Newsroom

The Goldbugg Report – December 1, 2009

December 1, 2009

-New gold bugs making gold investments mainstream.

-Gold is soaring, hitting new record highs almost daily.

-Silver price soars on heavy demand, high hopes for gains.

GOLD

-Up $800 million on its IMF gold, India may buy the rest. India is open to buying more gold from the International Monetary Fund (IMF). It bought 200 tonnes for $6.7 billion on November 3. The Reserve Bank of India (RBI) may well buy the IMF’s remaining hoard of 201.3 tonnes on acceptable terms, which are now under negotiation.

A government official said that the additional purchase would depend on the “successful pitching by RBI.” “RBI is an independent body, and the government does not interfere in its affairs. It will get the gold if its bid is successful and at the price it has offered,” said the official.

RBI did not respond to Financial Chronicle questions if it was bidding for the remaining IMF gold. The purchase of the first lot of 200 tonnes, RBI had said at the time, was a part of its foreign exchange reserves management operations.

Responding to query from FC, an IMF spokesperson said the gold sale process was still under way and “there is no fixed timetable for completing the sale.” Its spokesperson further said that “the fund does not wish to comment on discussions with individual members.” Read more here-http://www.gata.org/node/8088

-IMF sells 10 tonnes of gold to Sri Lanka. Read more here-http://uk.news.yahoo.com/18/20091125/tbs-imf-sells-10-tonnes-of-gold-to-sri-l-5268574.html

-Russia central bank buys 0.5 mln oz gold in October. Read more here-http://in.reuters.com/article/fundsNews/idINGEE5AM1A020091123

-Have Central Banks lost their desire to cut gold reserves? With India leading the charge a desire not just to be conservative but also to been seen as conservative will see central banks helping bolster the gold price. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=93536&sn;=Detail

-New gold bugs making gold investments mainstream. Read more here-http://www.marketwatch.com/story/story/print?guid=08A47646-A6C5-4293-9595-1A37A564D70A

-Gold to hit $1650 by late 2010, early 2011, but estimate could be low Jim Sinclair. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=93428&sn;=Detail

or listen here-http://www.moneyweb.co.za/mw/view/mw/en/page295799?oid=331136&sn;=2009%20Detail&pid;=295683 or http://www.gata.org/node/8072

-Gold is soaring, hitting new record highs almost daily. This C rise is going strong. Our initial $1200 target level for this year’s rise has nearly been reached, but gold could go higher.

This is good news for all of us who have been invested in gold for the past eight years. But even for those of you who invested in more recent times, gold has been a good and profitable investment.

We feel strongly that this will continue in the months and years ahead. And there are many valid reasons why. Most important, the unprecedented monetary policy currently in force is inflationary. The same is true of the weak U.S. dollar, negative interest rates, rising oil and commodities. Gold buying by central banks is also boosting the gold price higher.

Even though gold is still relatively unknown in mainstream investment circles, it’s starting to attract some attention. As this interest grows, momentum buying will pick up and the exchange traded funds are another big positive, simply because they make it easy to buy gold. The improving economy is another positive factor. Aden Sisters-Read more here-

http://www.kitco.com/ind/Aden/aden_nov232009.html

-Miners say they’re running out of gold. Gold production will continue to fall, despite a brief boost in 2009 and soaring prices, as deposits are exhausted and new discoveries remain elusive, say miners. In terms of production, “2009 is the outlier as far as the trend,” Omar Jabara, spokesman for US-based Newmont Mining, the second-largest gold producer in the world, told AFP.

Overall, “It’s a fact that gold production from mines has been in decline since 2001 and has gone roughly from 85 million ounces to about 75 million ounces a year,” said Vincent Borg, spokesman for No. 1 producer Barrick Gold. “It sort of goes down about 1 million ounces every year and our forecast is that it will continue to decline despite the higher price” for gold nowadays, he said.

Almost everywhere, mineral deposits are being exhausted and new deposits are not being found fast enough to replace them, these experts explain. Read more here-

http://www.gata.org/node/8086

-James Turk: Welcome to Stage 2 of gold’s bull market. Read more here-http://www.kitco.com/ind/Turk/turk_oct232009.html

-Central banks of emerging markets have substantial scope to expand their gold reserves given their underweight position in the metal relative to developed market central banks, Stephen Jen, managing director of macroeconomics and forex at BlueGold Capital Management, said in a report dated Monday. According to the report, the average gold holding ratio, or gold holdings as a percentage of total foreign exchange and gold reserves, of the U.S., Japan, ECB, UK, Germany, Italy, France and Switzerland is 37.9% on average.

This compares with an average of 2.2% for a group that includes China, Russia, India, Taiwan, South Korea, Hong Kong, Brazil and Singapore. “The obvious implication is that the scope for emerging market central banks to buy more gold is substantial, if they decide to diversify into gold,” said Jen.

Jen also said the top eight emerging market forex reserve holders have $4.1 trillion in foreign reserves, meaning every 1% reallocation in reserves towards gold would correspond to $41 billion in gold purchases. “If these banks raise their gold holdings from the current 2.2% to a conservative 5%, this would correspond to $115 billion in gold purchases,” he said.

The Reserve Bank of India’s purchase of 200 metric tons of gold from the IMF, first reported Nov. 3, which cost it around $7 billion, has been one of the factors widely cited as driving gold to new record highs. Read more here-http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=8970ea5d-3ab9-4ad2-87a8-f76cca63c961

-Thanks in part to mounting US deficits and a weak US economy, the US dollar continues to trend lower. After all, a virtual collapse of the banking sector does have its consequences. For some perspective, today’s chart illustrates the current trend in the US dollar (blue line) as well as that other world currency, gold (gray line).

As today’s chart illustrates, the performance of the US dollar has varied inversely to that of gold since the latter stages of the credit bubble. It is worth noting that the US dollar is currently testing resistance of its downtrend (red line) while gold makes record highs. Read more here-http://www.chartoftheday.com/20091125.htm?T

Source: chartoftheday.com

-Long-term readers know that gold moves inversely to the dollar, meaning if the dollar drops, gold tends to rise (and vice versa). This happens with about 80% regularity. But what many gold writers haven’t acknowledged is the leveraged movement our favourite metal has demonstrated this year to the world’s reserve currency.

The U.S. dollar index, a six-currency gauge of the greenback’s value, has dropped 7.1% so far this year. Meanwhile, gold is up 34% year-to-date. In other words, for every 1% drop in the dollar index, gold has risen 4.7%. If that approximate percentage holds over time, one can begin to estimate what the gold price might be if you know what the dollar might do.

While the dollar is likely to bounce at some point, making gold correct, the long-term fate of the dollar has already dried in cement. If the dollar were simply to return to its March 2008 low of 71.30 next year a 5% drop from current levels this would imply a rise in gold of 23.5% and a price of about $1,437 an ounce.

The long-term scenario is more dramatic. If you believe the dollar will lose half its value from current levels, this would imply a gold price around $2,735. If you believe it will lose 75% of its value, gold would reach about $4,103. Doug Casey has called for a $5,000 gold price; if he’s right, guess what that implies for the dollar?

And think about this: these calculations ignore what else might “show up,” such as when price inflation shows up in the economy, the greater public shows up to buy gold, or the Chinese don’t show up at an auction. Could $5,000 gold be too low? Unless you think the dollar’s problems are solved, its eventual demise is gold’s eventual glory. Prepare, and invest, accordingly.

Jeff Clark, Casey’s Gold & Resource Report

-BNN discusses targets for gold, and the danger of hyperinflation for the U.S. with Charles Oliver, senior portfolio manager, Sprott Asset Management. Watch video here-

http://watch.bnn.ca/#clip239610

-U.S. House Fed audit proposal gives gold another boost. While such an event is unlikely in the current form proposed, as is the Fed losing its independence the fact that such proposals have got as far as the senate has given the yellow metal a lift. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=93501&sn;=Detail or

http://www.gata.org/node/8083

-An interview with James Turk: Gold isn’t an investment but money itself. Read more here-http://www.mmnews.de/index.php/Englisch-News/Gold-is-not-an-investment.-It-is-money.html

-Gold worry mounting, but some bulls charging on. Some gold bugs aren’t worried about the metal’s rapid bid-up. Read more here-

http://www.marketwatch.com/story/story/print?guid=9EC4C7E3-DBAD-45D4-84EE-FC53C263F70E

-Schmidt’s Gold Thoughts. Read more here-http://www.kitco.com/ind/Schmidt/nov242009.html

-Peter Grandich: Gold is rising on more than dollar weakness. Read more here-http://www.gata.org/node/8082

-GATA Chairman Bill Murphy appeared on Bloomberg TV during the week. Watch and read more here-http://www.gata.org/node/8057 or http://www.gata.org/node/8054

and http://www.gata.org/node/8063

-Gold and Fed Face-Off: Peter Schiff Goes Toe-to-Toe With Alan Blinder, Jim Bullard. Read more here-http://finance.yahoo.com/tech-ticker/article/378046/Fed-Face-Off-Peter-Schiff-Goes-Toe-to-Toe-With-Alan-Blinder-Jim-Bullard

-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1259161260.php

-Still time to buy into gold rally Even central banks have become buyers not sellers. Read more here-http://www2.canada.com/edmontonjournal/news/business/story.html?id=9ed746c0-7edd-437c-a85e-6d49e64c1163

-Dump the dollar! Buy gold! Chris Pia, a master trader and Moore Capital alumnus, explains the market. Read more here-

http://money.cnn.com/2009/11/23/pf/dollar_gold.fortune/index.htm

-Gold price strength not a bubble Nichols. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=93588&sn;=Detail and

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=93247&sn;=Detail and http://news.goldseek.com/LewRockwell/1258959960.php

-Jordan Roy-Byrne: Gold isn’t even close to being a bubble. Read more here-http://www.gata.org/node/8056

-Could gold really go as high as $6,000? It’s possible. Read more here-http://www.moneyweek.com/investments/precious-metals-and-gems/could-gold-price-reach-usd6000-an-ounce-94807.aspx

-Gold at $10,000 an ounce? 10 reasons it could happen within the next 12 months. Read more here-http://commoditytradealert.com/blog/?p=3956

-JP Morgan targets gold at $1300. Read more here-http://www.miningmx.com/news/gold_and_silver/jp-morgan-targets-gold-at-$1300.htm

-How much longer can gold rise? Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/how-much-longer-can-gold-rise.aspx

-Central banks net gold buyers for the second quarter in succession WGC. Negative numbers abounded with respect to gold demand in the third quarter of this year, and the fourth quarter outlook is “mixed”. It is arguable that the demand in the market is now past the worst. India has regained its position as the largest jewellery consumer. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=93324&sn;=Detail or http://www.bloomberg.com/apps/news?pid=20601082&sid;=a1VXnBV5EXxA

-Three ways to tell when gold’s bull market is over. Read more here-http://www.moneyweek.com/investments/precious-metals-and-gems/how-to-tell-when-golds-bull-market-is-nearly-over-94802.aspx?utm_source=newsletter&utm;_medium=email&utm;_campaign=Money%2BMorning

-CNBC’s Santelli blurts it out: Central banks suppress gold. Read more here-http://www.gata.org/node/8074

-US Mint to suspend American Eagle gold 1-oz coins. The U.S. Mint said on Wednesday it will suspend sales of the popular American Eagle one-ounce bullion coins as strong demand depleted its inventory. Read more here-http://uk.reuters.com/article/idUKN2552271120091125?rpc=401&feedType;=RSS&feedName;=asianCurrencyNews&rpc;=401 or

http://www.gata.org/node/8098 or http://www.gata.org/node/8091

-Gold Krugerrands Run Out. Read more here-http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId;=8590

-Fleets of armored trucks piled with gold bars and coins have been streaming out of midtown Manhattan in one unexpected consequence of the gold craze. Amid gold’s rise it has gained 32% this year and reached a record on Monday investors have been loading up on bullion and coins. One big problem now is where to store it. The solution from HSBC, owner of one of the biggest vaults in the U.S.: somewhere else.

HSBC has told retail clients to remove their small holdings from its fortress beneath its tower on New York City’s Fifth Avenue. The bank has decided retail customers aren’t profitable enough and is demanding those clients remove their gold to make room for more lucrative institutional customers.

An HSBC spokeswoman said the firm doesn’t comment on its vault due to “security concerns.” HSBC’s decision has created a logistical nightmare for both the investors and the security teams in charge of relocating the gold, silver and platinum to new vaults across the country. Many of those vaults are also feeling pressure from the surge in demand for space from clients that have stocked up on metal. Read more here-http://www.gata.org/node/8077

-Canadian Mint Says Police Report Shows Lost Gold Wasn’t Stolen. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aQVTwqF_8hbs or http://www.gata.org/node/8085 or http://www.gata.org/node/8069

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,300 the silver price would be $16.25

Gold to silver ratio at 70 to 1 with gold at $1,300 the silver price would be $18.57

Gold to silver ratio at 60 to 1 with gold at $1,300 the silver price would be $21.67

Gold to silver ratio at 50 to 1 with gold at $1,300 the silver price would be $26.00

Gold to silver ratio at 40 to 1 with gold at $1,300 the silver price would be $32.50

Gold to silver ratio at 30 to 1 with gold at $1,300 the silver price would be $43.33

Gold to silver ratio at 20 to 1 with gold at $1,300 the silver price would be $65.00

Gold to silver ratio at 15 to 1 with gold at $1,300 the silver price would be $86.67

-Silver market analyst Ted Butler interviewed by King World News. Listen here-http://www.gata.org/node/8061

-Silver price soars on heavy demand, high hopes for gains. Read more here-http://www.usatoday.com/money/markets/2009-11-20-silver20_ST_N.htm

-Why Silver Will Outshine Stocks. Read more here-http://news.silverseek.com/SilverSeek/1259095068.php

-US Mint Silver Coin Sales: Eagles 7,000 Shy of 26 Million. Read more here-http://www.silvercoinstoday.com/us-mint-silver-coin-sales-eagles-7000-shy-of-26-million/101746/

-Silver and Gold as Currency. Read more here-http://news.silverseek.com/SilverSeek/1259129040.php

-Silver Goes Institutional. Read more here-http://seekingalpha.com/article/174513-silver-goes-institutional?source=feed

-S.Africa to launch platinum/silver product. Read more here-http://www.miningmx.com/news/platinum_group_metals/S.Africa-to-launch-platinum-silver-product.htm

-Fashion is turning away from gold jewellery; silver now looks far more exciting. Read more here-http://www.telegraph.co.uk/fashion/6645424/Fashion-is-turning-away-from-gold-jewellery-silver-suddenly-looks-far-more-exciting—Pret-a-rapporter.html

-Poor man’s gold may be an investor’s treasure. Silver’s a severely undervalued ‘investment opportunity of a lifetime’. Silver’s not so much a poor man’s gold anymore and investors may soon realize that the white metal’s the real treasure.

True, at $18 per ounce, silver is cheap trading around 60 times less than gold’s record price of more than $1,100. But year to date, it’s climbed 52% in value compared with gold’s rise of around 25%, according to data from FactSet Research. Read more here-http://www.marketwatch.com/story/story/print?guid=ECE2C8D2-FC88-4221-BD01-9BFB72ED253A

-Silver Prices to Hit New Highs in 2010. Silver may yet outshine gold in 2010 as spot prices for the white metal respond to the prospect of a surge in industrial demand. With a little additional help from investment demand, silver may even rally into the $25 range.

So says Chintan Parikh, a commodity analyst at the CPM Group a leading New York-based commodities research, consulting, asset management and investment banking organization. Read more here-http://www.321gold.com/editorials/davis/davis111609.html or http://news.silverseek.com/SilverSeek/1258382340.php

-Is silver’s salvation upon us? Advances in technology, increasing focus on reducing human interaction with bacteria, and tracking goods and people are all good news for silver and the price of the industrial metal, which has lagged for so long, says Jessica Cross, CEO of VM Group.

Long regarded as the poor cousin of gold, the metal, which is mainly used in industrial applications as well as to make jewellery, has bright prospects, with off take in a spectrum of new products put at just below 350 million ounces by 2020, Cross argued in a presentation at the LBMA Conference earlier this month. Read more here-http://www.miningmx.com/news/gold_and_silver/is-silver-salvation-upon-us.htm

-Revenues from Silver Inks and Pastes to Reach $3.6 Billion in 2016. Read more here-http://www.azonano.com/news.asp?newsID=14691

CHART OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week: The “Distressing” Gap Between New And Existing Home Sales. Monday morning’s existing home sales number showed that sales surged in October by a surprising 10.1%. But new home sales continue to remain quite weak. Today’s chart, showing the “distressing” gap between the two measures, comes courtesy of Calculated Risk, which explains:

The initial gap was caused by the flood of distressed sales. This kept existing home sales elevated, and depressed new home sales since builders couldn’t compete with the low prices of all the foreclosed properties.

The recent spike in existing home sales was due primarily to the first time homebuyer tax credit. But what matters for the economy and jobs is new home sales, and new home sales are still very low because of huge overhang of existing home inventory and rental properties. Read more here-http://www.businessinsider.com/chart-of-the-day-new-and-existing-home-sales-2009-11

-Chart of the week: We’re Still Generating Too Many Negative Equity Mortgages. In Washington, DC, the prevailing view these days is that unemployment is now the leading driver of mortgage defaults. This is one reason you can expect to see the next stage of the government’s attempt to rescue the housing market focus on saving jobs.

But a new study out of Amherst Securities indicates that negative equity is by far the best default predictor of defaults. If that view is correct, the fact that we are still producing mortgages that quickly slip into negative equity should be terrifying. And, in fact, much of the recovery in the housing market appears to be built on thinly capitalized mortgages subsidized by low loan-to-value FHA guaranteed mortgages and the home-buyer tax credit.

As the chart below shows, even home buyers who took out mortgages as late as this year are finding themselves with negative equity at historically high rates. We’ve come down from the worst levels of the housing boom but we are still well above healthy levels.

In short, we may be witnessing a policy mistake of stunning proportions as lawmakers and regulators focus on job creation while ignoring the still problematic loan-to-value ratios in the housing market. Read more here-http://www.businessinsider.com/chart-of-the-day-negative-equity-by-vintage-year-2009-11

-A successful man is one who can lay a firm foundation with the bricks others have thrown at him. David Brinkley

-I’ll try not to overstate how high I think the price will go in a true silver shortage, and how quickly it will occur, so that I don’t sound too extreme. But the price move will give new meaning to the words ‘high’ and ‘fast’. Ted Butler, November 16, 2009

-”Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man’s suit at the conclusion of the Revolutionary War, the Civil War, the presidency of Franklin Roosevelt, and today.” Peter A. Burshre

-Gold is a tad weaker Thursday but there is no mistaking the classic characteristics of a secular bull market it has risen consistently for the past nine years through periods of a weak and a strong U.S. dollar; phases of inflation and deflation fears; and it has rallied against all currencies, not just the formerly big U.S. dollar.

During this bull run in gold, production of global fiat currency has exploded by 130% while mined output of the yellow metal has declined fractionally. It’s about supply and demand. On the demand side, the folks with the deep pockets (otherwise known as central banks) and the ones who were largely responsible for driving the price down to the $250/oz a decade ago are the entities now driving the price to new heights.

Sri Lanka just bought 10 metric tons from the IMF yesterday following in the footsteps of India, Russia and Mauritius. Private demand, however, is waning India’s gold imports, as an example, is down 47% from year-ago levels (to about 18 tons). All that said, the chart patterns are so strong that gold could correct all the way down to $970/oz and it still wouldn’t break any critical technical level. David Rosenberg-Gluskin/Sheff

-Dubai Debt Delay Rattles Confidence in Gulf Borrowers. Dubai shook investor confidence across the Persian Gulf after its proposal to delay debt payments risked triggering the biggest sovereign default since Argentina in 2001.

The cost of protecting government notes from Abu Dhabi to Bahrain rose, extending the steepest increase since February as Dubai World, with $59 billion of liabilities, sought a “standstill” agreement from creditors. Its debt includes $3.52 billion of bonds due Dec. 14 from property unit Nakheel PJSC. Dubai credit-default swaps climbed 90 basis points to 530 after yesterday increasing the most since they began trading in January, CMA Datavision prices showed.

“There is nothing investors dislike more than this kind of event,” said Norval Loftus, the head of convertible bonds and Islamic debt at Matrix Group Ltd. in London, which manages $2.5 billion of assets including Dubai credits. “The worst-case scenario will of course be involuntary restructuring on the Nakheel security that brings into question the entire nature of the sovereign support for various borrowers in the region.”

Dubai World’s assets range from stakes in Las Vegas casino company MGM Mirage to London-traded bank Standard Chartered Plc and luxury retailer Barneys New York through asset-management firm Istithmar PJSC. The Dubai government’s attempt to reschedule debt triggered declines in stocks worldwide that had been rebounding from the worst financial crisis since the Great Depression. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aRsjlClzl500

-General Motors raised more than a few eyebrows last week by announcing plans to repay what it describes as $6.7 billion in outstanding loans to taxpayers. So provocative was this announcement that it all but overshadowed the real news of the day: G.M. had lost $1.2 billion since exiting bankruptcy in July, and its fourth-quarter results were expected to be worse.

Edward Niedermayer, the editor of The Web site The Truth About Cars, writes in an op-ed in The New York Times.

For starters, $6.7 billion doesn’t begin to scratch the surface of what G.M. actually owes us. Over the past 12 months, the Treasury has given it some $52 billion in the form of cash, loans and the purchase of that 60 percent of the company’s post-bankruptcy equity. And that number fails to take into account the two bailouts of G.M.’s former lending arm, GMAC, or the $3 billion spent on the “cash for clunkers” program, which doubtless kept the company from posting even deeper losses.

Moreover, G.M. is not, in the strictest sense, paying back taxpayers at all. Rather, it is refunding $6.7 billion of an $18 billion escrow account that was given to it by the government when it emerged from bankruptcy. The rest of that account will be used to cover fourth-quarter losses (including $2.8 billion pledged for the rescue of G.M.’s major parts supplier, Delphi), repay loans from the Canadian government, and possibly prop up the automaker’s shaky European operations.

That escrow account is due to expire in June, at which time G.M. will repay what remains of the $6.7 billion from this week’s pledge and then pocket the estimated $5.6 billion remainder. Read more here-http://dealbook.blogs.nytimes.com/2009/11/23/gm-is-taking-taxpayers-for-a-ride/?scp=2&sq;=General%20Motors&st;=cse

-Obama Shatters Spending Record for First-Year Presidents. President Obama has shattered the budget record for first-year presidents spending nearly double what his predecessor did when he came into office and far exceeding the first-year tabs for any other U.S. president in history.

In fiscal 2009 the federal government spent $3.52 trillion $2.8 trillion in 2000 dollars, which sets a benchmark for comparison. That fiscal year covered the last three-and-a-half months of George W. Bush’s term and the first eight-and-a-half months of Obama’s.

That price tag came with a $1.4 trillion deficit, nearly $1 trillion more than last year. The overall budget was about a half-trillion more than Bush’s for 2008, his final full fiscal year in office. Read more here-http://www.foxnews.com/politics/2009/11/24/obama-shatters-spending-record-year-presidents/

-$4.8 trillion Interest on U.S. debt. Unless lawmakers make big changes, the interest Americans will have to pay to keep the country running over the next decade will reach unheard of levels. Read more here-http://money.cnn.com/2009/11/19/news/economy/debt_interest/index.htm

-Wave of Debt Payments Facing U.S. Government. The United States government is financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true. But that happy situation, aided by ultralow interest rates, may not last much longer.

Treasury officials now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.

Even as Treasury officials are racing to lock in today’s low rates by exchanging short-term borrowings for long-term bonds, the government faces a payment shock similar to those that sent legions of overstretched homeowners into default on their mortgages.

With the national debt now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically. Other forecasters say the figure could be much higher.

In concrete terms, an additional $500 billion a year in interest expense would total more than the combined federal budgets this year for education, energy, homeland security and the wars in Iraq and Afghanistan. The potential for rapidly escalating interest payouts is just one of the wrenching challenges facing the United States after decades of living beyond its means.

The surge in borrowing over the last year or two is widely judged to have been a necessary response to the financial crisis and the deep recession, and there is still a raging debate over how aggressively to bring down deficits over the next few years. But there is little doubt that the United States’ long-term budget crisis is becoming too big to postpone.

Americans now have to climb out of two deep holes: as debt-loaded consumers, whose personal wealth sank along with housing and stock prices; and as taxpayers, whose government debt has almost doubled in the last two years alone, just as costs tied to benefits for retiring baby boomers are set to explode.

The competing demands could deepen political battles over the size and role of the government, the trade-offs between taxes and spending, the choices between helping older generations versus younger ones, and the bottom-line questions about who should ultimately shoulder the burden.

“The government is on teaser rates,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group that advocates lower deficits. “We’re taking out a huge mortgage right now, but we won’t feel the pain until later.” Read more here-http://www.nytimes.com/2009/11/23/business/23rates.html

-U.S. Corporate Bond Sales Climb to Yearly Record. U.S. corporate bond sales reached an annual record of $1.171 trillion as borrowers took advantage of low interest rates and surging demand for debt securities following last year’s credit freeze.

Sales of investment-grade and high-yield, high-risk debt compare with the more than $1.167 trillion that companies sold in all of 2007, the previous record, according to data compiled by Bloomberg. Last year, the total was $874 billion. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aqE0w29Ls5Rw

-What If They Stop Buying U.S. Debt? Read more here-http://news.goldseek.com/GoldSeek/1258614480.php

-IMF warns second bailout would ‘threaten democracy’. The public will not bail out the financial services sector for a second time if another global crisis blows up in four or five years time, the managing-director of the International Monetary Fund warned this morning.

Dominique Strauss-Kahn told the CBI annual conference of business leaders that another huge call on public finances by the financial services sector would not be tolerated by the “man in the street” and could even threaten democracy.

“Most advanced economies will not accept any more bailouts. The political reaction will be very strong, putting some democracies at risk,” he told delegates. Read more here-

http://business.timesonline.co.uk/tol/business/economics/article6928147.ece

-World Bank: Raising rates quickly may cause slump: report. Read more here-http://www.reuters.com/article/ousiv/idUSTRE5AO08N20091125

-Fed Officials Said Low Rates May Fuel Speculation, Minutes Say. Federal Reserve officials said record-low interest rates might fuel “excessive” speculation in financial markets and possibly dislodge expectations for low inflation, according to minutes of their meeting released today. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid;=a21OX2ZVK22I

-Dollar Slump Persisting as Top Analysts See No Bottom. The most accurate dollar forecasters predict the world’s reserve currency will continue sliding even when the Federal Reserve begins to raise interest rates, which policy makers say is an “extended period” away. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUFExWDBKmew&pos;=3

-Strauss-Kahn Says Dollar Not at Risk, Asset Bubbles Pose Threat. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aq1tyLUQpWvI&pos;=10

-Russia to Buy Canadian Dollars, Mulls More Currencies. Russia’s central bank will add Canadian dollars to its reserves and may include more currencies as it seeks to reduce its dependence on the U.S dollar.

“Technical preparations for transactions in Canadian dollars are underway,” Sergei Shvetsov, the bank’s financial operations head, told lawmakers in Moscow today, in remarks confirmed by a Bank Rossii official. “Then there may be one, two other currencies and that’s it.”

Russia aims to diversify its reserves, increase gold holdings and promote regional currencies in trade and finance to reduce risks posed by the dollar’s dominance. President Dmitry Medvedev has blamed the global financial crisis on an over- reliance on the U.S. currency. Read more here-

http://www.bloomberg.com/apps/news?pid=20601082&sid;=at5XsdLU.68w

-U.S. Economy Expanded at a 2.8% Rate in Third Quarter. The U.S. economy expanded at a 2.8 percent annual rate in the third quarter, less than the government reported last month, reflecting a smaller gain in consumer spending and a bigger trade deficit.

The increase in gross domestic product from July through September reported today by the Commerce Department in Washington compares with a 3.5 percent gain previously estimated. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aVfai6l_4im0

-U.S. bankruptcies rise 33 percent in third quarter. U.S. bankruptcy filings rose 33 percent in the third quarter to the highest number since 2005, government data show, as rising unemployment and tight credit made it more difficult for consumers and businesses to stay current on their debts. Read more here-

http://www.reuters.com/article/GCA-Economy/idUSTRE5AO48A20091125

-Late Card Payments Rose in October, Moody’s Reports. U.S. credit-card delinquencies climbed last month to the highest level since February as five of the six biggest card lenders posted increases, Moody’s Investors Service said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=an1l4Yelc5lI

-The ‘Real’ Jobless Rate: 17.5% Of Workers Are Unemployed. As experts debate the potential speed of the US recovery, one figure looms large but is often overlooked: nearly 1 in 5 Americans is either out of work or under-employed.

According to the government’s broadest measure of unemployment, some 17.5 percent are either without a job entirely or underemployed. The so-called U-6 number is at the highest rate since becoming an official labor statistic in 1994.

The number dwarfs the statistic most people pay attention to the U-3 rate which most recently showed unemployment at 10.2 percent for October, the highest it has been since June 1983. Read more here-http://www.cnbc.com/id/34040009

-California Was Among States With Record Unemployment. California, Delaware, South Carolina and Florida registered record rates of unemployment in October as weakness in the labor market stretches from coast to coast and limits the economic recovery.

Joblessness rose in 29 U.S. states last month compared with 22 in September, the Labor Department said today in Washington. Michigan had the highest jobless rate at 15.1 percent, followed by Nevada at 13 percent and Rhode Island at 12.9 percent.

The national rate last month reached a 26-year high of 10.2 percent, weighing on consumer spending that accounts for about 70 percent of the economy. Federal Reserve Chairman Ben S. Bernanke said Nov. 17 that joblessness “likely will decline only slowly,” a reason policy makers will keep interest rates near zero to ensure growth is sustained. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid;=aQsHAD0w1egE

-World oil demand growth to outpace supply in 2010: poll. Read more here-http://www.reuters.com/article/ousiv/idUSTRE5AN26920091124

-Commodities to Get Record $60 Billion, Barclays Says. Commodities will likely attract a record $60 billion this year as investors seek to diversify their assets, Barclays Capital said.

Inflows so far this year are almost $55 billion, already more than the previous full-year record of $51 billion set in 2006, the bank said in a report. Total commodity assets under management will probably expand to $230 billion to $240 billion by the end of the year, Barclays said.

“Sharp falls in commodity prices earlier in the year created opportunities for long-term exposure, providing an opportunity for investors to act on their interest in commodities as a diversification tool,” analysts including London-based Gayle Berry and Suki Cooper said in the report. Read more here-

http://www.bloomberg.com/apps/news?pid=20601082&sid;=a5pObGmh0Ewk

-Roubini Sees Asset-Bubble as Money Chases Commodities. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=agzqkJ2EQR3M&pos;=4

-With a large majority of third-quarter earnings in the books (87% of S&P; 500 companies have reported for Q3 2009), today’s chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P; 500 earnings.

Today’s chart illustrates how earnings declined over 92% from its Q3 2007 peak to its Q3 2009 trough, which makes it easily the largest decline on record (the data goes back to 1936). On the positive side, S&P; 500 earnings bottomed and are moving up sharply. Read more here-http://www.chartoftheday.com/20091120.htm?T

Source: chartoftheday.com

-Iran’s central bank chief said on Monday that the country has gained five billion dollars by replacing the US dollar with the euro in its currency basket, state-owned English language Press TV reported. “Iran has considerably reduced the total of US dollars in its currency basket,” Mahmoud Bahmani said at a bankers’ seminar in Tehran.

Since October 2007, Iran has received 85 percent of its oil revenues in currencies other than the US dollar, the channel reported, adding it is seeking a substitute for the dollar for the remaining 15 percent. The Iranian government began preparing the ground for the dollar’s replacement by the euro and other foreign exchanges in 2005, it said.

The channel said the constant slide of the dollar coupled with the persisting economic crisis in the US has forced many countries to drop the currency in favour of a more stable and valuable one. Read more here-http://www.google.com/hostednews/afp/article/ALeqM5hZqxQv30jwoiPVpxQ-mQEncafeRA

-Scientist Repeats Swine Flu Lab-Escape Claim in Published Study. Adrian Gibbs, the virologist who said in May that swine flu may have escaped from a laboratory, published his findings today, renewing discussion about the origins of the pandemic virus.

The new H1N1 strain, which was discovered in Mexico and the U.S. in April, may be the product of three strains from three continents that swapped genes in a lab or a vaccine-making plant, Gibbs, and fellow Australian scientists wrote in Virology Journal. The authors analyzed the genetic makeup of the virus and found its origin could be more simply explained by human involvement than a coincidence of nature. Read more here-http://www.bloomberg.com/apps/news?pid=20601124&sid;=ajw2AS.d1wK8

-Norway Flu Strain May Make Disease Worse; Wales Mutation Seen. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aEhvd7R2HL80

-China expert warns of pandemic flu mutation. Read more here-http://www.reuters.com/article/healthNews/idUSTRE5AO16220091125

-Iran Testing Air Defense System for Nuclear Plants. Iran is testing an air defense system in the country’s largest military exercises to assess the ability to protect its nuclear plants, the government said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aKjxQGa9jiG8 or

http://www.washingtonpost.com/wp-dyn/content/article/2009/11/21/AR2009112100891_pf.html

-Secret Service Probes Gate Crashers at White House State Dinner. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a4RXGzkUPqPI&pos;=9

WWW.RARECOLOREDDIAMONDS.COM

 

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

 

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

-Pink Diamond, Bordeaux Wine Boost HK$1 Billion Hong Kong Sale. A ring with a pink diamond the size of a chickpea will be the smallest and most-expensive item offered at a Hong Kong auction of paintings, antiques and gems that may tally HK$1 billion ($129 million).

The 5-carat, so-called fancy-vivid stone set by London- based jeweler Graff Diamonds and given the second-highest rating of potentially flawless is estimated to make as much as HK$55 million, said Christie’s International. The 2,000-lot, five-day sale starts tomorrow at the harbor-front convention center, with the diamond selling on Dec. 1. Read more here-

http://www.bloomberg.com/apps/news?pid=20601088&sid;=aCuG1manSgHs

-Who Would Buy An $8 Million Diamond? Christie’s is betting the market for high-end goods in Asia hasn’t lost its luster. On the block during upcoming sales in Hong Kong is a rare pink diamond the auction house estimates could fetch up to $8 million. “Vivid Pink,” as it’s called, is a five-carat stone flanked by two white diamonds and set in a ring by elite jeweler Graff. It hails from a private collection.

The glamorous rock toured Singapore, Bangkok, Geneva and Taipei before returning to Hong Kong, where it will be auctioned off Dec. 1 at the Convention and Exhibition Center alongside 250 other gemstones and pieces of jewelry from the likes of Cartier and Van Cleef and Arpels. Altogether, the jewelry sale’s lots are estimated to be worth more than $33 million.

The brilliant pink stone earned top marks from the Gemological Institute of America, which rates diamonds. The gem is unique because of its particular hue–a rich bubblegum rather than a more common lighter rose. It is also valuable because of its saturation, the depth the color extends into the stone.

“Stones like this–they’re not just jewelry, they’re artwork,” says Alan Bronstein, a New York-based trader and dealer of rare colored diamonds. “The simplest possible mounting is the best way to make that diamond shine. You don’t want to embellish it with motifs and designs.”

Colored diamonds mined naturally are often pockmarked with flecks of other hues, like purple, orange or gray. But this one is blemish-free, boasting an even tone throughout. Only one in 100,000 diamonds is as special.

In Geneva last week, Sotheby’s sold a diamond of similar size and shape, but a lighter shade, for $1.4 million. “It is not even close to as rare,” Bronstein says. “If a blush or pale pink can bring $200,000 per carat, it is not a stretch of the imagination for the five-carat vivid to bring $1 million per carat.” The highest price paid at auction for a pink diamond was $7.4 million; that was in 1994 for a 19-carat, rectangular-cut stone auctioned in Geneva. Read more here-http://www.forbes.com/2009/11/25/christies-diamond-auction-lifestyle-collecting-vivid-pink_print.html

-Color me dazzled. Record auction prices for rare colored diamonds. “If you have money to invest, there is no safer haven than something rare,” says Laurence Graff, the London-born “King of Diamonds”. If this is sales talk, he is his own best customer. In December 2008, during some of the bleakest days of the credit crisis, Mr. Graff paid $24.3m for the 35.56-carat, 17th-century Wittelsbach blue diamond at Christie’s in London.

He set the auction record for any jewel. But in his opinion, “it was the bargain of the century. In my life, it is the rarest of them all; it is the supreme colored diamond.” Rarity seems to be the greatest single factor influencing today’s auction prices for superb coloured diamonds. The blue “Star of Josephine” sold for $1.35m per carat more than five times what the colourless Annenberg fetched. Prescient investors now turn their eyes to Hong Kong.

On December 1st Christie’s is offering “The Vivid Pink”, described by one expert as the “finest and largest” of its type ever to be auctioned. Mr. Graff bought the ten-carat rough-cut stone from De Beers. (He somewhat playfully describes it as the irresistible sweetener to a particularly large deal.) He had it cut into a five-carat gem and set as a ring. The American client to whom he sold this exceptional pink is now offering it at auction. “He will make a lot more than I did,” says the King of Diamonds, who plans to leave a bid. Read more here-

http://www.economist.com/opinion/PrinterFriendly.cfm?story_id=14944566

-Diamonds: An Investor’s Best Friend? “If you want to buy diamonds for investment purposes, they should be big and fancy (colorful),” says Holly Midwinter-Porter, a gemologist at U.K. jeweler Boodles.

“Red and green are the rarest, and unlike white, man-made diamonds, are finite as they are only found in one or two areas in the world.” She says returns on rare diamonds can enjoy double digit growth a year, and their portability makes them more appealing than gold or art to some investors. Read more here-http://online.wsj.com/article/SB125866936692256433.html

-Investors wanting exposure to gold or other precious metals have an array of options, whether it is buying the physical items or purchasing mining stocks, commodity indices or exchange-traded funds. With diamonds the opportunities have been far more limited. But that may be changing. Read more here-http://gata.org/node/8058

HALF OF BANK LOSSES ARE UNDISCLOSED-BANKING CRISIS NOT OVER

-International Monetary Fund Managing Director Dominique Strauss-Kahn said that about half of bank losses from the global financial crisis have yet to be revealed. “It is our view we are still in the situation where a lot of losses haven’t been disclosed,” Strauss-Kahn said during questions at the Confederation of British Industry’s conference in London today. “How much is a difficult assessment, but let’s say something which is close to half of it.”

Banking systems “remain undercapitalized” in many advanced economies with “far from normal” financial conditions, Strauss-Kahn said in a speech to the conference. The IMF said in September that banks may have $1.5 trillion in toxic debt remaining on their books, which may hurt credit markets and stifle the global economic recovery. “Probably a little more has been disclosed in the U.S. and a little less in Europe, but it’s almost half and half,” Strauss-Kahn said. “So, we still have a long way to go.”

The IMF cut its projection for global writedowns on loans and investments by 15 percent to $3.4 trillion in September, citing improvements in credit markets and initial signs of economic growth. The IMF said then that U.S. banks have recognized about 60 percent of their expected losses, compared with 40 percent in both the euro area and in the U.K. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=ay2MiTrFzQYI or http://www.reuters.com/article/ousivMolt/idUSTRE5AN4QD20091124

-FDIC announces 124th bank failure. State regulators shutter Commerce Bank of Southwest Florida. Closure will cost the FDIC $23.6 million. Read more here-

http://money.cnn.com/2009/11/20/news/economy/bank_failure/index.htm

-‘Problem’ Banks at 16-Year High in Third Quarter. U.S. “problem” lenders climbed to the most in 16 years and the Federal Deposit Insurance Corp.’s fund protecting customers against bank failures slipped into a deficit in the third quarter, the agency said.

The FDIC had 552 banks with $345.9 billion in assets on the confidential problem list as of Sept. 30, a 33 percent increase from 416 lenders with $299.8 billion in assets at the end of the second quarter, the agency said today. The insurance fund had a $8.2 billion deficit, its first negative balance since 1992.

“Today’s report shows that while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance,” FDIC Chairman Sheila Bair said at a Washington news conference.

Regulators are closing banks at the fastest pace in 17 years, seizing 124 so far this year amid loan losses stemming from the collapse of the mortgage market in 2007. Fifty banks failed in the third quarter, double the full-year total of 25 that collapsed during 2008.

FDIC-insured banks reported net income of $2.8 billion in the third quarter compared with a $4.3 billion loss in the second quarter. “Earnings remain weak,” Bair said. “Eroding loan quality continues to have the greatest impact on industry earnings compared to a year ago.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a_Y3J5KD0Deg&pos;=4 or http://www.reuters.com/article/ousiv/idUSTRE5AN36P20091124

-Fed Said to Ask Stress-Tested Banks to Submit Plans on TARP. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aD00dAKNxIfo

-Most global banks are still unsafe, warns S&P.; Standard & Poor’s has given warning that nearly all of the world’s big banks lack sufficient capital to cover trading and investment exposure, risking further downgrades over the next 18 months unless they move swiftly to beef up their defences. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6638922/Most-global-banks-are-still-unsafe-warns-SandP.html

-Bank of England tells of secret £62bn loan to save RBS and HBOS. The Bank of England secretly lent £61.6bn to Royal Bank of Scotland and HBOS at the height of the financial crisis to prevent their immediate implosion, it said on Tuesday. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6646923/Bank-of-England-tells-of-secret-62bn-loan-to-save-RBS-and-HBOS.html

ECONOMY IS FORCING YOUNG ADULTS BACK HOME IN BIG NUMBERS

-For more young adults, there is no place like home for the holidays, and for the rest of the year, too. Ten percent of adults younger than 35 told the Pew Research Center that they had moved back in with their parents because of the recession.

They also blamed the economy for other lifestyle decisions. Twelve percent had gotten a roommate to share expenses. Fifteen percent said they had postponed getting married, and 14 percent said they had delayed having a baby.

In the Pew study, 13 percent of parents with grown children said one of their adult sons or daughters had moved back home in the past year. According to Pew, of all grown children who lived with their parents, 2 in 10 were full-time students, one-quarter were unemployed and about one-third said they had lived on their own before returning home.

According to the census, 56 percent of men 18 to 24 years old and 48 percent of women were either still under the same roof as their parents or had moved back home. A smaller share of 16-to-24-year-olds 46 percent is currently employed than at any time since the government began collecting that data in 1948.

Meanwhile, the portion of adults 18 to 29 who lived alone declined to 7.3 percent in 2009 from 7.9 percent in 2007, according to the Current Population Survey. A decline that big was recorded only twice before over three decades, in the early 1980s and the early 1990s during or after recessions. Read more here-

http://www.nytimes.com/2009/11/24/us/24boomerang.html?_r=1&pagewanted;=print

REAL ESTATE

-Option ARMs: Housing recovery killer? An explosion of foreclosures will result from option ARMs set to reset to higher payments. Option-ARMs: File under, “It sounded good at the time.” These exotic mortgages allowed homebuyers to come to closing with little cash and choose, monthly, how much to pay: interest and principal, interest only, or a minimum amount less than the interest due.

Of course, the last option is the one 93% of option-ARM buyers selected, according to a new report released this week by Standard & Poors. But eventually, everyone has to pay the piper.

Nearly all of the 350,000 option-ARM borrowers owe more than when they first bought their homes thanks to unpaid interest accumulating. And many loans written during the first big wave, which started in 2004, are getting ready for their five-year reset, when they become standard, amortizing loans. Additionally, some newer loans, where accumulated interest has pushed the loan-to-value ratio above 110% to 125%, will also reset.

That means borrowers are about to start paying very hefty prices for their homes. In one scenario outlined in the S&P; report, the payment on a $400,000 mortgage jumps from $1,287 to $2,593. Read more here-http://money.cnn.com/2009/11/24/real_estate/option_ARM_defaults/index.htm

-A second wave of foreclosures is poised to hit the market, potentially undermining housing recovery efforts as more homes add to the glut of inventory and drive down prices.

These homes largely represent loans that are delinquent but have not yet resulted in foreclosure sales. About 7 million properties are destined to go into foreclosure, according to a September study by Amherst Securities Group, compared with 1.27 million properties in early 2005.

“There’s a huge supply out there,” says Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C. “The foreclosure process can take a long time. When it comes to (the housing recovery), we’re not home free.” There is often a long lag time between a borrower going delinquent and the bank taking the home. Here’s why. Read more here-http://www.usatoday.com/money/economy/housing/2009-11-19-shadow19_ST_N.htm

-The number of U.S. homes worth less than the debt owed on them reached almost 10.7 million, or 23 percent of all mortgaged properties, at the end of the third quarter, according to a report from First American CoreLogic. An additional 2.3 million mortgages are approaching “negative equity” as loan defaults mount nationwide, the Santa Ana, California-based real estate research company said today.

“We don’t expect prices to grow dramatically,” First American Chief Economist Mark Fleming said in a telephone interview from Washington. “It’ll be a problem for years. It reduces mobility and puts more mortgages at risk if and when you lose a job.”

Unemployment and declining property values have increased mortgage defaults during the past three years. Freddie Mac, the mortgage-finance company under government control, said today that defaults among its loans rose to a record 3.54 percent last month, while its portfolio of residential assets fell at an annualized rate of 21.6 percent. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aV_BL.4Dmi_A or http://money.cnn.com/2009/11/24/real_estate/mortgages_underwater/index.htm

-The Case-Shiller Index pegs the peak in national home prices in the summer of 2006, followed by a 34-month, 32% slide in prices. With the help of an $8,000 tax credit, the housing decline appears to have stabilized that’s if you consider reliance on government subsidies a sign of stability.   

Commercial property prices, on the other hand, didn’t peak until October of 2007. Prices have since fallen further and faster than residential, suffering a 34% haircut just in the last eleven months. But the foundation of commercial real estate is just beginning to crumble:

According to Deutsche Bank, $2 trillion in commercial mortgages will mature between now and 2013 in CMBS, banks and life insurance company portfolios, of which they estimate 64-72% ($400-$450 billion) of loans wouldn’t qualify to refinance were they to survive to maturity.

The total delinquency rate was 4.1% at the end of Q2 2009, a 120% increase from March 2009 and a 450% rise since October 2008.

Transaction volume is down from a peak of $133.2 billion in Q2 2007 to $4.8 billion Q2 2009.

According to a Wall Street Journal analysis of regulatory filings, more than 2,600 banks and thrifts have commercial real estate loan portfolios that exceed 300% of total risk-based capital, the capital used as a cushion to cover losses. Regulators consider the 300% level a red flag for the banks’ health. Read more here- http://caseyresearch.com/displayCcs.php?e=true

-Home Prices in 20 U.S. Cities Rise for Fourth Month. Home prices in 20 U.S. cities rose for a fourth straight month in September, pointing to improvement in real estate that’s helping the economy emerge from recession.

The S&P;/Case-Shiller home-price index increased 0.27 percent from the prior month on a seasonally adjusted basis, after a 1.13 percent rise in August, the group said today in New York. The gauge fell 9.36 percent from September 2008, more than forecast, yet the smallest year-over-year decline since the end of 2007. Read more here-

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

-Home Prices Declined 3.8% in Third Quarter on Foreclosures. U.S. home prices fell 3.8 percent in the third quarter from a year earlier, the smallest decline since the first quarter of 2008, as a tax credit for first-time homebuyers boosted demand and slowed foreclosure-driven price drops.

Prices were little changed in September from August, according to a report today from the Federal Housing Finance Agency in Washington. Prices were 0.2 percent higher in the third quarter than in the second quarter.

Prices fell in all nine U.S. regions in the three months ended in September from a year earlier as banks seized real estate from delinquent borrowers. Even as the $8,000 tax credit fueled housing demand among first-time buyers, a 26-year high in unemployment boosted defaults by prime borrowers, according to a Nov. 19 report from the Mortgage Bankers Association in Washington.

“Any recovery in housing won’t be on firm ground until the job market comes back,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a3wkdsd.xKu4

-U.S. Existing Home Sales Rise 10%, More Than Forecast. Sales of existing U.S. homes increased more than forecast in October to the highest level since February 2007, spurred in part by a tax credit that lured first-time buyers.

Purchases rose 10.1 percent to a 6.1 million annual rate from a 5.54 million pace in September, the National Association of Realtors said today in Washington. The median sales price decreased 7.1 percent from October 2008, the smallest decline in more than a year. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=at8txtF7KVaA&pos;=2

-Sales of New Homes in U.S. Rise to Highest Since 2008. Purchases of new homes in the U.S. rebounded more than anticipated in October as buyers rushed to take advantage of a government tax credit before it expired.

Sales rose 6.2 percent to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today in Washington. The median sales price fell 0.5 percent and the number of unsold homes reached a four-decade low.

Rising demand shows the administration’s incentive for first-time buyers, which earlier this month was extended into next year and expanded to include current owners, may help housing recover from the worst slump since the Great Depression. Home values may remain under pressure as builders are forced to compete with mounting foreclosures as unemployment climbs. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aEd91lkIePdg&pos;=2

-U.S. Housing Recovery Delayed to 2010 as Market Wanes. A recovery in U.S. housing will have to wait at least until next year. The outlook for the home market dimmed this week as residential construction and mortgage applications fell and loan delinquencies reached a record.

“I don’t think the housing crisis is over,” Mark Zandi, chief economist with Moody’s Economy.com, said in a telephone interview. “I think we’re going to see another leg down.” Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aqxm_UFsIdMI

-San Francisco Home Prices Rise, First Time Since ’07. San Francisco Bay Area home prices rose for the first time since November 2007 as fewer foreclosures were sold, MDA DataQuick said.

The median price for houses and condominiums increased 4 percent in October from a year earlier to $390,000, the San Diego-based research company said today in a statement. The number of homes sold rose 4.2 percent to 7,933 for the nine- county region. Prices gained 6.8 percent from September.

Sales of homes priced over $500,000 made up 36 percent of transactions, up from a low this year of 23 percent in January. Foreclosure sales were 32 percent of the total, the lowest since June 2008, according to MDA DataQuick. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid;=awj4NJKfhfRY

-California Housing Market Turns Corner, Realtors Say. California, one-time hub of subprime mortgage lending and the nation’s leader in home foreclosures, has turned the corner toward a housing recovery, according to the state Association of Realtors.

Single-family home prices in California rose for the eighth consecutive month in October. The median cost of an existing, detached house gained 0.3 percent from the previous month to $297,500. Prices dropped about 3.2 percent from a year earlier, compared with annual declines of 7.3 percent in September and 17 percent in August.

“California has hit and passed the bottom of this real estate cycle,” Leslie Appleton-Young, vice president and chief economist of the Los Angeles-based Realtors group, said in a statement today. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aYrBU.MJHwKU

-Toronto Office Vacancies May Top Boston, Manhattan. A surge in office construction in Toronto’s downtown may push the city’s vacancy rate higher than New York and Boston after developers added space during the first recession in 17 years.

The proportion of empty space in Toronto’s office market, lower than the 12 largest U.S. business districts last year, will more than triple by 2011 to 13.6 percent, according to Cushman & Wakefield Inc. Brookfield Properties Corp., Cadillac Fairview Corp. and Menkes Developments Ltd. each added a glass skyscraper to the downtown of Canada’s most populous city in the last five months.

“We’re going to have a little bumpy ride for the next couple of years,” said Paul Morse, Cushman & Wakefield’s senior managing director of office leasing in Toronto. “We’re not going to see too many buildings after this because the economics aren’t really there to support it.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aUFwsvo5.DVI

© 2010, Worldwide Precious Metals.
www.wwpmc.com

The Goldbugg Report – December 1, 2009
Posted by Worldwide Precious Metals on Tuesday, December 1, 2009

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