Newsroom
The World Financial Report – November 10, 2009
November 10, 2009
-Can gold hit $1,500?
-Gold may touch $4,000 during this bull run.
-Current Gold/Silver Ratio Screams: Buy All Things Silver
GOLD
-India, the world’s biggest gold consumer, bought 200 metric tons from the International Monetary Fund for $6.7 billion as central banks show increased interest in diversifying their holdings to protect against a slumping dollar.
The transaction, equivalent to 8 percent of world annual mine production, was the IMF’s first such sale in nine years and propels India to the ninth-biggest government owner globally, according to figures from London-based research company GFMS Ltd. The country previously held 358 tons, the data show. The news was a “surprise because everybody was talking about China being the buyer,” said James Moore, an analyst at TheBullionDesk.com.
“The fall in the U.S. dollar seems to be pushing all the central banks to strengthen their portfolio with gold,” said N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy in New Delhi. “Gold is a safe store of value compared to the U.S. dollar.”
India purchased the gold at an average price of about $1,045 an ounce, according to an IMF official on a conference call. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=al7qXOH.bVn8 or http://www.reuters.com/article/wtUSInvestingNews/idUSSP37590020091103
-RBI buys half of IMF’s gold for sale; who’s next? Read more here-http://in.reuters.com/article/economicNews/idINIndia-43625720091103?sp=true
-Q+A Why is India buying IMF gold? Read more here-http://uk.reuters.com/article/idUKBOM33873420091103
-India dumps dollars for IMF gold is China next in line? The news that the IMF has sold virtually half the gold it has approved for sale to India surprised some observers although the growing Asian giant is, on reflection, a logical purchaser. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=91828&sn;=Detail
-Central banks will become global net buyers of gold, the World Gold Council’s chief executive officer said today at a conference in Edinburgh. “I believe that central banks will be net buyers over time,” Aram Shishmanian told the conference. Bloomberg
-Is India clearing the way for gold ‘moonshot’? India’s IMF bullion purchase excites the gold bugs. Let Mary Anne and Pamela Aden tell the story. Their Aden Forecast first came to fame in the great gold bull market 30 years ago. The Adens are careful and adroit traders, and have a strong track record according to Hulbert Financial Digest, but they were speculating that gold might ultimately reach $5,800 when I last looked.
Last night they wrote in a hotline: “Gold is the big news this week. It hit another new record high today, quickly closing in on the $1,100 level. This followed yesterday’s $31 jump, which clearly propelled gold well above its previous high. The news that India bought 200 tons of the [International Monetary Fund's] gold (half of what it’s planning to sell) at these high prices, and in one fell swoop, was incredibly bullish.
It was viewed as a strong sign that gold is not too expensive and the Indians, who have a long gold history, obviously believe it’s going high.” The Adens conclude: “Our next target for gold at $1,200 is looking more realistic.” Read more here-http://www.marketwatch.com/story/story/print?guid=D3BFF5F0-FDEE-4D98-96D2-47BB8D03655C
-India Shows Hedge-Fund Savvy With Huge Gold Buy: William Pesek. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=ae2wslm0YHgc
-We are still contemplating the massive gold purchase by the Reserve Bank of India the largest in at least 30 years that took up half of what the IMF intends to sell. Look for China to come in next.
But here is the reality. All India did was bring gold to a 6% share of its total FX reserves from 4%. Fifteen years ago, that representation was closer to 20%. China has increased its gold holdings by 76% over the past six years but they are a mere 1.9% of the aggregate 2.2 trillion of reserves and Russia’s gold holdings is just under 5%. This is not the 1990s when Bob Rubin was running a hard U.S. dollar policy, U.S. fiscal deficits were vanishing and gold production was on the rise.
Today’s world is exactly the opposite. Policymakers beginning in the 1990s wanted disinflation and got it. Now they want inflation it will take years, maybe a decade, but it will come. For the near-term, we are still optimistic on Treasury securities but be forewarned that this view has an expiry date that is earlier than the peak we are likely to see in gold.
It is very clear that central banks are behaving in a way that would suggest that gold is now again being considered a currency within the global monetary system. As we said before, it is all about relative scarcity and a well-defined supply curve fiat currency at this juncture does not share that quality. As a good friend reminded me yesterday, when the Fed was created nearly a century ago, it was acceptable to have at least 40% of the money supply backed by gold reserves. The U.S. now has 8,133 tons of gold in reserve, which equates to $285 billion at this year’s pricing.
Meanwhile, the Fed has spiked the punchbowl to such an extent that the monetary base now stands at $1.7 trillion. Do the math under the old regime (which indeed hamstrung the Fed), the U.S. alone would need to buy an incremental $400 billion of bullion or the equivalent of what would be nearly four times the typical level of annual demand. We could do the same calculation based on M2 but we don’t want anyone falling off their chairs. David Rosenberg-Gluskin/Sheff
-Sri Lanka’s central bank has been buying gold for the past five or six months as it diversifies its reserves amid volatile markets, the bank’s governor said in an interview on Thursday. “We have been fairly strong accumulators of gold reserves over the past few months,” Sri Lanka Central Bank Governor Ajith Nivard Cabraal told Reuters in a telephone interview from the southern Indian city of Chennai.
“We haven’t stopped yet,” he added, declining to quantify how much gold the central bank had bought or how much of the more than $4.8 billion of the country’s reserves were in gold. “Many countries are today diversifying. They are also looking at intrinsic value of their reserves, so gold would be a natural candidate for that kind of reserve accumulation,” he said. Read more here-http://www.gata.org/node/7983
-It would be cheaper for China to buy domestically mined gold than purchase bullion the International Monetary Fund is seeking to sell, a former adviser to the People’s Bank of China said on Thursday.
Asked whether China should emulate India, which last month bought 200 tonnes of IMF gold at an average price of $1,045 an ounce, Li Yang told reporters on the sidelines of a financial forum: “China’s gold is much cheaper than that.” Read more here-http://in.reuters.com/article/businessNews/idINIndia-43702720091105
-Fed statement may let gold continue upward course. Read more here-http://www.gata.org/node/7981
-Gold Being Rediscovered as a Monetary Asset. Read and watch more here-http://www.cnbc.com/id/15840232?video=1317326752&play;=1
-The latest commentary by Sprott Asset Management’s chief investment strategist, John Embry, argues that central bank and government treasury talk about withdrawing “stimulus” funds from the world financial system is a con job and that the desperate basement of world currencies will continue, causing gold and silver prices to go berserk.
Embry’s commentary appeared in Investor’s Digest of Canada and is headlined “Con Job in the Financial Markets Continues. Read more here-http://www.gata.org/node/7987 or
-Can gold hit $1,500? The price of gold is flirting with $1,100 an ounce. Many other precious metals continue to surge. How much higher can gold go and what’s it all mean? Read more here-http://money.cnn.com/2009/11/04/markets/thebuzz/index.htm
-Gold may touch $4,000 during this bull run. Here are 10 compelling reasons why gold is going to do well this year.
The Stimulus Effect: Including $1 trillion in cash infusions, the stimulus plan will pump $9.7 trillion into the economy, according to Bloomberg. As the Globe & Mail reports flatly, “Many believe that the monetary stimulus efforts will cause a spike in inflation,” driving gold higher.
COMEX Traders Predict $1,600 Gold… by December: If gold trades at or above $1,600 by December, some 100,000 call option contracts will be “in the money.” Big-money players Goldman Sachs and JPMorgan are reportedly helping to drive the action, ahead of a huge purchase of gold futures contracts.
“Big Money” Inflows: In 2008, NYC-based hedge fund Paulson & Co’s flagship fund returned 37%, as the world markets burned. Paulson’s bullish on gold, big time, including the Mar. 17 purchase of 39.9 million shares of AngloGold, worth $1.28 billion. Other major hedge funds are piling into gold, too, including Eton Park Capital, Green light Capital and Hayman Advisors.
China’s Doubling Down! China just revealed that it has doubled its gold holdings to 1,054 tons. Yet that still only equals 1.6% of its overall reserves. As China moves out of U.S. Treasuries and into gold, this will help fuel the next leg of the run-up.
Demand Building across the Board: Worldwide demand for gold jumped by $29.7 billion in the first quarter, a 36% bolt, according to the World Gold Council. Demand for gold ETFs (Exchange Traded Funds) rocketed 540%… another trigger for the coming gold boom.
The Paper Dollar’s 30% Drop: Since 2001, the U.S. Dollar Index has tanked 30%… while gold has risen 300%. With all the downward pressure on the dollar, and inflation on the way, this trend is about to pick up steam.
Gold/Dow Ratio Signals $8,000 Gold: During major gold bull markets (and corresponding equity bears), gold and the Dow converge at a 1-to-1 ratio. During the last gold bull, the Dow sank to 850 and gold rose to $850. The Dow is now over 8,000… But even if it fell to 4,000, we could see $4,000 gold before this bull run is over!
U.S. Treasury Dept. Signals $5,468 Gold: Currently, the U.S. government holds about 286.9 million ounces of gold. It has printed about $1.569 trillion worth of paper dollars. If each dollar were backed by gold, that would put the price at $5,468.80 an ounce.
Riding the “Commodity Super Cycle”: Jim Rogers expects the Commodity Super Cycle to drive commodity prices higher for another eight years… including gold. And he’s stockpiling the yellow metal by the day. Every pullback, says Rogers, is another buying opportunity. Considering he’s been dead right on every major trend of the past 40 years, we wouldn’t bet against him.
Historic Model Predicts $6,214 Gold: During the last gold bull, the yellow metal ran from $35 an ounce to $850, a 24-fold increase. This bull started with gold at $255.95, meaning that if historic trends hold, the price target would be $6,214 an ounce. Read more here-http://www.commodityonline.com/news/Gold-may-touch-$4-000-during-this-bull-run-22567-3-1.html
-Rob McEwen, founder of Goldcorp Inc., said the recent decline in gold’s price is temporary and that the metal will reach $2,000 an ounce by the end of 2010. “There is a seasonal low in this part of the year; I wouldn’t be disturbed by it,” McEwen said.
“I think by the end of 2010 we will be at $2,000; by the end of this cycle it will be at $5,000.” He gave no timeframe for the end of the cycle. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aobedrOd8X4o
-Gold to Make New Highs Above $2000, Says Commodity Maven Frank Holmes. Read and watch more here-http://news.goldseek.com/GoldSeek/1256919865.php
-$1,160 is Gold’s Next Target Level: Charts. Read more here-http://www.cnbc.com/id/33632775?__source=RSS*blog*∥=RSS
-Gold Spells Trouble for Greenback: Charts. The value of gold and silver are on the rise, but this spells trouble for the declining dollar index which could push as low as 66 points, according to Chris Zwermann, strategist from Zwermann Financial.
While gold strength spells trouble for the US dollar, the silver market is likely to rise with gold pushing the spot silver value to more than $20 per ounce, he said. Read and watch more here-http://www.cnbc.com/id/33615933
-Rogers Says Roubini Is Wrong on Bubbles as Gold, Stocks Rally. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a8fc.G.WUIP8
-Roubini Says Rogers’s Forecast of $2,000 Gold ‘Utter Nonsense’. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aOfwpkHV2clM
-Got Gold Report: Gold, silver futures in backwardation. Read more here-http://www.stockhouse.com/Columnists/2009/Nov/3/Got-Gold–Report–Gold,-silver-futures-in-backward
-King World News interviews GATA’s Douglas on ‘imaginary’ gold. Listen here-http://www.gata.org/node/7953
-Cashing in Memories, at $1,000 an Ounce. Read more here-http://www.nytimes.com/2009/11/01/nyregion/01critic.html?_r=2&pagewanted;=print or http://www.gata.org/node/7958
SILVER
Gold to silver ratio at 80 to 1 with gold at $2,000 the silver price would be $25.00
Gold to silver ratio at 70 to 1 with gold at $2,000 the silver price would be $28.57
Gold to silver ratio at 60 to 1 with gold at $2,000 the silver price would be $33.33
Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00
Gold to silver ratio at 40 to 1 with gold at $2,000 the silver price would be $50.00
Gold to silver ratio at 30 to 1 with gold at $2,000 the silver price would be $66.67
Gold to silver ratio at 20 to 1 with gold at $2,000 the silver price would be $100.00
Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33
-Current Gold/Silver Ratio Screams: Buy All Things Silver! Read more here-http://news.silverseek.com/SilverSeek/1257377703.php
-Silver set to soar as it did in the 1970’s. Silver remains very undervalued on an historical basis and is undervalued even against gold. While gold has begun to receive some interest from a small minority of retail investors, silver remains the preserve of relatively few contrarian investors and the media and financial press rarely if ever covers silver. And yet silver is quite likely in the intermediate stage of a bull market that will rival or surpass that of the 1970’s.
Silver is currently worth less than $17.00 per ounce. Silver rose to a recent nominal high $20.88/oz in March 2008. After an 18 month period of correction and consolidation, silver looks set to challenge that high in the coming months. We continue to be bullish on gold and particularly silver and believe that silver will likely surpass its non inflation adjusted high of $48.70 per ounce and its inflation adjusted high of some $130 per ounce in the coming years.
Silver is unique in terms of being both a monetary and an industrial metal. Silver is priced at less than $17/oz today. The average nominal price of silver in 1979 and 1980 was $21.80/oz and $16.39/oz respectively. In today’s dollars and adjusted for inflation that would equate to an inflation adjusted average price of some $60/oz and $44/oz in 1979 and 1980. It is for this reason that we believe silver will be valued at well over $50/oz in the coming years and silver remains the investment opportunity of a lifetime. Read more here-
http://news.silverseek.com/SilverSeek/1257267140.php
-Xerox claims printable electronics breakthrough with silver. Read more here-http://www.pcmag.com/article2/0,2817,2354848,00.asp
-US Mint Silver Bullion Sales Top Annual Record. Read more here-http://news.coinupdate.com/us-mint-silver-bullion-sales-top-annual-record-006/
-US Mint Gold and Silver Coin Demand Sets October Records. Read more here-http://www.coinnews.net/2009/11/02/us-mint-gold-and-silver-coin-demand-sets-october-records/
-Trade Imbalances Are Silver’s Bullish Signal. Read more here-http://news.silverseek.com/SilverSeek/1257283566.php
-Ted Butler silver commentary. Read more here-http://news.silverseek.com/SilverSeek/1257430207.php or http://www.gata.org/node/7986
-Silver market analyst Ted Butler interviewed by King World News. Listen here-http://www.gata.org/node/7955
-Take the Long View for Gold & Silver. When gold reached its record high against the US dollar of $1064.20 on October 13th, the price of gold in euros, Swiss francs and British pounds did not confirm. On that day they were still below their recent high by 10.1%, 7.5% and 4.4% respectively. Technically, this result was a bearish divergence, which can be a warning sign that the market’s internal condition is deteriorating. For example, bearish divergences often signal a top.
Whether or not gold was signalling a potential top, the argument could be made and many have made it – that gold was rising solely because of dollar weakness, rather than underlying fundamental strength. It is an argument that on the surface seems plausible, but it is one that is not supported by an obvious fact. Namely, gold has been rising against all of the world’s major currencies this decade, and for the past eight years has appreciated by double-digit rates of return against all of them. However, gold’s progress at any moment in time is very much dependent on relative currency movements.
For example, in 2008 gold dropped -14.9% in terms of the Japanese yen while at the same time it appreciated 44.3% against the British pound. But from 2001 through 2008, gold’s performance against these two currencies is similar, rising 13.6% p.a. on average against the yen and 17.1% p.a. against the pound.
What’s more, last year’s results are to a certain extent being corrected this year. Through October, gold is up by 16.7% against the yen and only 4.8% against the pound, which makes my point. We live in a world of floating currencies that bob up-and-down relative to each other, but they are all sinking against gold, as evidenced by gold’s double-digit rates of appreciation this decade against all of them, as shown in the following table (which also presents separately, gold’s results this year for the ten months through October 31st).
|
Gold % Annual Change |
|||||||||
|
USD |
AUD |
CAD |
CNY |
EUR |
INR |
JPY |
CHF |
GBP |
|
|
2001 |
2.5% |
11.3% |
8.8% |
2.5% |
8.1% |
5.8% |
17.4% |
5.0% |
5.4% |
|
2002 |
24.7% |
13.5% |
23.7% |
24.8% |
5.9% |
24.0% |
13.0% |
3.9% |
12.7% |
|
2003 |
19.6% |
-10.5% |
-2.2% |
19.5% |
-0.5% |
13.5% |
7.9% |
7.0% |
7.9% |
|
2004 |
5.2% |
1.4% |
-2.0% |
5.2% |
-2.1% |
0.0% |
0.9% |
-3.0% |
-2.0% |
|
2005 |
18.2% |
25.6% |
14.5% |
15.2% |
35.1% |
22.8% |
35.7% |
36.2% |
31.8% |
|
2006 |
22.8% |
14.4% |
22.8% |
18.8% |
10.2% |
20.5% |
24.0% |
13.9% |
7.8% |
|
2007 |
31.4% |
18.6% |
10.4% |
23.0% |
17.9% |
17.5% |
24.7% |
21.5% |
29.2% |
|
2008 |
5.8% |
32.5% |
32.4% |
-1.1% |
11.9% |
30.4% |
-14.9% |
0.2% |
44.3% |
|
Annual Average |
16.3% |
13.3% |
13.6% |
13.5% |
10.8% |
16.8% |
13.6% |
10.6% |
17.1% |
|
31-Oct-2009 |
17.7% |
-8.7% |
4.0% |
17.8% |
11.3% |
13.7% |
16.7% |
13.1% |
4.8% |
Interestingly, the results for silver are similar. Silver had a relatively bad year in 2008 against most currencies because it was sold aggressively in the deleveraging that occurred after the collapse of Lehman Brothers. But look in the table below at the remarkable results that silver has achieved so far this year.
|
Silver % Annual Change |
|||||||||
|
USD |
AUD |
CAD |
CNY |
EUR |
INR |
JPY |
CHF |
GBP |
|
|
2001 |
-0.1% |
8.5% |
6.1% |
-0.1% |
5.3% |
3.1% |
14.4% |
2.3% |
2.7% |
|
2002 |
4.8% |
-4.6% |
4.0% |
4.9% |
-11.0% |
4.3% |
-5.0% |
-12.6% |
-5.3% |
|
2003 |
24.0% |
-7.3% |
1.4% |
23.9% |
3.2% |
17.7% |
11.9% |
11.0% |
11.9% |
|
2004 |
14.3% |
10.2% |
6.5% |
14.3% |
6.4% |
8.6% |
9.6% |
5.4% |
6.5% |
|
2005 |
29.6% |
37.7% |
25.5% |
26.3% |
48.1% |
34.6% |
48.8% |
49.3% |
44.4% |
|
2006 |
45.3% |
35.3% |
45.3% |
40.5% |
30.4% |
42.6% |
46.7% |
34.8% |
27.5% |
|
2007 |
15.4% |
4.1% |
-3.1% |
8.0% |
3.5% |
3.2% |
9.5% |
6.7% |
13.5% |
|
2008 |
-23.8% |
-4.7% |
-4.7% |
-28.9% |
-19.5% |
-6.2% |
-38.8% |
-27.9% |
3.8% |
|
Annual Average |
13.7% |
9.9% |
10.1% |
11.1% |
8.3% |
13.5% |
12.1% |
8.6% |
13.1% |
|
31-Oct-2009 |
44.2% |
11.8% |
27.4% |
44.3% |
36.3% |
39.2% |
42.9% |
38.6% |
28.4% |
So the point of this analysis is to forget about the bearish divergences and other noise that can easily distract one from the big picture, which is clear from the above tables. It does not really matter whether gold is up or down one week or one month in terms of one currency or another. Let the professional currency traders and speculators worry about those fluctuations. Focus instead on the big picture and take a long view.
In the long run, all currencies are losing purchasing power against gold, which is the important point. Don’t get caught up in the daily, weekly or even monthly price changes in the precious metals that occur as a result of the volatility of fiat currencies.
We therefore need to ignore the noise that can easily distract us from the big picture. And one way to do that is to continue following the strategy I have been recommending all decade. Save gold, and/or save silver. Accumulate precious metal month-in and month-out under a cost averaging program, and view the gold and silver accumulated in this way to be your savings account. Savings are always a good thing, particularly so when you are saving sound money. James Turk-Read more here-http://goldmoney.com/commentary-take-the-long-view-for-gold-and-silver.html
CHART OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Bernanke Rips A Page From Japan’s Suicidal Playbook. Let’s hope that Bernanke doesn’t keep playing by Japan’s suicidal 1991 interest rate playbook for too much longer. The chart below shows Japan’s 1991-2006 interest rates on top of our current U.S. interest rate cycle.
While Mr. Bernanke is trying to temporarily fight deflationary forces in the economy after the massive housing bust, don’t forget that Japan’s low interest rate policy lasted far longer than they had initially expected. And they lost a decade of economic growth by not allowing prices to fall when they should have. If we follow Japan, our rates would stay low until 2022.
Sure, the U.S. dynamics are different. Yet if Bernanke follows the Japan model for just a quarter as long as Japan did, while we might not lose a decade of growth, we might set off a decade of dollar-destroying inflation. Read more here-http://www.businessinsider.com/chart-of-the-day-japan-vs-us-interest-rates-2009-11
-It is Japan we should be worrying about, not America. Japan is drifting helplessly towards a dramatic fiscal crisis. For 20 years the world’s second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending and allowing it to push public debt beyond the point of no return. Read more here-
-Quotes from the great depression. Read more here-http://alethonews.blogspot.com/2009/11/quotes-from-great-depression.html
September 1929-”There is no cause to worry. The high tide of prosperity will continue.” Andrew W. Mellon, Secretary of the Treasury.
October 14, 1929-”Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board.” New York Times
December 5, 1929-”The Government’s business is in sound condition.” Andrew W. Mellon, Secretary of the Treasury
December 28, 1929-”Maintenance of a general high level of business in the United States during December was reviewed today by Robert P. Lamont, Secretary of Commerce, as an indication that American industry had reached a point where a break in New York stock prices does not necessarily mean a national depression.” Associated Press dispatch.
-This weeks major event was FOMC’s unanimous decision to keep “Interest rates exceptionally low” for an “extended period of time.” This means that US dollar will remain the carry trade currency of choice as we transit to new ground with a major reserve currency as a carry trade currency. There are no rules or experience with this phenomenon.
Professor Roubini says $2000 gold is nonsense. I agree. It is probably going to a minimum of Alf Field’s lowest estimate of $3000. Professor Roubini might consider the old saying of “Never say never.”
I can’t tell you how many emails have I received telling me that gold would NEVER trade over $1000. One caller told me gold would never trade over $1000 in his lifetime, so I enquired how old he was. He hung up. Jim Sinclair
-India, like China, understands the virtues of gold. This is why they have snapped up 200 tons of gold from the IMF at around $1,045 per ounce or $6.7 billion. The UK does not understand gold, that is why Gordon Brown sold most of the nation’s gold in 1999 at virtually the low of $250.
Instead the UK has today spent $51 billion on propping up bankrupt banks. Royal Bank of Scotland received another $41 billion today making it the costliest bailout worldwide with a total of $75 billion. Lloyds Bank received another $10 billion. The US is of course also spending printed money on rescuing bank creditors with 115 bank failures so far in 2009.
So who is likely to make the best return on their investment, India with their gold or the UK or US with their bankrupt banks. We certainly know who we will put our money on.
Matterhorn Asset Management-Read more here-http://goldswitzerland.com/index.php/india-buys-gold-uk-buys-banks/ or http://goldswitzerland.com/index.php/final-warning/
-Central banks lead subtle shift away from dollar. Read more here-http://www.reuters.com/article/newsOne/idUSTRE5A25KO20091103
-FX strategists in poll expect long, slow slide for dollar. Read more here-http://www.gata.org/node/7979
-Ron Paul, Be Prepared for the Worst, The large-scale government intervention in the economy is going to end badly. The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans.
The Fed has already overseen a 95% loss in the dollar’s purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year. Read more here-http://www.forbes.com/forbes/2009/1116/opinions-great-depression-economy-on-my-mind_print.html
-Ron Paul interviewed by King World News. Listen here-http://www.gata.org/node/7956
-White House says projected deficits unsustainable. Projected U.S. budget deficits are too high and could force up interest rates and crowd out investments unless the country takes action, the White House budget chief said on Tuesday.
The Obama administration reported a record U.S. budget deficit for last fiscal year of $1.4 trillion, or 10 percent of gross domestic product, after it moved to rescue the economy and some of the biggest U.S. banks from the worst recession in 70 years.
Next year’s fiscal shortfall is expected to be about the same size, and current projections show $9 trillion in deficits over the next 10 years, averaging about 5 percent of GDP, said Peter Orszag, director of the Office of Management and Budget. “Deficits of this size are serious, and ultimately unsustainable,” Orszag said at New York University. Read more here-
http://www.reuters.com/article/ousiv/idUSTRE5A23HQ20091103
-Deficits Over Time and the Interest Paid on Them. Read more here-http://blog.newsweek.com/blogs/wealthofnations/archive/2009/10/28/deficits-over-time-and-the-interest-paid-on-them.aspx
-U.S. state and local government pensions are underfunded by $1 trillion and may need to seek federal guarantees for their debt, according to Orin Kramer, chairman of New Jersey’s Investment Council. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aZCJ6B6hlvUE&pos;=7
-Illinois Teacher Fund Confronts $35 Billion Unfunded Liability. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=atzvnSNhv8ig
-Stock Market ‘Bubble’ to End, Morgan Stanley Says. The global stock market rally, which resembles the bull run between 2003 and 2007, will end as government spending slows after so-called easy money boosted asset prices, according to Morgan Stanley. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a.YErMIwMYKA
-The Federal Reserve repeated it will keep interest rates near zero for “an extended period” and specified for the first time that policy will stay unchanged as long as inflation expectations are stable and unemployment fails to decline. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=amE4MRLU_acw&pos;=1
-Bank of Canada Deputy Governor John Murray said a strong Canadian dollar threatens economic recovery and reiterated a pledge to keep the bank’s benchmark lending rate at a record low through June unless the inflation outlook shifts. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=afzrOFS899hQ
-A Visual History of the Federal Reserve System from JP Koning. Read chart here-http://financialgraphart.com/history_of_fed_free.pdf
-Personal bankruptcies surge 9%. Number of Americans filing for bankruptcy continues to climb. Total bankruptcies expected to top 1.4 million in 2009, highest in 4 years. Read more here-http://money.cnn.com/2009/11/04/news/economy/October_consumer_bankruptcy/index.htm?postversion=2009110412
-U.S. Inflation to Appear Next in Food and Agriculture. Read more here-http://www.reuters.com/article/pressRelease/idUS199272+30-Oct-2009+PRN20091030
-Iran’s Military Power Subject to New U.S. Study Used for China. Iran’s military will be subject for the first time to the kind of U.S. assessment reserved for China’s expanding forces as lawmakers seek a more accurate analysis of the Persian Gulf oil power’s strengths and strategy.
Congress ordered an annual report on Iranian military goals and capabilities, including the country’s missile and nuclear programs, in a provision tucked into a 1,200-page measure authorizing defense spending. President Barack Obama signed the bill into law last week. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a9llyoTKyef0&pos;=15
-Iran Raises Uranium Output as Photos Show Need for Wider Checks. Satellite photos indicate that Iran has increased production at a uranium mine, underscoring the need for wider UN inspections to determine whether the country is trying to build a nuclear weapon. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aMtzNb9WS83I&pos;=13
-Israel Official Says Hamas Rockets Can Reach Tel Aviv. The Islamic Hamas movement in the Gaza Strip can now launch rockets capable of reaching the Israeli metropolitan area of Tel Aviv, Deputy Foreign Minister Danny Ayalon said at a Jerusalem briefing.
“We know they have tried to, and have obtained missiles that reach 60 kilometers (37 miles),” Ayalon said today. “Tel Aviv and its vicinity are now under the range of Hamas.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a6jwVybuY9rc
-Israel Seizes 500 Tons of Hezbollah-Bound Iran Arms. The Israeli navy intercepted a ship heading for Syria and seized an unprecedented 500-ton haul of weapons from Iran intended for the Shiite Muslim Hezbollah militia in Lebanon, the army said.
“This is the largest cache of smuggled weapons ever to be seized by Israel,” an army spokeswoman, Avital Leibovitz, said in a phone interview today. “The cache includes thousands of rockets as well as hand grenades and mortar shells.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ajq8.fQK6B.M
-NKorea claims to expand arsenal of atomic bombs. Read more here-http://www.breitbart.com/article.php?id=D9BO6DAG1&show;_article=1
-The financial crisis has mauled Las Vegas like no other city. What was once the land of luxury and excess is now the home of empty houses and broken dreams. While the city and its investors keep hoping for a turnaround, others see long, lean years ahead. Read more here-http://www.spiegel.de/international/business/0,1518,657616,00.html
-Food-Stamp Recipients Rise to Record 36.5 Million. About 36.5 million people, almost one out of every eight Americans, received food stamps in August, the most ever, as the U.S. jobless rate rose to a 26 year high, government reports show. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a7OeMakQXtWw or http://www.breitbart.com/article.php?id=D9BNKH3O1&show;_article=1
-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
-Christie’s Fall Sale of Magnificent Jewels, to be held in Hong Kong on Dec. 1, will feature “The Vivid Pink,” a 5-carat fancy vivid-pink diamond with potentially flawless clarity set in a ring by Graff. It is estimated to fetch between $5 million and $7 million. Read more here-http://www.nationaljewelernetwork.com/njn/content_display/fashion/jewelry-auctions/e3id386c4a26251b0b543b08ff543f18183
-“Very Strong Price Appreciation” at Rio Tinto’s Pink Diamond Tender. Rio Tinto has celebrated the 25th anniversary of its iconic Argyle Pink Diamonds Tender with an exceptional result that belies the global financial crisis of the past 12 months. Titled Grand Passions, this year’s tender collection comprised 43 of the rarest and the best pink diamonds from Rio Tinto’s Argyle Diamond Mine in Western Australia, including four heart shaped gems.
According to Jean-Marc Lieberherr, General Manager for the sales and marketing for all diamonds from Rio Tinto’s mines. “This year’s collection was keenly contested by investors, collectors and diamond experts from around the world. All diamonds were sold and we were delighted to see strong representation from the growing markets of India and China, as well as the more established markets for rare coloured diamonds.”
Whilst Rio Tinto does not release the prices of the pink diamonds sold at its tender, Josephine Archer, Business Manager for Argyle Pink Diamonds, commented that, “The 2009 Pink Tender results have demonstrated a significant global reach with very strong price appreciation, on the back of a growing awareness of the rarity, exclusivity and uniqueness of the Argyle Pink Diamond brand.”
Referred to as the world’s most exclusive diamond sale, the Argyle Pink Diamonds Tender was showcased around the world from June to September with private viewings in Perth, London, Hong Kong, Sydney, and for the first time ever, Mumbai. All 43 diamonds were cut and polished in Perth, Western Australia by Rio Tinto’s master craftsmen, acknowledged globally for their expertise, precision and artistic flare.
This year’s collection included a 2.61carat intense pink heart shaped diamond named Argyle Amour, a 1.25 carat purplish pink round diamond, Argyle Shalimar, and Argyle Scarlett, a 1.10 carat red oval diamond. According to Josephine Archer, “The diamonds sold at this year’s Tender will go to a range of individual diamantaires, jewellery manufacturers and luxury retailers across all major markets.
The ultimate consumers for these diamonds are likely to be investors, collectors, celebrities and high net worth individuals. Rio Tinto’s Argyle Diamond Mine, in Australia, is the world’s only consistent supplier of rare pink diamonds and provides a large proportion of the world’s coloured diamonds.
The Argyle Diamond mine produces more than 90 per cent of the world’s pink diamonds, which are sold in a broad range of colours and sizes to an international customer base.
The best stones are reserved for the annual Argyle Pink Diamonds Tender. Read more here-http://www.diamondne.ws/2009/10/22/very-strong-price-appreciation-at-rio-tintos-pink-diamond-tender/ or http://www.diamonds.net/news/NewsItem.aspx?ArticleID=28364 or http://www.idexonline.com/portal_FullNews.asp?id=33111
NO END TO THE BANKING CRISIS
-CIT Group Inc., a 101-year-old commercial lender, filed for bankruptcy to cut $10 billion in debt after the credit crunch dried up its funding and a U.S. bailout and debt exchange offer failed.
CIT listed $71 billion in assets and $64.9 billion in debt in a Chapter 11 filing in U.S. Bankruptcy Court in Manhattan. The U.S. Treasury Department said the government probably won’t recover much, if any, of the $2.3 billion in taxpayer money that went to CIT. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3.t_GrxbL2U&pos;=1 or
http://www.economist.com/daily/news/displaystory.cfm?story_id=14787579&fsrc;=nwl
-9 banks in major holding company fail. FBOP’s banks in California, Illinois, Texas and Arizona bring the number of ‘09 failures to 115. Depositors insured up to $250,000. Nine subsidiaries of FBOP Corp., a multistate holding company that included California National Bank of Los Angeles, succumbed Friday to the nationwide banking crisis, bringing to 115 the number of banks closed by regulators so far this year.
The Federal Deposit Insurance Corp. said the nine banks in California, Illinois, Texas and Arizona that made up the privately held FBOP were taken over by U.S. Bancorp (USB, Fortune 500) of Minneapolis. The banks, which had combined assets of $19.4 billion and deposits of $15.4 billion, will open Saturday as U.S. Bank branches.
The nine banks are Bank USA N.A. of Phoenix, California National Bank of Los Angeles, San Diego National Bank of San Diego, Pacific National Bank of San Francisco, Park National Bank of Chicago, Community Bank of Lemont in Lemont, Ill., North Houston Bank in Houston, Madisonville State Bank in Madisonville, Texas, and Citizens National Bank of Teague, Texas. Together, the nine banks had 153 offices. Read more here-http://money.cnn.com/2009/10/30/news/economy/fbop_failure/index.htm?postversion=2009103022 or
http://www.reuters.com/article/wtUSInvestingNews/idUSTRE59U05420091031?pageNumber=2&virtualBrandChannel;=0 or http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a2qyJNCkvneA
-Bank Failures Buffeting FDIC Efforts to Bolster Insurance Fund. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a2uv1dlCirt8
-Stiglitz Says U.S. Is Paying for Failure to Nationalize Banks. Nobel Prize-winning economist Joseph Stiglitz said the world’s biggest economy is suffering because of the U.S. government’s failure to nationalize banks during the financial crisis.
“If we had done the right thing, we would be able to have more influence over the banks,” Stiglitz told reporters at an economic conference in Shanghai Oct 31. “They would be lending and the economy would be stronger.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aGR4KXaGwxd8
-Roubini Says U.S. Banking Mergers May Create ‘Bigger Monster’. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aJRnB5UgnWto&pos;=4
-Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc will receive 31.3 billion pounds ($51 billion) in a second bailout from the U.K. taxpayer as the two banks agreed to cap bonuses. The Treasury will inject 25.5 billion pounds of capital into RBS, for a total of 45.5 billion pounds, making it the costliest bailout of any bank worldwide. The government will fund about a quarter of Lloyds’s 21 billion-pound fundraising. Both banks said they won’t pay cash bonuses to workers earning more than 39,000 pounds this year.
The rescue will bring the U.K. closer to full ownership of RBS, while Lloyds will escape government control. Lloyds Chief Executive Officer Eric Daniels will raise funds from money managers to avoid the Treasury’s asset insurance plan, which would give the government a majority stake. He’s betting bad loans will drop after the Bank of England said the country’s recession was nearly over. Stephen Hester, RBS’s CEO, will by contrast accept more government oversight and insure 282 billion pounds of his banks’ riskiest assets with the Treasury.
“There is now a very fine line between RBS being nationalized and the stake the government now holds,” said Danny Gabay, director of Fathom Consulting in London and a former Bank of England economist. “This contrasts with Lloyds’s willingness to fight harder for its independence.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aaT.lcVDG6WA&pos;=1
-Royal Bank of Scotland to Cut 3,700 Jobs at Branches. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aH87D1AkENzE
-Bank of Ireland reports huge loss. Bank of Ireland has announced losses of almost 1bn euros (£895m) for the six months to the end of September. The bank has said that the total value of loans that it thinks might not be repaid will be 6.9bn euros (£6.1bn) for the period to April 2011. It has warned the Irish government that it may require another infusion of taxpayers’ capital. Read more here-http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/8341796.stm
REAL ESTATE
-Chart of the week: Housing Needs To Keep Falling. More ammo for the housing bears here: Despite the dips in both the Case-Shiller and FHFA Home Price Indices, houses still aren’t affordable based on historical price/income ratios.
Historically, both indices have generally tracked Mean Household Income, but as this chart in a new report from St. Louis Fed (.pdf) indicates, as of the middle of this year, there’s still no convergence. And based on the upswing in Case-Shiller numbers over the summer, that’s still the case. Remove all of the extraordinary government support from the market, and it’s easy to see prices dipping below the lines before they stabilize. Read more here-http://www.businessinsider.com/chart-of-the-day-house-prices-and-median-household-income-2009-11
-Chart of the week: First-Time Homebuyers Rising To Dominate Housing Market. First time home buyers have risen from a tiny percentage of the market for homes to making up a significant portion of the market. Even the panic at the end of 2008 barely slowed down the first timers.
In the most troubled markets, such as Las Vegas, Nevada, the first time buyers are actually dominating the market. FHA loans are extremely popular with first time home buyers, which is one reason that the market for homes has become so dependent on the FHA. (Our thanks to DQNews.com for the data used in this chart.) Read more here-
http://www.businessinsider.com/chart-of-the-day-first-time-homebuyers-dominate-the-market-2009-11
-Wilbur Ross Sees ‘Huge’ Commercial Real Estate Crash. Billionaire investor Wilbur L. Ross Jr., said today the U.S. is in the beginning of a “huge crash in commercial real estate.” “All of the components of real estate value are going in the wrong direction simultaneously,” said Ross, one of nine money managers participating in a government program to remove toxic assets from bank balance sheets.
“Occupancy rates are going down. Rent rates are going down and the capitalization rate the return that investors are demanding to buy a property are going up.” U.S. commercial property sales are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s, according to property research firm Real Capital Analytics Inc.
The Moody’s/REAL Commercial Property Price Indices already have fallen almost 41 percent since October 2007, Moody’s Investors Service said Oct. 19. Billionaire George Soros, speaking today at a lecture organized by the Central European University in Budapest, said a “bloodletting” may be coming for leveraged buyouts and commercial real estate.
“The American consumer will no longer be able to serve as the motor for the world economy,” said Soros, 79. His comments came in the same week that Capmark Financial Group Inc. filed for Chapter 11 bankruptcy protection after originating $60 billion in commercial property loans in 2006 and 2007. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aoRYl03Rw1_g
-U.S. Home Price Slump to Last to Mid-2010, Pimco Says. The slump in U.S. housing prices is unlikely to end before the middle of next year, and statistics portraying rising values are misleading, according to Pacific Investment Management Co.
An S&P;/Case-Shiller index for 20 metropolitan areas showed values rising 4.8 percent in the four months through August after a record 33 percent drop from its July 2006 peak. Such statistics are being distorted by U.S. efforts to reduce foreclosures, which are temporarily limiting sales of seized homes, said Scott Simon, Pimco’s mortgage-bond chief.
“It only makes prices look like they’re going up,” Simon said yesterday in a telephone interview. “Think about it this way: If you had 100 percent of the sales as foreclosure sales, prices would look like they went down a ton, and if you had none, prices would look like they went up a ton.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=awyQa2v2Phtk
-High-End Home Prices Haven’t Bottomed Out, Pimco Says. Prices on the most expensive houses have yet to reach bottom because there’s limited political support for helping the wealthy, according to Pacific Investment Management Co.
“It’s very, very popular to help the median and below in terms of the mortgage market, but the high end, there’s just not a lot of sympathy,” said Scott Simon, Pimco’s mortgage-bond chief. “‘Oh yeah, that guy bought a $2 million house. We should bail him out.’ That’s just not a thought.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aW8pvpaT7_n4
-Real Estate Price Plunge Makes U.S. Homeownership Perilous Path. Kajal and Vishal Dharod paid $559,000 in 2006 for a new four-bedroom house built in Rancho Cucamonga, California. Today, it’s worth about $360,000. “We don’t know how we can come back from a loss like that,” said Kajal Dharod, 29, a first-time homeowner with a $4,200-a-month mortgage. “Buying the house was a mistake.” Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a5Mu8v6dknLo
-It was the most expensive real estate deal in U.S. history. Now it’s poised to become one of the biggest flops. At the height of the real estate bubble in 2006, an investment group led by New York City real estate firm Tishman Speyer Properties and BlackRock Realty Advisors paid $5.4 billion for a pair of gigantic Manhattan apartment complexes known as Stuyvesant Town and Peter Cooper Village.
The price seemed outrageous to many, but the company believed it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar. Three years later, to the glee of many New York renters, the tactic has been a bust.
Tenants fought back, conversions happened much slower than expected and a state court ruled Thursday that about $200 million in the company’s new rent increases were improper. Real estate analysts say the ownership group is now just two to three months away from a likely default on the $3 billion mortgage it used, along with a $1.4 billion secondary loan, to buy the property. Read more here-http://news.yahoo.com/s/ap/20091025/ap_on_bi_ge/us_meltdown_biggest_bust
© 2012, Worldwide Precious Metals Canada Ltd.
www.wwpmc.com
The World Financial Report – November 10, 2009
Posted by Worldwide Precious Metals on Tuesday, November 10, 2009
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