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The Goldbugg Report – March 02, 2010

March 2, 2010

February 26, 2010

The Week in Review

There was a new twist on the Greece situation this week. Not only did major banks, including Goldman Sachs and JP Morgan, help hide the fact that Greece’s debt was growing out of control, it turns out that they’ve been betting on the fact that they might very well default on that debt as well. Goldman Sachs, JP Morgan and about a dozen other banks created an index (based on credit default swaps and started before Greece’s debt problems became public knowledge), that allowed traders to bet on whether Greece and other EU countries would default on their debt. If the term “credit default swaps” sounds familiar to you, you might recall that they were the same financial voodoo that nearly bankrupted AIG. You may also recall that there was a bank that made tremendous amounts of profit betting on AIG’s default: that would be Goldman Sachs. The Fed has issued a statement that it will be investigating the matter.

Initial unemployment claims rose again last week, climbing by 22,000 and defying analyst’s expectations that they would fall. The unemployment numbers helped move the stock market lower, coming right on the heels of a report that home sales hit record lows in January. On Wednesday, the Senate approved a $15 billion dollar package of tax breaks and highway spending aimed to bring down unemployment.

Data out of Europe this week showed the overall economic recovery may be faltering. Household and business confidence dropped unexpectedly and bank loans to the private sector fell for the fifth straight month. Julian Callow, chief European economist at Barclays Capital in London said “Europe is where we see the biggest risk of a double dip at the global level, Europe has been lagging and we’ve continued to see better numbers in Asia and now the U.S.” Standard and Poors announced that it may downgrade Greece one more time as it continues to struggle with its debt crisis.

Data out of Asia was markedly better than what was coming out of Europe. India’s finance minister announced that its economy may grow 10 percent. According to Finmarket, a Russian news agency, China has announced that it will bid on the remaining 191.3 tons of IMF gold at an open auction. While this news has not been confirmed by Chinese officials, China has long been assumed to be looking to purchase more gold to diversify its reserves further.

Existing home sales dropped 7.2% in January. While some of that decline can probably be attributed to massive amounts of snow that have been falling across the US, the general consensus is that the housing sector is much worse off than previously expected.

Crude oil prices touched $80 a barrel before retreating back below that level on weak data out of the US and another wave of heavy winter storms.

The euro touched a one year low against the yen as the fears in Greece continue. The US dollar, after showing some recent strength against the yen, retreated against that currency after fears of an impending rate hike by the Fed subsided. Revised GDP numbers that were worse than expected also helped drive the dollar lower.

Here are your Short Term Support and Resistance Levels for the upcoming week.

Volatility should be expected to continue. Adrian Douglas, publisher of the Market Force Analysis newsletter, analyzed 6 months worth of daily delivery notices and inventory data from COMEX. His analysis led him to conclude that there is an increasing shortage of gold and silver. The CFTC announced this week that it would host a public meeting in late March to discuss speculation limits in the US metal futures. Bart Chilton, a CFTC commissioner, said “I’m not suggesting they [those who think banks are conspiring to keep precious metals too cheap] have a legitimate argument. I looked at it carefully and I became convinced that it’s something we should investigate.” The pressure is on the large banks including JP Morgan, Goldman Sachs, et al. to stop manipulating the precious metals market. These large banks have been abandoning their short positions in precious metals left and right, as reflected on the weekly Commitments of Traders (COT) report put out by the CFTC. The COT reports provide a breakdown of each Tuseday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. China and India may soon be competing with each other over the IMF’s remaining gold for sale. The situation in the EU is rapidly devolving, with Greece beginning to lash out at those that control the purse strings for the bailout it so desperately needs. The term “double dip recession” is popping up more and more in the media and there seems to be quite a bit of fear that the recovery may be slowing down, this time led by the EU. The global financial market seems to be teetering on the edge of a tipping point, and it looks like that tip won’t be for the positive. Starting, or adding to your existing, precious metals portfolio may well be an excellent way to ride out the avalanche of turmoil if that tip occurs. 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

-CFTC to Hold Public Meeting to Examine Futures and Options Trading in the Metals Markets,

http://www.cftc.gov/newsroom/generalpressreleases/2010/pr5782-10.html

-Citi: China Sold Their Treasuries Because They Want To Buy Tons Of Gold. Read more here-http://www.businessinsider.com/citi-theres-no-problem-for-gold-2010-2

-China will bid on IMF’s remaining gold offer, Russian news agency says. China has confirmed its intention to purchase 191.3 tons of gold from the International Monetary Fund at an open auction, Finmarket news agency said.

World central banks started to increase their gold reserves after prices on gold began to climb in 2001. The IMF sells gold within the scope of a program to diversify sources of income and achieve an increase in lending.

The IMF announced an intention to sell 403.3 tons of gold in accordance with the adequate decision made by the board of directors of the fund in September of 2009. India, Mauritius, and Sri Lanka purchased about 212 tons of the amount at the end of 2009. India purchased most, 200 tons.

China’s interest in international trade is connected with the development of the nation’s economy, as well as with the growing consumer demand in the country. “Chinese officials have confirmed previous announcements from IMF experts and said that the purchasing of 191 tons of gold would not exert negative influence on the world market.

China is interested in the development of the domestic consumer market,” the agency reports. Most of Chinese citizens believe that investing in gold jewelry is a good way to avoid inflation, Rough & Polished agency said.

The IMF has received the profit of $7.2 billion from gold sales. A part of the funds is to be used for crediting poor countries. Read more here-http://www.gata.org/node/8372

-Will she won’t she? China’s gold dance. First the rumours are that China won’t buy the IMF gold, then there are equally strong rumours that it will. If China or India, the other rumoured buyer, don’t cough up does it really matter? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99671&sn;=Detail&pid;=1

-Dominic Frisby: Ignore the IMF sales Soros is right about gold. Read more here-http://www.gata.org/node/8367

-Gold Production Has Peaked: CEO. The world’s supply of new gold is shrinking as the major producers are finding less of the precious metal and the days of big open-pit mines are fading, Dave Paxton, CEO of Vatukoula Gold Mines, told CNBC Friday.

“Gold production has peaked; I think the highest production I saw was in 1999 and it has declined since then,” Paxton said. Production is coming down in all of the key producing counties of South Africa, America and Australia, the former mining analyst added.

“The big open-pit mines, which were these massive units that produced lots of gold are coming to the end of their lives,” Paxton said. “We’re not finding any more of the large open-pit gold mines. We’re going back to more the underground mines, which are the long-term producers, but they are much higher costs,” he added. Read more here-http://www.cnbc.com//id/35475766

-Peak gold theory gains impressive adherents. In his latest Basic Points analysis, global market strategist Don Coxe suggests investors maintain a high exposure to gold and gold miners whose production comes from politically secure areas.

Global market strategist Don Coxe, chairman of Coxe Advisors, said he believes in “a hitherto-undiscovered erogenous zone in gold bugs: peak gold-which could be the latest Big Thing since peak oil.” In his latest Basic Points, Hard Rocks and Hard Shocks, Coxe credits “Aaron Regent, Barrick’s market-savvy new CEO” for “fueling the flames of desire” through the concept of peak gold.

Regent has noted “that new mined production of gold has been declining for a decade,” suggesting this could prove to be the equivalent of peak oil, the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline.

Much of the recent commentary on gold, Coxe said “is that Obama’s deficits, coupled with Bernanke’s money-printing, could produce either a Depression or runaway inflation. To us, this is an argument investors really should take seriously.” Coxe advised that “a holding of gold and gold stocks offers excellent protection under both extremes, and attractive potential under a regime of moderate inflation and modest recovery.”

In his analysis, Coxe noted that a “big boost in bullion prices has not meant a big jump in gold production-but was actually accompanied by declining output. Rather, he adds, “the kinds of mining companies in which you should invest are those that recognize that each ton of ore taken out of ground brings the mine closer to closure.” Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99054&sn;=Detail&pid;=1

-Strong start to 2010 gold demand in China, India WGC. The WGC says India’s jewellery sector has been buying regularly while tighter monetary policy in China has not affected buying. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=99636&sn;=Detail&pid;=1

-Credit Suisse Says Charts Show Gold Is Poised To Jump Higher. Watch video here-http://www.businessinsider.com/credit-suisse-says-charts-show-gold-is-poised-to-jump-higher-2010-2

-Gold: A picture tells a thousand words. The net long dollar position on Inter continental exchange is 150 times the six-year average; CME Euro is heavily oversold. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=99654&sn;=Detail&pid;=1

-Gold: Long-Term Fundamentals Remain Promising. Read more here-http://news.goldseek.com/GoldSeek/1267043375.php

-Redburn Partners On The Coming Gold War: “Gold Is Money And Nothing Else”. Gold price will reach at least US$1,500/oz: we are raising our long-term gold price estimate to US$1,500/oz (from US$900/oz) with the possibility of a spike to US$4,000-5,000/oz. Read more here-http://www.zerohedge.com/article/redburn-partners-coming-gold-war-gold-money-and-nothing-else

-Peter Grandich: Perma-gold bears hitting new lows. Read more here-http://www.gata.org/node/8362

-I.M. Vronsky, I knew I should have bought gold. Read more here-http://www.gold-eagle.com/gold_digest_08/vronsky021610.html

-Listen to GATA Chairman Murphy’s interview on Liddy radio show. Listen here-http://www.gata.org/node/8370

-Gary North: Fed’s secrecy aims mainly to hide gold’s disposition. Read more here-http://www.gata.org/node/8357

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,100 the silver price would be $13.75

Gold to silver ratio at 70 to 1 with gold at $1,100 the silver price would be $15.71

Gold to silver ratio at 60 to 1 with gold at $1,100 the silver price would be $18.33

Gold to silver ratio at 50 to 1 with gold at $1,100 the silver price would be $22.00

Gold to silver ratio at 40 to 1 with gold at $1,100 the silver price would be $27.50

Gold to silver ratio at 30 to 1 with gold at $1,100 the silver price would be $36.67

Gold to silver ratio at 20 to 1 with gold at $1,100 the silver price would be $55.00

Gold to silver ratio at 15 to 1 with gold at $1,100 the silver price would be $73.33

-Silver Can Hit $1,500. Mike Maloney, author of Rich Dad’s Guide to Investing in Gold and Silver, predicted $15,000 gold but think silver offers more upside over the long term. Watch video here-

http://www.thestreet.com/video/10675784/silver-can-hit-1500.html#65406945001

-A long-term look at Silver. Read more here-http://www.321gold.com/editorials/roy_byrne/roy_byrne022310.html

-Butler tells King World News metals are ‘locked and loaded’ for rally. Listen here-http://www.gata.org/node/8351

-Howard Ruff-Think Outside the Box: Maverick Investing in the Age of Obamanomics. Your investment program should be based in coins and bullion. Invest at least one-third of your assets in gold and silver coins or bars. Read more here-http://www.kitco.com/ind/Ruff/ruff_feb242010.html

-Cash for metals not a sign of a market top. Read more here-http://news.goldseek.com/PeterCooper/1266933660.php

-New COMEX Rule: Another Reason to Fear Metals ETFs. Read more here-http://www.kitco.com/ind/Lewis/feb172010.html

-CFTC to examine trading in metals markets. The U.S. Commodity Futures Trading Commission said on Tuesday it will hold a public meeting on March 25 to examine whether position limits are needed for gold, silver, and copper futures markets.

The CFTC, the top regulator for futures markets, has long enforced position limits for grains trading, and is now mulling similar restrictions on the number of contracts speculators can hold for other markets. Read more here-http://www.gata.org/node/8364

-Financial Times notes Butler’s and GATA’s clamour to CFTC. Read more here-http://www.gata.org/node/8368

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week: History Shows Why Another Sovereign Debt Crisis Is Right Around The Corner. This chart from Gerard Minack at Morgan Stanley, inspired by the research of Harvard professor Ken Rogoff, shows how, surprisingly, sovereign debt crises are pretty common from a historical perspective.

The developed world has gone through many cycles of debt accumulation followed by sharp and sudden corrections of debt imbalances via sovereign debt crises of some form as shown below. The blue line indicates the percentage of nations either in default or restructuring their debt each year.

You can see that individual national crises tend to clump together and happen in waves. The last wave was around 1990, while the 2000’s were characterized by a lull in overt sovereign debt problems.

Which means that a new wave of sovereign debt defaults could be just around the corner and would be perfectly normal historically speaking; since as Morgan Stanley said in their recent related report, ‘this time will probably not be different.’ Read more here-http://www.businessinsider.com/chart-of-the-day-sovereign-external-debt-1800-2006-2010-2

Source: chartoftheday.com

-Chart of the week: Bankers Getting Paid A Lot To Sit On Their Hands And Do Jack Squat. Yesterday we pointed you to the latest data from the St. Louis Fed showing that bank lending continues to plunge.

Rather than ply businesses with loans, banks are instead opting to hoard cash and buy Treasuries. And yet despite the lending shutdown, bonuses are back up, per fresh data out today from the New York Comptroller.

In other words, sitting on your hands and doing nothing is a pretty lucrative gig. Read more here-http://www.businessinsider.com/chart-of-the-day-wall-street-bonuses-vs-bank-lending-2010-2

Source: chartoftheday.com

-Chart of the week: Banks Continue To Pull The Rug Out From Under The Economy. Can the economy revive if banks don’t start to lend again? Let’s hope so. Today the St. Louis Fed released its latest monthly look at commercial and industrial loans at major banks a measure that some would say represents the essence of the US banking system.

As you can see, this measure is still falling like a knife a bad sign for the ongoing health of the economy. (And also not what we were promised when we bailed out the banks.) Read more here-http://www.businessinsider.com/chart-of-the-day-commercial-and-industrial-loans-at-all-commercial-banks-2010-2

Source: chartoftheday.com

-Chart of the week: Wall Street’s Gravy Train Is About To Hit A Brick Wall. The major banks are loving the uber-steep yield curve that allows them to borrow money on the cheap, and then lend it back to the government at a fat yield.

Well, that’s just about over. Bernanke has signalled the beginning of the rate-hike cycle (driving up the cost of short-term borrowing) and as this historical chart of the 2year-10-year yield spread (via Waverly Advisors) indicates, the curve just can’t get any steeper. In fact if history is any guide, it’s about to collapse big time. Read more here-http://www.businessinsider.com/chart-of-the-day-2y10y-yield-spread-2010-2

Source: chartoftheday.com

-The economy is so bad that…I ordered a burger at McDonald’s and the kid behind the counter asked, “Can you afford fries with that?” Anonymous

-As we all know, the global economic crisis started neither in Greece, nor in Russia, nor in Europe. It came to us from across the ocean. Russian Prime Minister Vladimir Putin, 16 February 2010

-The Bank of England may still have to restart its asset-buying programme if the economic outlook worsens, and things are not looking good in the euro zone, Governor Mervyn King said Tuesday. Read more here-http://www.nytimes.com/reuters/2010/02/23/business/business-uk-britain-bank-qe.html?_r=3

-The Federal Deposit Insurance Corporation is bracing for a new wave of bank failures that could cost the agency many billions of dollars and further strain its finances. Read more here-

http://www.nytimes.com/2010/02/24/business/24fdic.html?ref=business

-It’s truly amazing that there are still economists out there who think we don’t need emergency interest rates. What a laugh! David Rosenberg-Gluskin/Sheff

-The dollar rally will soon end and speculators should begin to take short positions. All the good news for the dollar is out. For the moment it is the best of a bad lot. Then only real money is gold and silver.

In the future more and more people worldwide will realize that and eventually there will be a stampede into the two precious metals. America will produce a debt to GDP ratio or 95% to 100% this year. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1267024590.php or http://news.goldseek.com/InternationalForecaster/1266783816.php

-Those who were unemployed/underemployed, to little surprise, spend 36% less, on average, than those who have a job ($48 per day versus $75 per day for a 36% gap). Fully 56% of the unemployed-underemployed reported that they have enough money to cover basic necessities and that compares to 86% for the ranks of the employed.

Things are so tight for these 30 million folks that we see in the NYT that applications for federal help on heating bills (LIHEAP) have risen 15% this year (from 8.8 million households). David Rosenberg-Gluskin/Sheff-Read more here-http://www.gallup.com/poll/125960/Underemployed-Report-Spending-Less-Employed.aspx

-I believe the short-term problems in Europe are being overblown and the potential demise of the euro highly exaggerated. For those who can connect the dots however, the Greek drama throws some much needed light on the far more daunting problems unfolding within our own U.S. fiscal house. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff022410.html

-There is no doubt that on a technical level the Euro is massively oversold but on a more fundamental basis, the questions over its sustainability are not likely to subside any time soon. That is where most of the contagion risk is located when it comes to the PIGS (Portugal, Italy, Greece and Spain) and their pig-like fiscal financial picture.

As per Morgan Stanley data, 51% of Portugal’s debt ($165bln) is owned by Spanish banks. Fully 32% of Spain’s debt ($748bln) is held by German banks, and 25% of that is owned by French banks. According to Commerzbank, 60% of new Greek bond issuance in recent years was gobbled up by non-Greece European borrowers.

So, any restructuring of Eurozone debt is going to fall squarely on the region’s banks, which would likely have to take massive writeoffs. Even a move by the rating agencies to cut the debt rankings of any European country would translate immediately into rating changes for the banks as well as higher capital charges (the Economist had a good take on this a few weeks ago).

As an aside, we see today on our Bloomberg screen that Ken Rogoff (co-author of “This Time is Different” and who is not prone to hyperbole) expects ballooning deficits and public sector debts to trigger a “bunch” of sovereign defaults. David Rosenberg-Gluskin/Sheff

-Nice to see the credit crunch is over. The FDIC was a hungry beast on Friday and ate up four more regional banks, with La Jolla being a big catch at $3 billion of assets. This brings the number of U.S. banks that have failed so far this year to 20 and that compares to 13 at this same stage a year ago when practically everyone feared the world was coming to an end (but before Geithner and Bernanke declared that any bank that was thought too big to fail would not be allowed to). David Rosenberg-Gluskin/Sheff

-Goldman Sachs is among the biggest contributors in the financial industry. Over twenty years, it has given $31,462,375 to politicians that’s an average of $1,573,199 per year. Casey’s Daily Dispatch-Read more here-http://www.caseyresearch.com/displayCdd.php?id=355

-House Republicans are pushing the Obama administration to add Fannie Mae and Freddie Mac’s $1.6 trillion in outstanding debt to the federal budget in legislation to be introduced today. Representatives Scott Garrett, Spencer Bachus and other Republicans on the House Financial Services Committee will propose subjecting the companies’ unsecured debt to the $14.3 trillion public debt ceiling and accounting for their other liabilities and assets similar to federal loan programs.

“Now that they have been placed in conservatorship, the distinction between Fannie Mae and Freddie Mac being government sponsored, rather than government operated, has been eliminated,” Garrett of New Jersey said in a background memo on the bill circulated in Washington yesterday. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aqUsQss37UJc

-Home prices are already double dipping. According to Zillow.com, home prices are now deflating in 21% of the 143 markets it tracks; and the average discount amounts to 11% from the original listing price. One in five homeowners, as per the Zillow database, is under water on their mortgage in the fourth quarter.

Moreover, we also see from RealtyTrac that 2010 will be a big payback from all the government-imposed moratoria because an estimated 4.5 million foreclosure filings is slated for this year compared to 2.8 million in 2009.

Meanwhile, the Mortgage Bankers Association, to little media attention, released its Q4 data, which found that a record 15.02% of housing loans were either in foreclosure or behind on at least one payment on Q4. About 3.9 million Americans are more than 90 days behind on their payments, which is triple triple! the level of two-years ago. David Rosenberg-Gluskin/Sheff

-The Secretary of the Treasury, in coordination with the Director of the Office of Management and Budget, is required annually to submit financial statements for the U.S. government to the President and the Congress.

Since 1997, the Government Accountability Office (GAO) has been required to audit these statements. And it’s my understanding that the government has failed each and every such audit. The most recent report, covering 2008, marks the 12th year in a row in which the government’s consolidated audit statement received a judgement of “no comment” from auditors. Porter Stansberry Read more here-http://www.caseyresearch.com/displayCdd.php?id=354

-U.S. double-dip recession possible: Shiller. The U.S. housing market showed early signs of stabilization in December, but that may not mean a recovery is at hand. In fact, Yale economics professor Robert Shiller tells BNN home prices could fall further and a double-dip recession is possible. Watch video here-http://www.bnn.ca/news/15894.html

-Bernanke Says ‘Nascent’ Recovery Requires Low Rates. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aJDZb0jjJyL0&pos;=2

-Fed Won’t Lift Target in 2010, Pimco’s Clarida Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=apSZLR4rKxXE&pos;=4

-Greenspan Says Crisis ‘By Far’ Worst, Recovery Uneven. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a4lpUmEdbebw

-Yellen Says U.S. Economy Will Perform Below Potential. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aPLqIw9VZgjg

-Harvard’s Rogoff Sees Sovereign Defaults, ‘Painful’ Austerity. Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks.

Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.”

The U.S. is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets, Rogoff said in an interview after the speech. Fiscal policy won’t be curbed until soaring bond yields trigger “very painful” tax increases and spending cuts, he said.

Global scrutiny of sovereign debt has risen after budget shortfalls of countries including Greece swelled in the wake of the worst global financial meltdown since the 1930s. The U.S. is facing an unprecedented $1.6 trillion budget deficit in the year ending Sept. 30, the government has forecast.

“Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff, who co-wrote a history of financial crises published in 2009. It would be better “to keep monetary policy soft and start gradually tightening fiscal policy even if it meant some inflation.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aI8fxn.J_Fs4&pos;=5

-Economist Rogoff Who Predicted The U.S. Crisis And A European One, Now Predicts A China Collapse. Read more here-http://www.businessinsider.com/economist-rogoff-who-predicted-the-us-crisis-and-predicts-a-european-one-now-predicts-a-china-collapse-2010-2 or http://www.bloomberg.com/apps/news?pid=20601087&sid;=aMfBJ1pwuKgw&pos;=4

-Record U.S. Debt Hampers Fiscal, Monetary Policies: Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aJdsMXW4DFrE

-U.S. Stocks to Fall, Faber Says; Wood Doubts Recovery. U.S. stocks will probably fall this year, according to investor Marc Faber, and the country’s economy won’t face a “normal” recovery as job cuts dent consumer spending, said CLSA Asia-Pacific Markets’ Christopher Wood. Read more here- http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5O3DHxpH2II

-Matt Taibbi-Wall Street’s Bailout Hustle. Goldman Sachs and other big banks aren’t just pocketing the trillions we gave them to rescue the economy they’re re-creating the conditions for another crash. Read more here-http://www.rollingstone.com/politics/story/32255149/wall_streets_bailout_hustle/print

-Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ax3yON_uNe7I

-SEC Votes 3-2 to Curb Short-Sale, Disappointing Goldman Sachs. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aLZZMYHxmtDw

-Millions of Unemployed Face Years Without Jobs. Read more here-http://www.nytimes.com/2010/02/21/business/economy/21unemployed.html

-States had to borrow $31B for jobless pay. South Carolina and other cash-strapped states borrowed a total of about $31 billion from the federal government over the last two years to provide their unemployed workers with benefit checks, and now as the country climbs out of recession the states must find a way to pay it back.

John Rainey, South Carolina’s chief economic adviser, said the state needs to take calculated steps to repay its $800 million debt while some others hold out hope that the federal government will forgive the loans.

Rainey said the federal government should have no place in erasing the debt that will largely be the responsibility of the business community to pay back. Read more here-http://www.postandcourier.com/news/2010/feb/22/states-had-to-borrow-31b-for-jobless-pay/

-The number of Americans filing first-time claims for unemployment insurance unexpectedly increased last week, a sign that the economic recovery will be uneven as the labor market struggles to rebound. Initial jobless applications rose by 22,000 to 496,000 in the week ended Feb. 20, the highest level in three months, Labor Department figures showed today in Washington.

The total number of people receiving unemployment insurance gained and the four- week moving average of weekly claims jumped close to a three- month high. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a94m9InQxJjM&pos;=3

-US Jan mass layoffs edge up on weak manufacturing. Read more here-http://www.reuters.com/article/idUSN239866720100223?type=marketsNews

-Ferguson: We’re One Downgrade Away From The End Of American Empire. Niall Ferguson is candidly calling time on the American Empire, or at least pointing to the combination of factors that will soon lead to its demise, in the latest issue of Foreign Affairs.

Ferguson, who has become one of the leading intellectuals of the deficit hawk camp, theorizes that empires don’t decline in the slow, cyclical process long assumed. Instead it is dramatic events that push them over the edge to oblivion. Read more here-http://www.businessinsider.com/ferguson-were-one-write-down-away-from-the-end-of-american-empire-2010-2

-California One Step Closer To Insolvency After State Cancels $2 Billion General Obligation Bond Sale. Read more here-http://www.zerohedge.com/article/california-one-step-closer-insolvency-after-state-cancels-2-billion-general-obligation-bond-

-Doomsday is here for the state of Illinois. To become solvent, the state must enact the largest tax-increase package in Illinois history, whack another $2 billion from already starved government programs and wrest major financial concessions from the state’s unionized work force, a nonpartisan government watchdog contends. Read more here-http://www.suntimes.com/news/maxedout/2062132,CST-NWS-doomsday22.article

-Citigroup Warns Customers It May Refuse To Allow Withdrawals. The image of banks locking their doors to keep customers from making withdrawals during a bank run is what immediately came to mind when we heard that Citigroup was telling customers it has the right to prevent any withdrawals from checking accounts for seven days.

“Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change,” Citigroup said on statements received by customers all over the country. Read more here-

http://www.businessinsider.com/citigroup-warns-customers-it-may-refuse-to-allow-withdrawals-2010-2

-Slump in Tax Revenue Creates State of Siege. U.S. states face a “lost decade,” says Raymond Scheppach, head of the National Governors Association. The problem is a broken fiscal model exposed by the recession, and likely to extend the pain beyond the downturn’s official conclusion. Read more here-http://online.wsj.com/article/SB10001424052748703315004575073403314799286.html?mod=WSJ_Markets_section_Heard

-Muni Defaults May Rise Amid ‘Unprecedented Stress’ on Finances. Defaults by issuers of municipal bonds will rise as the worst recession since the 1930s leaves governments facing “unprecedented stress” on their finances into next year, according to Moody’s Investors Service. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a50udaSCFULE

-How long can the U.S. dollar defy gravity? Read more here-http://www.reuters.com/article/idUSTRE61M3MI20100223

-South Carolina Rep. Mike Pitts has introduced legislation that would mandate that gold and silver coins replace federal currency as legal tender in his state. Read more here-http://www.cbsnews.com/blogs/2010/02/17/politics/politicalhotsheet/entry6217403.shtml

-A Madoff in-law has filed for a name change, hoping to rid herself of the notorious moniker that has become synonymous with swindle. Stephanie Madoff, daughter-in-law of the imprisoned Bernard Madoff, filed for a name change with the New York Supreme Court in Manhattan, citing death threats against her family. Read more here-http://money.cnn.com/2010/02/25/news/companies/madoff_name_change/index.htm

-Swine Flu Protection Added to Seasonal Flu Vaccine. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a0uX494vslsk

-It’s a bird, it’s a plane it’s a $1 million comic book. Since he started selling comic books at age 16, Vincent Zurzolo had only dreamt of selling a million-dollar comic book. Monday was his lucky day. That was the day that Superman hit the jackpot.

“It is the single most important event in comic book history,” said Zurzolo, who co-owns auction site ComicConnect.com with founder Stephen Fishler. Zurzolo and Fishler posted a rare copy of Action Comics #1 on their site Monday morning. It was the issue where the Man of Steel made his debut in 1938. They were selling it on behalf of an unnamed collector. Within one minute, Zurzolo said, another unnamed collector bought it for $1 million.

That price is more than three times the previous record, set last year by a lesser-quality version of Action Comics #1, which ComicConnect sold for $317,200. Monday’s $1 million sale was for a very rare edition, because it was in much better condition. Only about 100 copies of Action Comics #1 are known to exist, and of those, only two are in such good shape, Zurzolo said. Read more here-http://money.cnn.com/2010/02/22/news/companies/superman_comic/index.htm

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

-“I think diamonds could end up being thought of like they once were an emergency escape mechanism. The Jews sewed them into their hems and used them for safe passage. We’re all worried about the Banks and how we would ‘get out of Dodge’ if we had to.” Trend expert Faith Popcorn

-Bear Stearns and Lehman Brothers have disappeared and the Big Three and Citigroup hover on the edge of vanishing a diamond is forever. From Adam Hanft article De Beers: Diamonds Are a Recession’s Best Friend

-If more people bought diamonds instead of credit-default swaps, we’d be just fine now. From Adam Hanft article De Beers: Diamonds Are a Recession’s Best Friend

-Diamonds Hold Allure as Gem of an Investment. Despite the financial meltdown, luxury assets such as wine and art are drawing strong interest from rich buyers, some looking at the goods as investments. Now, promoters of diamonds are hoping to add the precious stones to the investment mix.

The ‘Vivid Pink’ sold in Hong Kong for $10.8 million. Record sales at recent auctions, set by Asian bidders, is spurring talk of a surge in high-end diamond demand. Several investment funds focusing solely on diamonds have launched or are in the works and are hoping to take advantage.

Asian bidders, especially from mainland China, represent a growing presence at auctions, says Patti Wong, chairwoman of Sotheby’s Asia. At a Sotheby’s auction in New York City earlier this month, five of the top 10 buyers were Asian.

The most expensive item a 30.48 carat oval diamond went to a buyer from mainland China for approximately $4.11 million. At a Christie’s auction in Hong Kong this month, a colored diamond, called “The Vivid Pink,” sold for $10.8 million, setting a record for a gemstone of its kind.

It’s unclear if the buyers were after the rocks for investment purposes or simply to enjoy. But proponents are hoping to turn diamonds traditionally seen as ornaments into wealth-accumulating vehicles. Read more here-http://online.wsj.com/article/SB126099490068094349.html

20 U.S. BANKS HAVE FAILED IN 2010-BANKS AT RISK OF GOING BUST TOPS 700

-Banks in Calif., Ill., Fla., Texas are shut down. Regulators shut banks in Calif., Ill., Fla., Texas, putting US bank failures at 20 for year. Read more here-http://finance.yahoo.com/news/Banks-in-Calif-Ill-Fla-Texas-apf-1195100471.html?x=0&.v=12 or http://finance.yahoo.com/news/Banks-in-Calif-Ill-Fla-Texas-apf-1195100471.html?x=0&.v=12

-Banks at risk of going bust tops 700. More than 700 banks, or nearly one out of every 11, are at risk of going under, according to a government report published Tuesday. The Federal Deposit Insurance Corp. said that the number of banks on its so-called “problem list” climbed to 702, its highest level since June 1993.

The number of banks under scrutiny by regulators has moved steadily higher since the recession began. Just 76 financial institutions were on the list in the fourth quarter of 2007. Banks that end up on the problem list are considered the most likely to fail because of difficulties with their finances, operations or management. Read more here-http://money.cnn.com/2010/02/23/news/companies/fdic_list/index.htm

-U.S. ‘Problem’ Banks Soar 27%, Fund Deficit Widens, FDIC Says. U.S. “problem” banks climbed to the highest level in 17 years, signaling failures may accelerate in 2010, the Federal Deposit Insurance Corp. said. Bank lending had the biggest retreat in more than six decades.

The FDIC included 702 banks with $402.8 billion in assets on the confidential list as of Dec. 31, a 27 percent increase from 552 banks with $345.9 billion in assets at the end of the third quarter, the regulator said today in a quarterly report. “Problem” banks account for 8.7 percent of all U.S. lenders.

“The growth in the number and assets of institutions on the problem list points to a likely rise in the number of failures,” FDIC Chairman Sheila Bair said today at a Washington news conference. “Both the problem list and bank failures tend to lag behind economic recovery.”

Regulators are closing banks at the fastest pace since 1992, seizing 20 lenders through seven weeks this year after shutting 140 institutions in 2009 amid loan losses stemming from the collapse of the home and commercial mortgage market. A total of 28 banks failed in 2007 and 2008 combined.

“The pace is going to pick up this year and is going to exceed where we were last year,” Bair told reporters. Banks showed “incremental” improvement in the fourth quarter, Bair said. Overall profit was $914 million, compared with a $38 billion loss in the year-earlier period. Net charge offs slowed for a third consecutive quarter, the agency said.

“It’s not that this was a strong quarter,” Bair said. “It’s simply that everything was so bad last year.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aoYm3JlMWLkY&pos;=3

-Sick banks may mean feeble recovery. The rot in the U.S. banking system threatens to warp an already weak economic recovery. The dynamics that made 2009 such a downer for banks are still in place, the Federal Deposit Insurance Corp.’s quarterly banking review showed Tuesday.

FDIC chief Sheila Bair said she expects bank failures in 2010 to surpass last year’s 140, as institutions still struggling with mortgage losses gird for a massive commercial real estate bust.Read more here-http://money.cnn.com/2010/02/23/news/economy/banks.sick.fortune/index.htm

-Banker sees U.S. failed bank tally hitting 1,000. About 1,000 U.S. banks could fail as a result of the recent banking crisis that saddled financial institutions with large portfolios of bad loans, a leading investment banking executive said on Thursday.

James Dunne, senior managing principal of Sandler O’Neill, said 300 to 400 banks could be seized this year, especially as institutions start to deal with deteriorating commercial real estate loans.

“This is going to be a very slow recovery,” Dunne said in an interview with Reuters.

Regulators have seized 185 banks since January 2008. The Federal Deposit Insurance Corp has said the pace of failures is expected to peak this year. The agency said earlier this week that its “problem” bank list jumped 27 percent during the fourth quarter to 702.

Historically, less than 15 percent of the banks on that list end up failing. Read more here-http://www.reuters.com/article/idUSTRE61O6J120100225

MEREDITH WHITNEY-INVESTORS DONT REALIZE WHATS ABOUT TO HIT THE BANKING SECTOR

-Meredith Whitney spoke with Maria Bartiromo on the floor of the NYSE. She predicts big-cap banks will be down some 15%, because investors still aren’t pricing in the risks ahead. Here are some things that will hit the sector: Populism, Government taking away the punchbowl, The end of the re-equitization cycle (all those fees!). Watch more here-http://www.businessinsider.com/meredith-whitney-investors-dont-realize-whats-about-to-hit-the-banking-sector-2010-2

CHARLIE MUNGER-ITS OVER FOR THE U.S. ECONOMY

-A parable about how one nation came to financial ruin. As it worked out, the politicians ignored the Good Father one more time, and the Basicland banks were allowed to open bucket shops and to finance the purchase and carry of real securities with extreme financial leverage.

A couple of economic messes followed, during which every constituency tried to avoid hardship by deflecting it to others. Much counterproductive governmental action was taken, and the country’s credit was reduced to tatters. Basicland is now under new management, using a new governmental system. It also has a new nickname: Sorrowland. Read more here-http://www.slate.com/id/2245328/pagenum/all/#p2 or http://www.therightperspective.org/2010/02/24/its-over-for-us-economy-buffett-partner/

JAMES TURK-HYPERINFLATION WATCH

-The US Treasury has taken another step on the road leading to hyperinflation. It announced that it will borrow $200 billion and leave this money on deposit with the Federal Reserve. The announcement was made with bald disinformation aimed at camouflaging the true impact of this step.

The Wall Street Journal dutifully reported that taking this step “will make it easier for the Fed to raise interest rates when the time comes.” This red herring is obviously intended to make the Treasury’s overt dollar debasement appear reasonable. The WSJ statement itself is nonsensical. How can raising interest rates be made “easier” than it already is? All the Fed needs to do is pull the trigger and interest rates go up.

The Fed of course is lacking the will to do that. It may also be lacking the insight that the system is broken, but I doubt that point. The Fed must know the system is broken, but because it is a captive of vested interests who benefit enormously from the situation at present (anyone mention banker bonuses recently?), it works solely to keep the system from falling apart.

So the Fed is fanning inflation by creating more dollar currency, and easy money always leads to inflation. The US is now so far down the inflation road, having travelled it for decades, that it is hurtling pedal-to-the-metal toward hyperinflation. Read more here-http://www.fgmr.com/us-treasury-takes-another-step-on-the-road-to-hyperinflation.html

CONSUMER CONFIDENCE AT RECESSION LEVELS

-Confidence among U.S. consumers fell in February to the lowest level in 10 months, a sign that concern about job prospects may hold back the spending needed to sustain the recovery. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aZu.flR6PChM&pos;=1

BRITAIN AT RISK OF WORSE DEFICIT THAN GREECE

-Britain is at risk of a Government deficit crisis worse than that of Greece, sparking serious fears over the economic stability of the country. Economists said that the scale of the shortfall in the budget could this year mount to above £180 billion higher than even the Chancellor’s forecast of a record £178 billion.

Such a deficit would, at 12.8 per cent of British gross domestic product, be even greater than the deficit faced in Greece, which is facing a full-scale fiscal crisis and may need to be bailed out by fellow euro nations or the International Monetary Fund. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7266097/Britain-at-risk-of-worse-deficit-crisis-than-Greece.html

-Jim Rogers: The U.K. Will Lose Its AAA-Rating THIS YEAR For Sure. Read more here-http://www.businessinsider.com/indias-biggest-threat-water-2010-2

ROGERS-CHINA WILL CONTINUE TO SELL U.S. TREASURIES

-China’s move to reduce its holding of US debt is likely to continue in the long term while the “euro scare” may last a while, legendary investor Jim Rogers told CNBC.com Wednesday. On Tuesday, government figures showed that foreign demand for Treasurys fell by the largest amount on record in December.

China cut its holdings by $34.2 billion to $755.4 billion, losing the top spot in terms of foreign ownership of Treasuries to Japan. Japan also cut exposure, cutting ownership of Treasurys by $11.5 billion to $768.8 billion, a much slower pace than China.

“I am surprised China has not dropped more,” Rogers told CNBC.com. Asked if the US should be worried about this trend, Rogers, who does not hold US Treasurys, said: “Of course. The US should be worried about everyone lightening up not just China.” Read more here-http://www.cnbc.com/id/35438488

-Concerns grow over China’s sale of US bonds. Evidence is mounting that Chinese sales of US Treasury bonds over recent months are intended as a warning shot to Washington over escalating political disputes rather than being part of a routine portfolio shift as thought at first. Read more here-http://www.telegraph.co.uk/finance/currency/7300770/Concerns-grow-over-Chinas-sale-of-US-bonds.html

REAL ESTATE-FORECLOSURES-MORTGAGES

-Home Prices in U.S. Drop 1.2%, Smallest Decline in Two Years. U.S. home prices fell 1.2 percent in the fourth quarter from a year earlier, the smallest loss in two years, as a federal tax credit for homebuyers boosted demand.

Prices were down 0.1 percent from the third quarter, the Federal Housing Finance Agency said today in a report. The year- over-year drop was the smallest since a 1.1 percent decline in 2007’s fourth quarter, the Washington-based agency said.

Government stimulus programs including the homebuyer tax credit and a Federal Reserve program to buy mortgage-backed bonds lifted the real estate market in the closing months of 2009. A sustained recovery in housing faces hurdles that include mounting foreclosures and a weak labor market, said Thomas Lawler, a former economist with Fannie Mae who now is an independent housing consultant in Leesburg, Virginia.

“The government programs have helped to stabilize housing, but the market is still unbelievably fragile,” Lawler said in an interview. “Nobody knows what’s going to happen to all those properties in the foreclosure process.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aAyeLAKZ9DuU&pos;=7

-Home Prices in 20 U.S. Cities Rose for Seventh Month. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=azNrZPIn0GXg or http://money.cnn.com/2010/02/23/real_estate/2009_Case-Shiller_report/index.htm

-U.S. New-Home Sales Unexpectedly Fell to Record Low. Sales of new homes in the U.S. unexpectedly fell in January to the lowest level on record, a sign that an extension of a government tax credit may not be enough to rekindle demand.

Purchases declined 11 percent to an annual pace of 309,000, figures from the Commerce Department showed today in Washington. The median sales price dropped 2.4 percent from January 2009 and the supply of unsold homes increased.

The report underscores Federal Reserve Chairman Ben S. Bernanke’s comments today that the economy is in a “nascent” recovery still in need of low interest rates. Homebuilders face competition from foreclosed properties that have driven down prices at the same time companies are reluctant to create jobs.

“The foreclosure flow is robbing demand from the new-homes market, and that process seems to be strengthening,” said Julia Coronado, a senior economist at BNP Paribas in New York. “The new-homes market just can’t get off the floor. If new homes suffer, construction suffers and jobs suffer.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=acWCYvHlWvs8&pos;=1

-U.S. Mortgage Foreclosures Rose in Fourth Quarter. A record number of Americans were in danger of losing their homes in the fourth quarter, even as new delinquencies declined, the Mortgage Bankers Association said.

Loans in foreclosure rose to 4.58 percent of all mortgages, while those more than 90 days overdue the point at which lenders usually begin the process of seizing a property climbed to 5.09 percent, the Washington-based trade group said in a report today.

“We have a hard-core block of unemployed who have been out of jobs for a long time, and that’s keeping the long-term delinquencies high,” Jay Brinkmann, the association’s chief economist, said in an interview. Read more here-http://www.bloomberg.com/apps/news?pid=20601214&sid;=aHLH3zOdh4ro

-Nearly 25% of all mortgages are underwater. More bad news on the housing bust front: Nearly 25% of all mortgage borrowers were underwater, meaning they owe more on their loans than their homes are worth.

First American CoreLogic, the research firm that monitors housing equity, reported Tuesday that 11.3 million homeowners or 24% of all homes with mortgages were underwater as of the end of 2009. That’s up from 23% and 10.7 million borrowers three month earlier.

Nevada was the state with the worst record at 70% of all mortgaged properties underwater. That was followed by Arizona (51%), Florida (48%), Michigan (39%) and California (35%). Read more here-http://money.cnn.com/2010/02/23/real_estate/underwater_rates_rise/index.htm

-If bankers get their way, Floridians facing foreclosure could be kicked out of their homes in as little as three months. Read more here-http://www.tampabay.com/news/business/realestate/florida-bankers-move-to-dramatically-speed-up-the-foreclosure-process/1069024

-Commercial Mortgage Default Rate in U.S. More Than Doubles. The default rate for commercial property mortgages held by U.S. banks more than doubled in the fourth quarter and may reach a peak of 5.4 percent at the end of next year, according to Real Capital Analytics Inc.

The default rate for loans on office, retail, hotel and industrial properties surged to 3.8 percent from 1.6 percent a year earlier, the New York-based real estate research firm said yesterday in a report. The default rate for loans on apartment buildings climbed to 4.4 percent from 1.8 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aj9Yttz_UYxg

-More generations living under same roof. More generations are living under the same roof and the trend will deepen as families grappling with near double-digit unemployment share expenses, a study showed on Monday. Read more here-http://www.reuters.com/article/idUSTRE61L1WR20100222

GEOPOLITICAL NEWS

-Iran to ‘hide nuclear plants inside mountains’. Iran said on Monday it is considering plans to build two new uranium enrichment plants concealed inside mountains to avert air strikes, drawing condemnation from the United States.

The announcement from Iran’s atomic chief Ali Akbar Salehi came soon after top US General David Petraeus warned that Washington would now pursue a “pressure track” against Iran to thwart its galloping nuclear programme. Read more here-http://news.yahoo.com/s/afp/20100222/wl_mideast_afp/irannuclearpolitics

-Israel unveils new drone fleet that can reach Iran. Israel’s air force on Sunday introduced a fleet of huge pilotless planes that can remain in the air for a full day and could fly as far as the Persian Gulf, putting rival Iran within its range. Read more here-http://apnews.myway.com/article/20100221/D9E0PR5G0.html

-Russia warns West against “crippling” Iran sanctions. Read more here-http://news.yahoo.com/s/nm/20100224/wl_nm/us_nuclear_iran_russia

© 2010, Worldwide Precious Metals.
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The Goldbugg Report – March 02, 2010
Posted by Worldwide Precious Metals on Tuesday, March 2, 2010

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