of retailers said they would be slashing their holiday workforce. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1254034800.php or http://news.goldseek.com/InternationalForecaster/1254334139.php
-U.S. Job Seekers Exceed Openings by Record Ratio. Despite signs that the economy has resumed growing, unemployed Americans now confront a job market that is bleaker than ever in the current recession, and employment prospects are still getting worse. Job seekers now outnumber openings six to one, the worst ratio since the government began tracking open positions in 2000.
According to the Labor Department’s latest numbers, from July, only 2.4 million full-time permanent jobs were open, with 14.5 million people officially unemployed. And even though the pace of layoffs is slowing, many companies remain anxious about growth prospects in the months ahead, making them reluctant to add to their payrolls. Read more here-http://www.nytimes.com/2009/09/27/business/economy/27jobs.html
DAVID ROSENBERG COMMENTARY
-U.S. consumer confidence takes a tumble in September. Consumer confidence not only surprised to the downside in September but the Conference Board index actually fell to 53.1 from 54.5 with both the ‘present situation’ and the ‘expectations’ component failing to build on the August rebound. Before we go any further on the details, let’s recall the following:
• Historically, by the time the S&P; 500 rebounds 60% from the trough, the confidence index is sitting at 92.0;
• The month recession ends, the index is, on both an average and median basis, sitting at 72.0;
• During an economic expansion, the consumer confidence averages 102.0; in a recession, it averages 72.4.
Just to put a 53.0 reading into proper perspective. It’s still recessionary. Some pundits claim that the market is pricing in mid-cycle earnings, which means we can look three years out. Well, all we can say is that in the third year of the recovery, consumer confidence is typically sitting at 88.0.
The only categories who actually saw their confidence level rise in September were the ones in the lowest income strata less than $25,000 (their confidence rose two points). After all, they’re the only ones really benefiting from all the government intervention into the economy and the markets. David Rosenberg-Chief Economist & Strategist Gluskin/Sheff
-FED surveys suggest caution. The Chicago Fed’s national activity index, which is arguably the most reliable economic barometer around given its breadth of subcomponents, posted a -0.90 print in August and the key three-month average came in at -1.09, which, to be sure, is much better than the -1.61 figure in July, the -2.15 reading in June and the horrendous -3.63 posting at the turn of the year.
However, the Chicago Fed warns that anything at -0.70 or more negative than that still signals an economy that is in contraction mode, though it is certainly not uncommon at all to be seeing a number like we saw in August occur after GDP has had its inflection point. Our contention is that the equity market priced out the recession six-months ago and is now basically discounting three years worth of economic and profit growth.
Indeed, on some valuation metrics, the S&P; 500 is now trading at peak, not merely mid-cycle price-book, price-earnings and price-dividend ratios. Remember, the reason why the tortoise won the race in the end was because the hare tired himself out. David Rosenberg-Chief Economist & Strategist Gluskin/Sheff
-ADP sags again. The economists like to point out that employment lags the cycle. However, in a credit contraction, it is much more of a leading indicator than many believe, and the latest ADP data is another signpost of a very soft U.S. labour market. The ADP employment tally for the U.S. showed a 254k loss in September versus consensus expectations of a 200k decline.
Of course, the mantra of many is that the pace of layoffs is subsiding this was the smallest decline since July 2008 and that this is actually encouraging news. How weak is that? It’s like saying that your golf score is going up but at a slower rate than it was last year. You can’t pay the bills and feed the kids on “less negative” employment data and we know of no sustained or solid recovery that has ever occurred on productivity growth alone.
Note that the small business sector, which has no access to the capital markets as large companies do and are vulnerable to the relentless cutback in bank lending, is now at the forefront of the job declines down 100k in September and down 2.2mln year-to-date. For the first time ever, we have experienced a 60% surge in the equity market from a low over a six-month span in which employment slumped 2.5 million.
Let’s talk about what is normal. What is normal is that after a low, and every low in hindsight is an oversold low, we are up 60% three years into the economic expansion and have already created over two million jobs. So let’s get a grip on this flashy but very dangerous rally liquidity can only take you so far without the fundamentals.
-More signs of a soft employment backdrop. In addition to the Manpower hiring intentions hitting a new record low, we saw from the Conference Board survey that a mere 3.4% of respondents saw jobs as being “plentiful”, which was the lowest reading in 26 years.
Not only that, but the just-released Business Roundtable showed that only 13% of CEOs plan to hire in the next six months (even though 51% see a pick-up in sales activity they obviously don’t expect it to be sustained). At the same time, a separate CFO poll contained in the FT revealed that on a scale of 1 to 100, the average grade on the U.S. economic was 54.2.
Okay that’s a passing grade, but hardly worth the peak multiples we are currently seeing in the equity market. Too much air, too many fumes, and we find it amusing that as panic-stricken portfolio managers add to their positions, corporate insiders are trimming theirs. David Rosenberg-Chief Economist & Strategist Gluskin/Sheff
-The economy looks sick outside of government stimulus. Now that Cash-for-Clunkers is over, auto sales are collapsing again. Edmunds.com says the run-rate so far in September is down to 8.8 million units at an annual rate, but we see now that JD Power’s tracking is down to 590,000, which would be little better than a 7.0 million rate or half the pace of August and 24% below the already-depressed levels of a year ago.
The November 30th expiry date for the first-time homebuyer subsidy, and this group has been responsible for one-third of housing activity, may also have something to do with the below-consensus sales figures for August that came out last week. But don’t worry Uncle Sam is coming back to the rescue. Congress is moving to extend emergency jobless benefits to over one million workers who are about to see their benefits expire by year-end.
The House already approved on Tuesday a 15-week extension in states with unemployment rates of 8.5% or higher (oh that only includes 27 states right now, by the way) and now Congress is looking at extending and expanding the homeownership tax credit. The short-term-ism in fiscal policymaking in terms of still trying to promote consumption and credit remains is fully intact and is actually quite sad because the U.S. boomer population is seriously short of savings needed to fund a boom in the retirement community over the next two decades.
A Harvard University report shows that 60% of Americans do not have enough savings to fund their retirement. Why the government wants to resist the natural trend towards higher savings rates is well, it’s unnatural. When your homeownership rate is over 67% and your consumption-to-GDP ratio is over 70%, you’re no exactly suffering from under-spending.
David Rosenberg-Chief Economist & Strategist Gluskin/Sheff
CLUNKERS ENDS WITH A DIVE
-General Motors Co., Toyota Motor Corp. and Ford Motor Co. said sales fell in September as waning demand after the “cash for clunkers” rebates cut industry deliveries to the second-slowest rate this year.
GM deliveries tumbled 45 percent, while Toyota dropped 13 percent, both worse than analysts had estimated. Ford slid 5.1 percent, and Chrysler Group LLC, Honda Motor Co. and Nissan Motor Co. also posted declines.
“We knew sales would slow down significantly after the cash for clunkers surge,” said Stephen Spivey, senior auto analyst at Frost & Sullivan in San Antonio. “October will tell you what kind of rebound comes off that dip.”
U.S. auto sales plunged 23 percent, and the seasonally adjusted annual sales rate fell to 9.22 million units, said industry researcher Autodata Corp. of Woodcliff Lake, New Jersey. July and August were the only months in 2009 when the sales pace topped 10 million, a level that Ford and researcher J.D. Power & Associates expect the U.S. to surpass for the year.
The industry is coming off an August surge that snapped a streak of monthly sales declines dating to 2007. Buyers responded to the U.S. government’s offer of as much as $4,500 to trade in older, less fuel-efficient light vehicles from July 27 through Aug. 24, with almost 700,000 purchases. Read more here-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aZCyQESao0lg
-Chart of the day: The Amazing Cash-For-Clunkers Cliff Dive. This is what an economic strategy of pulling it forward looks like. In August, car buyers were going nuts with a $4,500 incentive to trade clunkers in for brand new cars.
Many warned, of course, that these sales would simply end up decreasing future sales, getting us nowhere. Well, September’s here, and… yeah. A monthly sales rate of over 14 million units annualized quickly fell to just above 9 million. Read more here-http://www.businessinsider.com/chart-of-the-day-us-auto-sales-2009-10
REAL ESTATE-MORTGAGES-FORECLOSURES-RENTS
-Home Prices in 20 U.S. Cities Rose by Most Since 2005. Home values in 20 U.S. cities climbed in July by the most in almost four years, helping stem the record plunge in household wealth that’s depressed spending. The S&P;/Case-Shiller home-price index rose 1.2 percent in July from the prior month, the biggest gain since October 2005, the group said today in New York. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=a1rwpx5RvEFg
-Pending Sales of Existing Homes in U.S. Rose 6.4% in August. The number of contracts to buy previously owned homes in the U.S. increased more than forecast in August, reinforcing signs of a rebound in housing, industry figures showed today.
The index of signed purchase agreements, or pending home sales, rose 6.4 percent after a 3.2 percent gain in July, the National Association of Realtors announced in Washington. The gain was the seventh in a row. Compared with a year earlier, pending sales rose 12.4 percent. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aFH0zI40heAc
-Last week, it was reported that the median price of a single-family home dropped 2.3% in August. The stock market sold off on the news. For some perspective into the all-important US real estate market, today’s chart illustrates the US median price of a single-family home over the past 39 years.
Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased. That brings us to today’s chart which illustrates how housing prices are currently 30% off their 2005 peak. In fact, a home buyer who bought the median priced single-family home at the 1979 peak has seen that home appreciate by a mere 4%.
Not an impressive performance considering that three decades have passed. Over the past two months, single-family home prices have resumed their decline and remain (until proven otherwise) in an accelerated downtrend. Read more here-http://www.chartoftheday.com/20090925.htm?T
-U.K. house prices increased the most in two years during September as confidence in the property market improved, Hometrack Ltd. said. The average cost of a home in England and Wales rose 0.2 percent from August to 156,100 pounds ($248,000), the London- based property-research company said in an e-mailed statement today. The increase, the biggest since June 2007, left house prices 5.6 percent lower than a year earlier, the smallest annual decline in a year. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aj_pV6hwFdu8
-Fannie and Freddie Delinquencies Move Into Uncharted Territory. Home prices have posted six straight months of increases, but few housing analysts are prepared to give a clean bill of health to the housing patient. (There are exceptions.) One big reason: Borrowers continue to miss loan payments.
Rising delinquency rates point to an eventual increase in homes that will go into and sell out of foreclosure. Finding a bottom for the housing market gets a bit easier once the market can adjust and absorb that distressed inventory. Fannie Mae and Freddie Mac, the two state-backed mortgage-finance giants, both showed that serious mortgage delinquencies (those that are three months or more late) continue to reach into uncharted territory.
The serious delinquency rate on single-family home loans backed or held by Fannie Mae crossed 4% in July for the first time ever, to 4.17%. One year ago, the rate was at 1.45%. Freddie Mac reported that its serious delinquency rate reached 3.13% in August, up from 2.95% last month and 1.11% one year ago.
Fannie’s worst performing loans are “Alt-A” loans, a step between prime and subprime, that were made in 2006 and 2007. Delinquencies on the Alt-A book of business reached 11.9% at the end of June, compared to 3.94% for all loans. Serious delinquencies on Alt-A loans originated in 2006 and 2007 hovered around 17%.
Many of those Alt-A loans, which didn’t require income documentation and became known as “liar’s loans,” had interest-only features that allowed borrowers to defer principal payments for an initial period or option adjustable-rate mortgages, which allow borrowers to make minimal payments at first only to face sharply higher ones later. Look for more problems as more borrowers begin to see their loans recast, requiring larger monthly payments. Read more here-http://blogs.wsj.com/developments/2009/09/30/fannie-and-freddie-delinquencies-move-into-uncharted-territory/
-Fannie Mae Mortgage Defaults Climb to Record in July. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aLrsqYzA6oX4
-The Mortgage Machine Backfires. With the mortgage bust approaching Year Three, it is increasingly up to the nation’s courts to examine the dubious practices that guided the mania. A ruling that the Kansas Supreme Court issued last month has done precisely that, and it has significant implications for both the mortgage industry and troubled borrowers.
The opinion spotlights a crucial but obscure cog in the nation’s lending machinery: a privately owned loan tracking service known as the Mortgage Electronic Registration System. This registry, created in 1997 to improve profits and efficiency among lenders, eliminates the need to record changes in property ownership in local land records.
Dotting i’s and crossing t’s can be a costly bore, of course. And eliminating the need to record mortgage assignments helped keep the lending machine humming during the boom. Now, however, this clever setup is coming under fire. Legal experts say the fact that the most recent assault comes out of Kansas, a state not known for radical jurists, makes the ruling even more meaningful. Read more here-http://www.nytimes.com/2009/09/27/business/27gret.html
-Walking Away From Affordable Mortgage May Become Winning Gambit. Scott Conroy pays the mortgage every month on his one-bedroom condominium in San Diego, even though it’s worth 33 percent less than what he owes and it may take more than a decade to break even.
Homeowners like Conroy who can afford their monthly payments are weighing whether to sell and pay the difference, stick it out until housing prices recover, or walk away. In the U.S., 26 percent of borrowers owe more than their home is worth, said Karen Weaver, global head of securitization research for New York-based Deutsche Bank Securities. In parts of California, Florida and Nevada, it’s as high as 75 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a_yVFTDSiHhY
-Recession Rising Like Phoenix With Area Delinquencies Surging. Drive up to the Peaks Corporate Park in north Scottsdale, Arizona, and the only person you’ll encounter at the luxury office complex is a security guard.
The development was planned to offer executive suites with views of the McDowell mountains, neighbors such as General Electric Co. and a location just minutes away from Jack Nicklaus’s Desert Mountain golf courses. Plans to lure tenants haven’t materialized and today the complex in this city next to Phoenix is empty, the entrance blocked by a traffic barricade.
Delinquencies in the Phoenix area on loans backed by office, industrial, retail and apartment properties have risen more than five-fold since March, according to data compiled by Bloomberg. The Phoenix region has the second-worst U.S. delinquency rate, behind Detroit’s 10 percent. In Phoenix, the economic recovery looks a lot like a recession. Read more here-
http://www.bloomberg.com/apps/news?pid=20601109&sid;=ak__6D.HTBQM
-San Francisco’s Prime Office Rents Fall 37%, Most Since 2001. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=afZUmP1qFy48
© 2012, Worldwide Precious Metals Canada Ltd.
www.wwpmc.com
The Goldbugg Report – October 06, 2009
Posted by Worldwide Precious Metals on Tuesday, October 6, 2009
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