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The Goldbugg Report – February 9, 2010

February 9, 2010

February 5, 2010

The Week in Review

What a week! Sovereign debt in Europe, specifically Greece, Spain and Portugal continued to rear its ugly head, helping fuel a spike in the dollar which helped beat down commodities prices, and sending waves of fear into the equities market, causing both the Dow and the S& P to go tumbling, the Dow even dipping back below 10,000.

On Thursday, the European Central Bank announced it was keeping interest rates at 1 percent. The Bank of England also announced it was keeping rates at 0.5 percent and that it was ending its quantitative easing program for the time being. The BOE left the door open to restart the program if the economy relapses saying that they would “continue to monitor the appropriate scale of the asset purchase programme and further purchases would be made should the outlook warrant them.”

There was conflicting information on the employment front. Both Cisco and Oracle announced intentions to add net jobs this quarter. This news was tempered by an unexpected jump in initial claims for unemployment. Friday’s jobs data, covering January, showed a revision downward for December’s jobs data, but a revision upwards for November by nearly the same amount as December’s revised loss. The official unemployment figure was moved down to 9.7 percent, a 5 month low. The media and the Obama administration are still trying to spin a viable story of how the US lost even more jobs, but was able to lower its unemployment. A total of 8.4 million jobs have been lost since the recession “officially” started in December of 2007. The previously reported number was 7.2 million jobs lost.

President Obama vowed to “get much tougher” with China on trade and currency rules. Treasury Secretary Timothy Geithner said he was optimistic Beijing would begin letting their currency appreciate. Obama and Geithner face a tough road in getting China to change its views. China was not shy about openly stating its displeasure with the Obama administration this week over an upcoming visit with the Dalai Lama and arms shipments to Taiwan saying “We will take corresponding measures to make the relevant countries realize their mistakes.”

On Monday, President Obama submitted his 2011 budget proposal. The total requested spending is $3.83 trillion and the federal deficit is projected to be $1.56 trillion and $1.27 trillion in 2010 and 2011 respectively. The budget, which relies on 6 years of better than expected growth, led Peter Morici, a professor at the University of Maryland’s Smith School of Business to say “Rosie Scenario wrote this budget.” On Thursday, the House voted to allow the government to go $1.9 trillion deeper into

debt. The cost of insuring US government debt over a five-year period then jumped to its highest since April 2009. A Reuter’s article quoted Moody’s Investors Service as saying “If the Obama administration’s budget projections for rising interest payments on government debt are realized, ‘at some point, we don’t know when, there would be downward pressure on the U.S. [credit] rating’”.

Crude oil continued to hover around the mid $70 range. Inventory rose more than expected and weaker demand combined with a stronger dollar, to help keep the price down. A monster of a winter storm blowing through the eastern half of the US may help drive the prices back up again, however.

The US Dollar hit an eight month high against the euro on the news coming out of the eurozone, but fell against the yen.

Volatility should be expected to continue. The sovereign debt issues currently plaguing the eurozone are far from over and most likely the issues are not confined to Europe. James Turk, a consultant to the Gold Anti-Trust Action Committee points out that “ as the sovereign debt crisis spins out of control, it may cause banking crises in Greece and Spain as well as the other weak spots in the eurozone, namely, Portugal, Ireland and Italy.” Turk’s view is brought on by the fact that Euros are moving from banks in troubled eurozone countries for safe haven in Germany or France on fears that, in a worst case scenario, those same troubled countries may have to exit the eurozone, forcing them to re-issue their original currencies. Turk also made in his statement of February 4^th, and we quote, “Every once in a great while, the market offers a unique opportunity to buy precious metals “on the cheap”. I believe today is one of those moments.” Speculation is rampant that a large hedge fund imploded and began liquidating assets this week, triggering panic among other investors. The astute investor can take advantage of the opportunity that this week of news and rumor-triggered panic selling has presented to add to, or start, a precious metals portfolio prior to prices moving sharply back to the upside after the “fear factor” subsides. Remember, the key to profitability through the ownership of physical precious metals is to own them and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

© 2010, Precious Metals International, Ltd.

GOLD

-Gold should continue to consolidate over the next few weeks but, the next big move is likely to be up. This is the view of Sprott Asset Management’s chief investment strategist John Embry, who says he is looking for the price of the yellow metal to hit around $1,350 to $1,400 by late spring. Speaking on the inaugural Mineweb Gold Weekly Podcast, Embry says the recent downward trend seen in the gold price is nothing more than a healthy correction.

“Gold had a 300 dollar plus run in US dollars from July into the early part of December and it has come under heavy pressure subsequently. It certainly has engendered immense bearishness amongst the commentators which is actually good from my perspective. I think the fundamentals are undisturbed and as a result it is setting up for another strong buy.”

Asked about the link between gold and the US dollar, especially the recent strengthening of the dollar against the euro, Embry, says, while there is often a very clear link, the problems in the US and, by extension, the US dollar, are everywhere especially given the huge budget deficit it is sitting with so “the idea that one should run away from gold and into the US dollar because it is strengthening against the euro and several other currencies to me is actually preposterous.

“The idea that the US dollar is a safe haven today is flat out wrong,” he added, “and that is going to be one of the major factors that are going to change the perceptions in the gold market going forward.” Another reason for Embry’s conviction about bullion’s next move, is the increasing role gold will play as a protection against monetary debasement.

“I think a lot of the world’s wealth is figuring out that we have little choice given the debt problems in the world and the resultant unlimited creation of money and so I think there is a solid investment bid in the market for gold.”

He adds, that concerns that have been raised about the possible impact the jewellery market is likely to have on the long term rise of gold because, he says, “all great bull markets in precious metals come from their reestablishment as money.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=97226&sn;=Detail&pid;=1

-Remarks by John Embry Chief Investment Strategist Sprott Asset Management, Toronto Vancouver Resource Investment Conference Hyatt Regency Hotel Vancouver, British Columbia, Canada Monday, January 18, 2010. Why gold will keep going up for years.

From a media perspective, if we were approaching the end of a bull market, the newspaper articles and television clips would be universally bullish touting the obvious merits of the yellow metal. There is indeed more coverage recently because of the relentless price rise, but it tends to be skeptical with the bearish commentators continuing to get the most exposure despite having been continuously wrong.

There is no better example of this than an individual who my compliance department would prefer that I not identify. However, I’ll give you a broad hint he writes virtually daily for a noted Canadian gold Internet site. Dubbed the Tokyo Rose of gold commentators, he is always quoted in articles with a negative slant despite having been consistently wrong since the inception of gold’s bull market. In my opinion, as long as he gets any press at all, we are a long way from the end of this bull market in gold.

Finally, it is widely acknowledged that if the peak gold price in the last great bull market ($850 in January 1980) were to be adjusted to reflect the U.S. inflation rate in the intervening period, it would be equivalent to $2,300 today. That the current gold price is approximately half of that should put to rest any suggestion that this is a bubble. Read more here-http://www.gata.org/node/8281

-Kevin Bambrough and David Franklin of Sprott Asset Management in Toronto argue in an essay just published that central banks no longer have any interest in maintaining the value of their currencies and that, as a result, gold is the only currency that can safeguard wealth. Read more here-http://www.gata.org/node/8285

-Gold to Reach $1,500 as Haven Status Restored, Nichols Says. Gold will climb to $1,500 an ounce and silver will top $25 this year as the dollar loses its haven status, according to Jeffrey Nichols, managing director of American Precious Metals Advisors.

“Fear of sovereign debt defaults by one or another European country could benefit the dollar and temporarily hurt gold,” New York-based Nichols said in an e-mail to Bloomberg yesterday. “But gold is the ultimate safe haven and the dollar, without the support of sound monetary and fiscal policies, is a depreciating asset.”

“As in the past year, these occasional reversals will lead some to believe the party is over for precious metals,” said Nichols, a precious metals analyst for more than 25 years. “But I believe periods of weakness will be opportunities for those underweighted in gold and silver to augment their holdings of physical metal.”

Gold advanced 24 percent last year as the Federal Reserve held interest rates near zero to spur growth, pushing the Dollar Index 4.2 percent lower. The U.S. government has boosted spending to combat the global recession, pushing the nation’s marketable debt to an unprecedented $7.27 trillion.

“It baffles me that so many foreign exchange traders and institutional investors around the world think of the dollar as a safe haven at a time of currency market turmoil and continued U.S. economic and financial market crisis,” he said. “It is only a matter of time before the dollar’s safe haven appeal diminishes and gold regains its status as the ultimate safe haven,” Nichols said.

Growing Chinese interest in gold, increased central bank bullion purchases and a worsening outlook for production should all boost the metal, he added. Nichols estimated China’s private-sector investment gold purchases totaled as much as 100 tons, or 3.2 million ounces, last year and said it could rise by more than 50 percent in 2010 as growing incomes and inflationary expectations give “more people both the means and the motivation to invest in the metal.”

Jewelry sales in China, which is bought both for adornment and as a store of wealth, totaled 350 tons last year and could increase by 100 tons or more this year, he said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=ay7aVAKL6qYw

-Prospects for gold look good over the next 12 to 18 months according to both GFMS CEO Paul Walker and DundeeWealth Economics president Martin Murenbeeld. That’s according to their presentations delivered at the Mining Indaba conference in Cape Town on Monday but the two differ over their longer term prospects for the metal.

Walker’s prediction on where the gold price could go in the next year was more bullish than that made by Murenbeeld but he is extremely concerned about the growing influence of investment demand in the gold market.

He told delegates, “I am bullish on gold for the next 12 to 18 months. A gold price of $1,400/oz would not surprise me. But we are now near a point where I have to question the sustainability of some of the drivers behind gold. Quite where the turning point will come I do not know.”

Murenbeeld’s forecasts were for gold to average $1,172/oz during 2010 and end the year at $1,234/oz while he forecast an average price of $1,280/oz for 2011. Murenbeeld was unable to attend the conference for medical reasons and his presentation was given on his behalf by conference programme director Tim Wood.

Murenbeeld said he had nine bullish arguments in favour of gold and six bearish ones against the metal which were “not as compelling”. He said mine supply of gold was flat with “anaemic ” growth prospects while global foreign exchange reserves held in US dollars were excessive.

This was likely to lead to a diversification out of US dollars and into SDRs (special drawing rights), other currencies and gold. Murenbeeld also believed investment demand for gold was in a long run uptrend because of fears over inflation and the debasement of currencies. Read more here-http://www.miningmx.com/special_reports/conf_cover/2010/mining-indaba-2010/good-prospects-for-gold.htm

-Newmont chief opens Boddington mine, believes gold could hit US$1,350/ounce this year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=97218&sn;=Detail&pid;=1

-Gold: fundamentals remain strong, says World Gold Council. The World Gold Council said that suggestions of a gold price ‘bubble’ do not take account of gold’s market fundamentals, which remain robust. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7136743/Gold-fundamentals-remain-strong-says-World-Gold-Council.html

-U.K.’s Royal Mint Doubles Production of Gold Coins. The U.K.’s Royal Mint, established in the 13th century, more than doubled gold-coin production last year as investors sought to diversify their assets and hedge against a weaker dollar and accelerating inflation.

Output rose to 125,469 ounces from 46,315 ounces a year before, according to data obtained by Bloomberg News under a Freedom of Information Act request. Gold averaged $974 (612 pounds) an ounce last year. Fourth-quarter production rose 54 percent to 25,078 ounces, the data show.

Gold’s nine-year bull market attracted hedge-fund managers including John Paulson and Paul Tudor Jones, while investors in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, amassed more metal than Switzerland’s central bank. The metal reached a record $1,226.56 an ounce on Dec. 3.

“People are obviously looking at physical gold more than paper,” Andy Davidson, an analyst at Numis Securities Ltd. in London, said by phone. “Coinage always seems to accelerate” in such conditions, he said.

Sales of American Eagle gold coins by the U.S. Mint increased 66 percent last year to 1.43 million ounces, its Web site showed. The mint suspended production in November of some coins because of depleted inventories. London-based luxury department store Harrods Ltd. began selling gold bars and coins for the first time in October. Read more here-http://www.bloomberg.com/apps/news?pid=20601102&sid;=abFClrv2Oqq8

-A Breather For Gold. Read more here-http://www.forbes.com/2010/02/01/forbes-india-gold-bubble-burst_print.html

-2010: A gap year for metal prices VM Group. According to the VM Group Metals monthly publication 2010 is likely to be the year metal prices take a breather but, the impact of China cannot be underestimated. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=96881&sn;=Detail&pid;=1

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

-James Turk: Precious Metals at ‘Bargain Basement’ Prices. Every once in a great while, the market offers a unique opportunity to buy precious metals ‘on the cheap’. I believe today is one of those moments.

There is ‘panic in the air’ and ‘blood in the streets’, which are conditions that open up unique opportunities. People who have used leverage to carry trading positions have been forced to sell their precious metals throwing out the ‘baby with the bathwater’ much like the panic that occurred after the Lehman Brothers collapse.

The trigger this time though is not an over-leveraged investment bank, but rather, the sovereign debt of Greece and Spain. Years of profligate spending and weakening economic activity are taking their toll. I highlighted in December that sovereign debt defaults were approaching as “countries around the globe run out of money and confront overwhelming debts that cannot be repaid.”

While Greece and Spain are now the trigger points, they are not alone. Nor is this problem of countries with too much debt unique to Europe. The debt of the biggest debtor of them all the US government is finally being called into question.

Reuters today reported: “If the U.S. economy grows anemically, already stretched government finances will be crimped, potentially putting downward pressure on the top Aaa U.S. rating, said Moody’s Investors Service.” To emphasize and make clear its point, the article went on to say: “If the Obama administration’s budget projections for rising interest payments on government debt are realized, ‘at some point, we don’t know when, there would be downward pressure on the U.S. rating,’ [Moody's] said.”

The likelihood of sovereign defaults is growing. Greece and Spain long ago gave up their domestic currencies to become part of the eurozone. They cannot create euros out of ‘thin air’ to repay their debts with debased currency.

While both countries give lip service to reducing their annual operating deficits but not their debts in the future, neither is prepared to bite the bullet and make tough decisions to bring spending under control. Given the weak economic activity in both countries, raising taxes is unlikely to produce further revenue, making the default all the more likely.

The discussion about default though is hiding a pernicious, developing force that portends a widening crisis. Euros are being pulled out of Greek and Spanish banks and placed in German and French banks. The thinking is that if Greece and/or Spain leave the eurozone to once again issue drachmas and pesetas, their revamped currencies will be trade at a discount to euros.

Therefore, to avoid losing purchasing power from this possibility, euros are moving out of banks from south to north. Thus, as the sovereign debt crisis spins out of control, it may cause banking crises in Greece and Spain as well as the other weak spots in the eurozone, namely, Portugal, Ireland and Italy, which bring me back to gold.

Counterparty risk is growing. As it does, the precious metals become increasingly important to preserve wealth because tangible assets are not dependent upon the promise of any government or bank. Gold and silver are the ultimate safe haven, and right now they are being offered at bargain basement prices. More importantly, it is clear from the Fear Index that gold is good value.

No one can predict the future. Precious metal prices may fall further. Then again, maybe today marks the low. But regardless, the risk of sovereign debt defaults is not going to disappear. Nor is uncertainty about the durability of the euro.

And the dollar continues to be debased by reckless spending that is piling more debt upon the US government’s huge mountain of debt. These risks create an environment in which one seeks safety for their hard-earned assets, which is what the precious metals offer. Read more here-http://www.fgmr.com/precious-metals-at-bargain-basement-prices.html

-Silver: Room for Growth. Mike Maloney says gold prices will hit $15,000 an ounce but silver is the better investment. Maloney, author of Rich Dad’s Guide to Investing in Gold and Silver, says silver prices can hit quadruple digits and will outperform gold over the long term.

During the last decade, gold prices soared to a high of $1,227 an ounce while silver moved from $4.57 to a high of $21, with prices now trading in the $15 range. Silver is a thinner market, and prices are subject to more volatile swings. Silver also has different leverage than gold.

Not only can it trade as a safe haven asset, but it also has exposure to growth and recovery sectors, like industrials. Maloney said that in times of both inflation and deflation, gold prices will skyrocket as the precious metal will have to cover the amount of base currency and outstanding revolving credit. Silver’s story is a little different but more profitable.

Which metal do you want to own, silver or gold?

Maloney: I think in inflation silver will perform with gold. In deflation you will see silver lag. People are trained to think gold in a currency crisis, gold as a safe haven. But there will come a day where gold will get too expensive for the common man [and] at that point just like in 1979, silver’s price will explode.

I believe in either scenario silver will blow the doors off of gold on a percentage basis. For the first 2,000 years that gold and silver were money, the average exchange rate between the two was that silver’s value was about 1/12th of gold’s value.

According to Maloney’s ratio, at today’s gold price of $1,100 an ounce, silver should be $96. But if gold hits $15,000, silver could rise to $1,250. Mike thinks silver can beat that number.

How should you invest in silver?

Maloney: I like the physical metal first. History shows that the physical metals outperform the stocks on an average. If you take the Barron’s Gold Mining Index and divide it by the price of gold you’ll see from 1970 to today, gold outperformed the index by about 4%. In other words, the mining stocks actually underperform on an average, but if you’re good at picking stocks, of course you could outperform gold significantly.

Maloney: There are these rare moments in history that go by in a blink of an eye, so as far as historic terms go, where the safest asset class is the place where people go to protect their purchasing power.

The safest asset class also simultaneously becomes the asset class that has the single greatest potential gains in absolute purchasing power. And we’re in one of those times right now when gold and silver are being revalued by the public. Just like in 1980 and 1934 all of the circulating medium would be redeemable in gold. Read more here-http://www.thestreet.com/print/story/10671767.html

-Silver Is Poised to Rise in The Long Run, But The Short-term Situation Is Complicated. Read more here-http://news.silverseek.com/SilverSeek/1265140361.php

-Win With Silver. With the Olympics just days away, and with precious metals sitting at very attractive prices (following this utterly absurd move lower), this is the perfect time to point out that when “going for gold” one can often be better off taking home silver.

As with many of the greatest, long-term investment opportunities, the reasons for investing in silver are numerous and obvious and will (like all things) become much more obvious, in hindsight. The simplest place to start is with the patterns in price movement, and the reasons for those patterns. Read more here-http://seekingalpha.com/instablog/407380-jeff-nielson/46854-win-with-silver

-Silver Ratio: The Investing Truth They Reveal. Read more here-http://www.kitco.com/ind/Lewis/feb042010.html

-Silver’s Most Important Price Point. Read more here-http://news.silverseek.com/SilverSeek/1265238514.php

-Ted Butler’s weekly interview with King World News. Listen here-http://www.gata.org/node/8283

-US Mint Gold and Silver Eagle Bullion Demand Hits January Highs. Read more here-http://www.coinnews.net/2010/02/01/us-mint-gold-and-silver-eagle-bullion-demand-hits-january-highs/

-U.S. Mint silver, gold, platinum coin revenue hits $1.7bn record high in FY 2009. Despite the inability of the U.S. Mint to acquire sufficient blanks, both gold and silver bullion coins smashed sales records due to unprecedented investor demand in FY 2009. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page34?oid=97140&sn;=Detail&pid;=1

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week: Why GDP Is Surging, But You Still Don’t Have A Job. Why is the GDP surging but jobs aren’t coming back? Maybe because the GDP isn’t really surging. Today’s chart, which comes from Goldman’s Jan Hatzius shows Real Final Demand so-called real GDP which basically represents GDP excluding inventory restocking.

As you can see by the dark line, the recovery is flat, and doesn’t live up to past recoveries at all. In the one measure that really counts, demand, there is no v-shaped recovery. And that’s why there are no jobs. Read more here-http://www.businessinsider.com/chart-of-the-day-why-gdp-is-surging-2010-2

Source: www.chartoftheday.com

-Chart of the week: See The Countries Short-Sellers Are Abusing. Sovereign debt concerns have exploded this year, and the chart below makes this fact very clear. It shows short-selling interest for the sovereign debt of different nations, as calculated by short-interest firm Dataexplorers in a February report.

Dataexplorers presents Short interest as an alternative to using credit default swap data alone: “CDS data on these markets is well publicized, but what does short selling data tell us about the current market attitude to developing country government bonds?”

The degree of recent short selling is indicated by the blue bars, while that of one year ago is in red. Longer bars implies far more traders betting against a nation’s debt. What is particularly striking about the data is that while some of the infamous European sovereign-default-risk PIIGS (Portugal, Italy, Ireland, Greece, and Spain) rank highly on this list of troubled nations, many Eastern European nations look far worse in terms of short interest.

Note some PIIGS aren’t in the table, they might not have been included in Dataexplorer’s screen. If the shorts are right, Eastern Europe may actually be the spark that sets off the rest of Europe’s financial crisis. Note Abu Dhabi shot up this year as well, no doubt due to Dubai’s crisis. Read more here-http://www.businessinsider.com/chart-of-the-day-simple-average-utilization–selected-sovereign-bonds-2010-2

Source: www.chartoftheday.com

-Chart of the week: Ohio’s Unemployed Masses Are Getting Hammered Like Never Before. You can never be sure of a job, a marriage, or even efficient markets theory these days, but through thick and thin it appears there’s at least one constant left in this world liquor sales will keep rising, at least in Ohio.

In 2009, Ohio’s liquor sales volume hit a record high, for the seventh year in a row. As shown below, even when recession and mass unemployment hits, the people of Ohio don’t give up when it comes to booze.

In fact, by the look of 2009 data, it appears mass unemployment may have helped boost spirits sales. That’s quite a jump from 2008 to 2009. Then again, liquor is probably one of the cheapest forms of entertainment around, thus tight times might lead some people to buy even more of it. Read more here-http://www.businessinsider.com/chart-of-the-day-ohio-unemployment-vs-liquor-sales-2010-1

Source: www.chartoftheday.com

-”Bernanke will continue to print money until there are no trees left in America.” Jim Rogers

-“No nation in history has ever printed its way to prosperity, borrowed its way to prosperity or spent its way to prosperity. The US will not be exempt from this truth.” Dan Norcini

-The past decade the Standard & Poor’s 500 Index lost 9 percent including dividends. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=akU.T5b3edZg

-The era of the great policy reflation is over China and India are tightening credit policies; much of Europe is tightening fiscal policies; Canada looks set to unveil a fiscal plan that will aim to reduce the deficit. David Rosenberg-Gluskin/Sheff

-Stocks plunged around the world Thursday, with the MSCI World Index dropping the most in four months, and metals tumbled on concern an unexpected increase in U.S. jobless claims and growing sovereign debt will derail the economic recovery. The euro slid to the lowest since June. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aOR8UFEmYXJE&pos;=2

-Commodity prices tumbled the most since August, led by metals and energy, on concern that rising job losses in the U.S. and mounting debt in Europe will slow economic growth and curb demand for raw materials. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aQGUJa3398V4&pos;=2

-Gold is down today because stops got run on the paper gold exchange. That came on the back of a strengthening dollar due to a weaker euro as a mirror effect. Please return to December of 2009 when the impending dollar rally was sold based on a sustainable US economic recovery. That was enough to convince money managers.

That demand then triggers the algorithms which fires off huge fund buying for what today is no reason at all. Our friends at the COMEX use this phenomena to bomb gold and so many of you have a heart attack selling your insurance in both shares and metals. It is like living in a mental hospital where emotions drive all decisions and most of those are total madness.

Technicals run the short term, Fundamentals run the long term, Insurance is not a day to day item. Despite these facts, most of the public gets pick pocketed in the paper gold market as a ritual played out every 28 days. You are not better than Trader Dan therefore stop speculating before you have no money left to protect.

Jobless claims were anticipated lower to confirm December’s US economic recovery enthusiasm, but went the other direction today. This is another wound in the assumption that started your dollar rally in December. Other reasons given for the general decline in commodities was fear that world demand for raw material will subside. As usual the West assumes it is the engine of world demand for everything. Jim Sinclair-Read more here-http://jsmineset.com/2010/02/04/golds-pick-pockets-continue-to-prosper-2/

-The California State Teachers’ Retirement System, the second-biggest U.S. public pension, is considering investments in commodities to boost returns and provide a hedge against inflation and slumping equities. The governing board of the fund, with $134 billion under management, is scheduled to hear today a staff report in Sacramento that recommends its first-ever commodity investment.

The board will decide whether to seek additional research on strategies and portfolio weightings. “Commodities historically exhibited low correlation to equities and bonds and produced double-digit returns when equities fell,” Innovation and Risk Director Steven Tong and Investment Officer Carrie Lo said in a report to the board.

“In effect, commodities may act as an insurance policy, realizing low single-digit returns over the long run but generating large double-digit payoffs in the event of a negative shock.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=adUC4S1obfh4&pos;=7

-More Americans unexpectedly filed first-time claims for unemployment insurance last week, indicating companies lack confidence the economic recovery will be sustained. Initial jobless applications increased to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, Labor Department figures showed today in Washington.

The number of people receiving unemployment insurance was little changed and those receiving extended benefits increased. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aKxCzuYaGS.c

-White House Sees U.S. Unemployment Rate Averaging 10% This Year. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=a9MIx5UDiDFM

-Self Employment in U.S. Climbs, Reflecting Lack of Other Jobs. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a1MCHbwdlS_4

-Poof: Another 800,000 jobs disappear. Job losses during the recession may have been underestimated by close to a million jobs. So instead of employers cutting just over 7 million jobs from their payrolls since the economic downturn began in December 2007, it’s expected that the Labor Department’s new estimate will be a loss of 8 million jobs. Read more here-http://money.cnn.com/2010/02/04/news/economy/jobs_outlook/index.htm

Source: www.chartoftheday.com

-Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to ensure enactment of his plan to cut the European Union’s largest deficit.

GSEE, which represents about 2 million workers in the private sector, voted at a meeting in Athens today to walk out Feb. 24. The main public-employee union plans a Feb. 10 strike to protest spending cuts as Papandreou steps up budget cuts to persuade investors Greece won’t need a bailout. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aN2G_2S_aP2M

-Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.

It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”

Taleb said investors should bet on a rise in long-term U.S. Treasury yields, which move inversely to prices, as long as Bernanke and White House economic adviser Lawrence Summers are in office, without being more specific. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3E4uC5VIFeo&pos;=5

-Italy’s financial police are seizing 73.3 million euros ($102 million) of assets from Bank of America Corp. and a unit of Dexia SA as part of a probe into an alleged derivatives fraud in the region of Apulia. Police are investigating losses on derivatives linked to the sale of 870 million euros of bonds sold by the regional government in 2003 and 2004, according to an e-mail from the prosecutor’s office in Bari today.

The banks misled the municipality, located in the heel of Italy, on the economic advantages of the transaction and concealed their fees, the prosecutor said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aMRv05Cm8PTg&pos;=5

-Meet the market’s biggest losers. Fortunes have been made and lost since AOL was last a standalone company. Here are the 10 companies that have lost the most in market value over the past decade. Read more here-http://money.cnn.com/galleries/2010/fortune/1002/gallery.biggest_losers.fortune/index.html

-El Nino, a warming in the Pacific Ocean that can influence the severity of the Atlantic hurricane season and weather patterns around the world, will likely fade sometime in the next six months, the U.S. Climate Prediction Center said today. Models indicate the Pacific may return to normal temperatures between April and June, although forecasters are uncertain exactly when, according to a CPC statement.

If El Nino fades in June, it is one factor that may mean more Atlantic storms this year, said David Streit, a senior meteorologist for Commodity Weather Group Llc in Bethesda, Maryland. The Atlantic hurricane season runs from June 1 through Nov. 30.

“With the loss of El Nino altogether, that will definitely help to give greater numbers than you would see in normal seasons,” Streit said. Read more here-http://www.bloomberg.com/apps/news?pid=20601124&sid;=alld1U0Kx2K8

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

-World’s most famous ‘unseen’ diamond. The room was dimly lit. Armed guards stood at both entrances and enormous ironclad doors were slid shut to seal the gallery. Nobody spoke above a whisper as we waited for the first glimpse in half a century of one of the world’s most extraordinary gems.

The Wittelsbach-Graff Diamond was last seen in public at the 1958 World Exhibition in Brussels. After that, it disappeared and its whereabouts remained a mystery until Laurence Graff, a billionaire diamond dealer, bought it at auction in 2008, appending his surname.

He and his son Francois were in the gallery of the Smithsonian’s National Museum of Natural History in Washington DC as the blue stone, was brought up from a secret vault and finally revealed. Read more here-http://news.bbc.co.uk/2/hi/americas/8488183.stm

-Smithsonian finds Hope and Wittelsbach-Graff diamonds are not from same stone. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2010/01/28/AR2010012801658_pf.html

-Historic 507-Carat Diamond Named ‘The Cullinan Heritage’. Petra Diamonds has announced that the 507-carat white diamond recovered at its Cullinan mine in South Africa will be named “The Cullinan Heritage.” The diamond is reportedly of “exceptional” color and clarity and one of the 20 largest high-quality rough diamonds ever discovered. Read more here-

http://www.idexonline.com/portal_FullNews.asp?id=33571

-Rio Tinto close to decision on restarting Argyle diamond mine. RIO Tinto is nearing a decision to restart work developing its underground Argyle diamond mine in Australia, the Anglo-Australian miner’s chief executive for diamonds and minerals said.

“We are hopeful of being able to start it but that depends on the approval of our investment committee. We are continuing to work on how and when the restart might take place,” Harry Kenyon-Slaney told Dow Jones Newswires.

Rio Tinto started building an underground mine at Argyle in 2006 as open pit operations dwindled. But the miner all but halted development last year as it faced heavy debt and crashing commodity prices. Markets have since bounced back. Read more here-http://www.theaustralian.com.au/business/mining-energy/rio-tinto-close-to-decision-on-restarting-argyle-diamond-mine/story-e6frg9df-1225826170445

-A powerful wing of South Africa’s ruling party is pushing for the nationalization of at least 60 per cent of the country’s mining sector, sending jitters through Canadian investors in Africa’s richest economy.

Analysts say the proposal is unlikely to become government policy, but the persistence of the nationalization idea among factions of South Africa’s ruling party is causing nervousness among Canadian and other foreign miners here. Read more here-http://www.theglobeandmail.com/report-on-business/nationalization-talk-puts-miners-on-edge/article1452803/

-U of A loans out rough diamond collection to Royal Alberta Museum. A new exhibit at the Royal Alberta Museum has a unique connection to Edmonton, as the University of Alberta has contributed diamonds from its own Mineralogy and Petrology Museum to enhance the show while on display in the city.

“Diamonds” will run at the Royal Alberta Museum until March 21. The Museum of Mineralogy and Petrology is located in the basement of the Earth Sciences Building, and is open Monday through Friday to the public. Read more here-http://thegatewayonline.ca/articles/news/2010/02/02/u-loans-out-rough-diamond-collection-royal-alberta-museum

PAULSON: U.S. WAS CLOSE TO COLLAPSE-RUSSIA WANTED FINANCIAL WAR

-The U.S. economy came “very close” to collapsing into a second Great Depression and the government had no alternative to bailing out financial firms, former Treasury Secretary Henry Paulson said.

“There was a time when the credit markets had essentially frozen and when blue chip industrial companies were having trouble raising money,” Paulson said in an interview today on Bloomberg Television. “I knew then we were on the brink.”

“We easily could have had unemployment of 25 percent,” he said. “That would have meant millions of additional jobs lost, millions of additional homes lost, trillions more lost in savings. It would have been terrible.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=axCgjHqNkaw0

-Paulson Says Russia Urged China to Dump Fannie, Freddie Bonds. Russia urged China to dump its Fannie Mae and Freddie Mac bonds in 2008 in a bid to force a bailout of the largest U.S. mortgage-finance companies, former Treasury Secretary Henry Paulson said. Paulson learned of the “disruptive scheme” while attending the Beijing Summer Olympics, according to his memoir, “On The Brink.”

The Russians made a “top-level approach” to the Chinese “that together they might sell big chunks of their GSE holdings to force the U.S. to use its emergency authorities to prop up these companies,” Paulson said, referring to the acronym for government sponsored entities. The Chinese declined, he said.

Russia’s five-day war with U.S. ally Georgia started on Aug. 8, the same day as the opening ceremonies of the Beijing Games. Prime Minister Vladimir Putin told U.S. President George W. Bush during those ceremonies that “war has started,” according to Dmitry Peskov, Putin’s spokesman.

“The report was deeply troubling heavy selling could create a sudden loss of confidence in the GSEs and shake the capital markets,” Paulson wrote. “I waited till I was back home and in a secure environment to inform the president.” Russia never approached China about dumping U.S. bonds, Peskov said today. “This is not the case,” he said by phone.

Russia sold all of its Fannie and Freddie debt in 2008, after holding $65.6 billion of the notes at the start of that year, according to central bank data. Fannie and Freddie were seized by regulators on Sept. 6, 2008, amid the worst U.S. housing slump since the Great Depression. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=afbSjYv3v814

U.S. DEBT CRISIS-TAXES GOING UP

-Obama Budget Said to Forecast $1.6 Trillion Deficit for 2010. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ackCreHkor18&pos;=8

-The era of big government has returned with a vengeance, in the form of the largest federal work force in modern history. The Obama administration says the government will grow to 2.15 million employees this year, topping 2 million for the first time since President Clinton declared that “the era of big government is over” and joined forces with a Republican-led Congress in the 1990s to pare back the federal work force.

Most of the increases are on the civilian side, which will grow by 153,000 workers, to 1.43 million people, in fiscal 2010. The expansion could provide more ammunition to those arguing that the government is trying to do too much under President Obama. Read more here-http://washingtontimes.com/news/2010/feb/02/burgeoning-federal-payroll-signals-return-of-big-g//print/

-Obama’s Budget Has One Small Missing Piece For $6.3 Trillion Dollars. What is not included, namely $2.8 Trillion and $1.9 Trillion of MBS guaranteed portfolios at Fannie and Freddie, and an additional $782 billion and $809 billion in company debt outstanding for the two GSEs, respectively.

This amounts to a total of $6.3 trillion in liabilities which should be counted toward the budget. Read more here-http://www.zerohedge.com/article/obamas-budget-has-one-small-missing-piece-63-trillion-dollars

-Obama Deficit-Reduction Plans Face Difficult Sell. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aZnNekhkN0cY

-Obama Budget Has $1.9 Trillion Tax Rise for Richest, Businesses. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aL975wIYeQjs

-Congress Approves $1.9 Trillion Increase in U.S. Debt Limit. The U.S. Congress voted to increase the federal debt limit by $1.9 trillion, to $14.3 trillion, enough to prevent lawmakers from having to raise it again before this year’s midterm elections. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZtM1bES_T1c

-Geithner Says Long-Term U.S. Deficits Pose ‘Corrosive Threat’. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aIMXrX2K9KPg&pos;=4

-Deficits May Alter U.S. Politics and Global Power. Read more here-http://www.nytimes.com/2010/02/02/us/politics/02deficit.html

-U.S. Rating Under Pressure Unless Deficits Cut, Moody’s Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=am_JfQwiS4po

-Next in line for a bailout: Social Security. Read more here-http://money.cnn.com/2010/02/02/news/economy/social_security_bailout.fortune/?section=magazines_fortune

-A Majority Of States Are Now Insolvent: Quantifying The Disastrous Unemployment Situation. Read more here-http://www.zerohedge.com/article/majority-states-are-now-insolvent-quantifying-disastrous-unemployment-situation

-Harrisburg, the capital of Pennsylvania, will consider Chapter 9 bankruptcy protection along with tax increases and asset sales as options to address $68 million in debt service payments due this year, the chairwoman of a City Council committee said last night. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid;=aRLYN3..REz4

-Budget-strapped states avoid the word ‘taxes’. Read more here-http://www.washingtontimes.com/news/2010/feb/03/budget-strapped-states-avoid-t-word//print/

-Desperate to save police, fire and other city jobs, a divided Phoenix City Council on Tuesday approved a sales tax on grocery items that will generate tens of millions of dollars a year. The 2 percent food tax will take effect April 1 and expire after five years, though Mayor Phil Gordon said the council has the option of reversing its decision after it hears from the public during 15 budget hearings planned for this month.

The tax on milk, meat, vegetables and other food purchased by shoppers will generate an estimated $12.5 million for the fiscal year that ends June 30. It will raise another $50 million for fiscal 2011. Read more here-http://www.azcentral.com/news/articles/2010/02/03/20100203foodtax0203.html

-Gravel roads, once a symbol of quaint times, are emerging as a sign of financial struggle in a growing number of rural towns. High costs and tight budgets have prompted communities in Maine, Michigan, Indiana, Pennsylvania and Vermont to convert or consider converting their cracked asphalt roads back to gravel to cut maintenance costs, officials in those states say. Read more here-

http://www.usatoday.com/news/nation/2010-02-03-gravel-roads_N.htm

-Colorado Springs cuts into services considered basic by many. More than a third of the streetlights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping firefighting jobs, a vice team, burglary investigators, beat cops dozens of police and fire positions will go unfilled.

The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter. Neighbors are encouraged to bring their own lawn mowers to local green spaces, because parks workers will mow them only once every two weeks. If that.

Water cutbacks mean most parks will be dead, brown turf by July; the flower and fertilizer budget is zero. City recreation centers, indoor and outdoor pools, and a handful of museums will close for good March 31 unless they find private funding to stay open.

Buses no longer run on evenings and weekends. The city won’t pay for any street paving, relying instead on a regional authority that can meet only about 10 percent of the need. “I guess we’re going to find out what the tolerance level is for people,” said businessman Chuck Fowler, who is helping lead a private task force brainstorming for city budget fixes. “It’s a new day.” Read more here-http://www.denverpost.com/news/ci_14303473

GLOBAL DEBT CRISIS

-Pimco’s El-Erian Says 2010 Will Be Year of Sovereign Risk. Mohamed El-Erian, chief executive and co-chief investment officer of Pacific Investment Management Co., said 2010 will be the year of sovereign risk as the “ballooning of public balance sheets” continues.

Greece is “Europe’s big game of chicken,” El-Erian, 51, said in a Bloomberg Radio interview today. Europe needs to provide “significant aid” to the country, while the Greek government works to adjust its fiscal deficit, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJeGbT7CCWTY

-20 reasons Global Debt Time Bomb explodes soon. Commentary: Which trigger will ignite the Great Depression II? Read more here-http://www.marketwatch.com/story/story/print?guid=98105012-8C05-444F-99C1-CB1F8D95870A

-Warning: Capt Bernanke’s sinking U.S.S. Titanic. Commentary: Cheap money’s again blowing new ‘icebergs’. Read more here-http://www.marketwatch.com/story/story/print?guid=55EC892F-94D3-4198-8ACA-47E553838BD6

-Greece rattled by ‘hidden debt’ controversy. Greek debt markets have come under fresh assault from hot money funds after a commission of experts in Athens told the country’s parliament that it had uncovered €40bn (£35bn) of “hidden debts” during an investigation into past manipulation by the financial authorities. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7140233/Greece-rattled-by-hidden-debt-controversy.html

SIX MORE U.S. BANKS FAIL

-Six banks fail, in Florida, Georgia and California. Regulators shuttered six banks on Friday, notching up 15 failed banks in the first month of in 2010. The biggest to fall was First Regional Bank in Los Angeles, which had deposits of $1.87 billion.

The others were Community Bank and Trust in Cornelia, Ga.; Florida Community Bank in Immokalee, Fla.; First National Bank of Georgia in Carrollton, Ga.; Marshall Bank in Hallock, Minn.; and American Marine Bank in Bainbridge Island, Wash. Read more here-http://money.cnn.com/2010/01/29/news/economy/bank_failures/index.htm

SWISS WARN OF UBS BANK FAILURE

-Swiss warn UBS bank could collapse. Switzerland’s justice minister warned in an interview on Sunday that top bank UBS could collapse if sensitive talks with the United States over a high-profile tax fraud investigation fall through.

“The actions of UBS in the United States are very problematic. Not just because they are punishable but also because they threaten all of the bank’s activities,” Eveline Widmer-Schlumpf told Le Matin Dimanche newspaper.

“The Swiss economy and the job market would suffer on a major scale if UBS fails as a result of its licence being revoked in the United States,” she said. Read more here-

http://news.yahoo.com/s/afp/20100131/bs_afp/switzerlandusbankingtaxregulatejusticecompanyubs

MORE BAD BANKING DEBT COMING

-S&P; raises estimates for US banks’ loan loss rates. Loss rates for U.S. banks’ mortgage and consumer loans could rise beyond previous estimates, especially in a prolonged economic downturn, credit rating agency Standard & Poor’s said on Monday.

The new forecasts could trigger downgrades of some financial institutions’ ratings, S&P; added. “We foresee loss rates exceeding our previous expectations under both a base case and a more severe stress test for residential mortgages, home equity loans, and consumer loans, including credit cards,” the agency said in a research report. Read more here-

http://www.reuters.com/article/idUSN019918320100201?type=marketsNews

-Banks’ bad debts to rise for another year, says Moody’s. Bad debts at Britain’s banks will not peak for another 12 months, according to credit-rating agency Moody’s, in a warning that the UK’s emergence from recession is a “false dawn for credit”. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7129844/Banks-bad-debts-to-rise-for-another-year–says-Moodys.html

STOCK MARKET

-El-Erian Says Retreat in Stocks Will Worsen as Economy Slumps. Mohamed A. El-Erian, whose firm runs the world’s biggest mutual fund, said the largest stock market decline in 11 months may worsen amid persistent U.S. joblessness and economic growth that trails analysts’ forecasts.

Investors have wrongly priced in an “orderly” withdrawal of stimulus measures, a rebound in bank lending and coordinated government policy to restore growth, the chief executive officer of Pacific Investment Management Co. wrote in a Bloomberg News column. That means Wall Street projections for gains in 2010 may prove incorrect and prices will slump, he said.

“Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes,” El-Erian, 51, wrote. “The global financial crisis has undermined growth and job creation; it has clogged many of the pipes that allocate funds to productive uses; and it has rapidly taken public debt and the budget deficit to worrisome levels.” Read more here-

http://www.bloomberg.com/apps/news?pid=20603037&sid;=aKp04HpeyeLU

-Stocks Plunge Risk at Highest Since April 1984, Survey Finds. Expectations that U.S. stocks will tumble 10 percent or more rose to highest level since April 1984 this week, according to Investors Intelligence’s weekly survey of newsletter writers.

The proportion of investment writers who anticipate a so called correction climbed to 38.9 percent in the week ended yesterday, an increase from 36.7 percent in the period ended Jan. 27. The New Rochelle, New York-based company has tracked the projections of newsletters since 1963. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a7MG6IzewL1E&pos;=4

-As for the equity market, if there is a possible bright light it is that sentiment has swung massively to the bearish side. The American Association of Individual Investors survey shows that as of February 4th, there were 29.2% in the bull camp and 43.1% in the bear camp.

Just a week ago these shares were at 35.0% and 36.7% respectively; and 41% and 26% at the turn of the year. Quite the swing. That said, the bear market rally off the March 2009 low was a rally more rooted in technical’s than in fundamentals a view validated by the fact that this rally stalled out after a classic 50% retracement from the bottom.

Now, what if we see a 50% reversal off the up-move? Well, that would mean a retest of 915 on the S&P; 500 to the downside. Don’t think it can’t happen this market, on a Shiller normalized P/E basis, is still 25% overvalued as it is. You do not want to pay a Cadillac price for a Ford focus that much we do know.

Meanwhile, the S&P; 500 closed yesterday’s session at 1097.28; back on October 15, it was sitting at 1095.56. The S&P;/TSX index is now at 11,390.46; back on September 15, it was sitting at 11,495.83. So here we have the U.S. market doing diddly-squat now for nearly four months just moving sideways and the Canadian market is actually lower now than it was five months ago.

It is surprising that the majority of pundits still believe that we are in a bull market. David Rosenberg-Gluskin/Sheff

REAL ESTATE-FORECLOSURES-MORTGAGES

-CIBC warns of double-dip in U.S. house prices. CIBC World Markets warned today of a double-dip in U.S. house prices, where the troubles all began. The U.S. economy is healing but a full recovery in the battered real estate market is years away, economists Benjamin Tal and Meny Grauman said in a report that projects American home prices could see prices drop again by 5 per cent to 10 per cent.

While most indicators have stabilized, they wrote, that is a sign of a “badly damaged” market and the distortions of temporary tax measures, and they forecast further weakness as supply outstrips demand, mortgage rates rise and the government’s tax credit expires. This, they added, has “significant implications” for related stocks that have priced in a steady recovery in the market.

“The risk of a double-dip in U.S. home prices is not simply the result of properties being sold at ‘fire-sale’ valuations, but also due to a deluge of shadow inventory coming onto the market. Although conventional inventories are trending lower, shadow inventories, capturing seriously delinquent and bank-owned properties, are just as large.”

Mr. Tal and Mr. Grauman noted that almost 2 million U.S. mortgages are more than 90 days delinquent, and most will end in a foreclosure. Some 2.3 million properties are already in foreclosure or seized by banks, they said, also warning of a record number of unemployed and the fact that some 10 million households are in a negative home equity position of more than 20 per cent. Read more here-http://www.ctv.ca/generic/generated/static/business/article1453635.html

-The Next Leg Of The Housing Crisis In Five Simple Charts. Read more here-http://www.zerohedge.com/article/next-leg-housing-crisis-five-simple-charts

-Obama Housing Rescue Threatened by Foreclosures, Unemployment. President Barack Obama’s efforts to bolster the U.S. housing market, the trigger of the worst recession since the 1930s, may be undone by record unemployment and repossessions by lenders.

Foreclosures probably will reach 3 million this year, surpassing the record of 2.82 million in 2009, according to Irvine, California-based RealtyTrac Inc. That would more than offset an estimated 448,000-unit rise in home sales, based on the average forecast of the National Association of Realtors, the Mortgage Bankers Association and Fannie Mae. Read more here-

http://www.bloomberg.com/apps/news?pid=20603037&sid;=a6RsJycboEUE

-Pending Sales of Existing Homes in U.S. Increased 1%. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=azeSgbfoQo7o&pos;=3

-U.S. Vacancy Rate Increases as Banks Seize More Homes. The share of homes vacant and for sale rose in the fourth quarter after banks seized property from borrowers who defaulted on mortgages.

The homeowner vacancy rate increased to 2.7 percent from 2.6 percent in the third quarter, the U.S. Census Bureau said in a report today. There were 2.09 million empty properties on the market, up from 1.99 million, according to the report. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aegjwGzWkAqY

-No Help in Sight, More Homeowners Walk Away. In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040.

“People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?” Read more here-http://www.nytimes.com/2010/02/03/business/03walk.html

-Consumers paying credit card over mortgage. Read more here-http://money.cnn.com/2010/02/03/news/economy/credit_vs_mortgage/index.htm

-Option ARMs Surpass Subprime Mortgages in Loss Severity. Read more here-http://www.housingwire.com/2010/01/29/option-arms-surpass-subprime-mortgages-in-loss-severity/?source=patrick.net

-Foreclosures new hot spots. The new foreclosure plague is tied more to the economy than bad mortgages. Here are 10 cities where defaults grew the fastest in 2009. Read more here-http://money.cnn.com/galleries/2010/real_estate/1001/gallery.New_foreclosure_hot_spots/index.html?hpt=Sbin&source;=patrick.net

-Rising FHA default rate foreshadows a crush of foreclosures. The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market’s recovery.

About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency’s figures show. Although the FHA’s default rate has been climbing for months and eating into the agency’s cash, the latest figures show that the FHA’s woes are getting worse even as the housing market shows signs of improvement.

The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.

If the trend continues and the FHA’s cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses a first for the agency, which has always used the fees it charges borrowers to pay for its losses. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2010/02/01/AR2010020103527_pf.html

-Fear and foreclosure in Las Vegas. Nowhere has America’s housing crisis taken a heavier toll than in Nevada, where a glut of new homes lie empty. Read more here-http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/7079868/Fear-and-foreclosure-in-Las-Vegas.html?source=patrick.net or http://money.cnn.com/2010/01/28/real_estate/foreclosure_cities_growth/index.htm

-GMAC Inc., the auto and home lender controlled by the U.S. government, posted a record quarterly net loss, driven by the declining value of mortgage assets. The fourth-quarter loss from continuing operations was $3.9 billion, compared with profit of $7.7 billion a year earlier, Detroit-based GMAC said in a statement.

GMAC’s net loss was $4.95 billion after writing down mortgage holdings. For the year, GMAC swung to a net loss of $10.3 billion from a $1.87 billion profit. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=afofZb7mCyOE

-You lost your house but you still have to pay. Read more here-http://money.cnn.com/2010/02/03/real_estate/foreclosure_deficiency_judgement/index.htm

-The commercial real estate dilemma. Read more here-http://money.cnn.com/2010/02/04/news/companies/banks_commercial_real_estate/index.htm

-China Property Market ‘Bubble’ Set to Burst, Xie Says. China’s property market “bubble” is set to burst as the government curbs credit growth and clamps down on speculation, according to independent economist Andy Xie.

As bank lending slows, “it’s very difficult to see this demand continuing,” Xie, formerly Morgan Stanley’s chief Asian economist, told Bloomberg Television in Hong Kong today. Read more here-

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

GEOPOLITICAL NEWS

-Al-Qaeda Likely to Try U.S. Attack In Six Months, Panel Told. Al-Qaeda is likely to attempt a terrorist attack in the U.S. within the next three to six months, U.S. intelligence officials told a Senate panel in Washington. National Intelligence Director Dennis Blair told the Senate Intelligence Committee today that an attempted attack is “certain” within that time frame.

Blair was responding to a question from the panel’s chairwoman, California Democratic Senator Dianne Feinstein, during an annual assessment of threats to the U.S. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5y7H_F_uMLk

-China, Iran Prompt U.S. Air-Sea Battle Plan in Strategy Review. The U.S. military is drawing up a new air-sea battle plan in response to threats such as China’s persistent military buildup and Iran’s possession of advanced weapons, according to the Pentagon’s latest strategy review. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ajDFeH4dy2qo

-Iran Threatens World, Not Just Israel, Peres Says. Israeli President Shimon Peres called for establishing the “widest possible” international coalition to prevent Iran from developing nuclear weapons. “Iran is a source of evil,” Peres said today at a conference in Herzliya, Israel.

It threatens “not just the security of Israel, but the security of the Arabs, too, and all nations that want peace and freedom.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a3DoWzm6bGBk

-’Iran will deliver telling blow to global powers on Feb. 11.’ Iranian President Mahmoud Ahmadinejad says the nation will deliver a harsh blow to the “global arrogance” on this year’s anniversary of the Islamic Revolution. Read more here-http://www.presstv.ir/detail.aspx?id=117545§ionid;=351020101

-U.S. expanding missile defenses in Gulf. he United States has expanded land and sea-based missile defense systems in and around the Gulf to counter what it sees as Iran’s growing missile threat, U.S. officials said. Read more here-http://www.reuters.com/article/idUSTRE60U18R20100131?type=politicsNews or http://www.nytimes.com/2010/01/31/world/middleeast/31missile.html?th&emc;=th or http://www.guardian.co.uk/world/2010/jan/31/iran-nuclear-us-missiles-gulf

-US missile test mimicking Iran strike fails. A U.S. attempt to shoot down a ballistic missile mimicking an attack from Iran failed after a malfunction in a radar built by Raytheon Co, the Defense Department said.

The abortive test over the Pacific Ocean coincided with a Pentagon report that Iran had expanded its ballistic missile capabilities and posed a “significant” threat to U.S. and allied forces in the Middle East region. Read more here-http://www.reuters.com/article/idUSN0120076120100201

-Russia is moving closer to the West on how to deal with Iran’s nuclear program following a rocket launch by the Islamic republic, said Konstantin Kosachyov, the head of the foreign relations committee of Russia’s lower house of parliament. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aAZv_K2i48Vg&pos;=9

-Australia blocks Iran shipments over weapons fears. Australia said it used an anti-weapons of mass destruction law to block three shipments to Iran but calls for new sanctions against the Islamic state opened up a new international divide Thursday. Read more here-http://www.breitbart.com/article.php?id=CNG.aa47ff8e5ba4bc86073248d6f79e96e3.681&show;_article=1

-China suspends military ties with US. China suspends military exchanges with the US and threatens to impose sanctions on US arms companies over a Washington decision to sell weapons to Taiwan. Read more here-http://www.presstv.ir/detail.aspx?id=117442§ionid;=351020404

-North Korea is expected to deploy a nuclear-tipped missile capable of reaching parts of the United States in the next decade, despite two long-range missile flight-test failures, according to the Pentagon’s ballistic-missile defense review. Read more here-http://www.washingtontimes.com/news/2010/feb/04/nuclear-missile-threats-to-us-mount//print/

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The Goldbugg Report – February 9, 2010
Posted by Worldwide Precious Metals on Tuesday, February 9, 2010

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