Newsroom

The Goldbugg Report – March 23, 2010

March 23, 2010

The Week in Review

Through a series of maneuverings this week, it appears that the Democrat controlled congress will be successful in ramming through the “Obamacare” health care reform. The bill is expected to pass this coming Sunday despite opposition by the Republican members of Congress.

In a poll released Wednesday by the Wall Street Journal and NBC only 17% said they approved of the job Congress is doing. A full 50% said they would vote to defeat every single member of Congress, including their own representative.

Weekly jobless claims were down for the third week in a row. Obama signed the Jobs Bill on Thursday. The bill provides tax breaks for businesses who hire those that have been unemployed. If the health care reform bill passes this weekend, those tax breaks may disappear in a slew of increased taxes and costs as businesses are forced to adjust to the new rules and regulations in the bill.

Marc Faber, author of the Gloom, Boom and Doom Report said on Thursday “I think we already have now a gold standard…created by the market place. We have the (exchange traded funds) that have proliferated and we have more and more physical buying of gold.”

In the continuing saga that is the Greece debt debacle, Greece Prime Minister George Papandreou said this week that if the Eurozone does not come through with a bailout that he would have to seek help from the International Monetary Fund in April. Chancellor Angela Merkel, of Germany went so far as to suggest changing EU legislation that currently restricts members from leaving the EU so that countries that “do not fulfill the conditions again and again in the long-term” could be “ejected” from the Eurozone.

US crude oil prices stayed above $82 a barrel for most of the week, buoyed up by demand forecasts by the International Energy Agency. Late evening rumors on Thursday that the Fed may be considering raising the discount rate again (they last raised it back on February 18) sent prices back down towards $80 on Friday.

The flare up of Greece’s debt problems once again drove the euro down. Both the yen and the dollar moved up on the news.

On Tuesday, the Fed once again reiterated their pledge to keep rates low for “an extended period”.

Applications for US home loans were down last week in spite of mortgage rates that are at their lowest in more than three months. The federal tax credit for home buyers

will soon be expiring and the fact that housing demand has not increased as a result of the extension of that credit is concerning to those who are watching the beleaguered housing market. Meredith Whitney said “The housing market surely will double dip.” Here comment appears to be based on the fact that loan modifications, which have kept some houses off the market, are failing at an increasing rate due to continuing unemployment problems. When the smoke clears, those failed loan modifications may result in a glut of supply on the housing market, once again driving prices down.

As we discussed in our March 12 memo, a judge in Milan leveled charges of fraud against four international banks and ordered 11 bankers and two former municipal employees to stand trial. The four banks involved are Deutsche Bank, Depfa, UBS and JPMorgan. As we’ve discussed many times in the past, JPMorgan has long been accused of manipulating the silver market by holding massively concentrated short positions on the Comex that cannot possibly be covered. At the upcoming CFTC meeting to discuss position limits in the precious metals market on March 25^th, Bill Murphy, chairman of the Gold Anti-Trust Action Committee has been invited to speak regarding this very issue. Ted Butler, who has been railing against this market manipulation for close to 25 years, has been asked by the CFTC to submit his evidence and work with them directly regarding position limits. Hopefully all of this activity means that the time of precious metals market manipulation by a handful of banks is coming to an end.

Friday to Friday Close

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

Volatility should be expected to continue. Gold, despite recent gains by the dollar, has maintained its price above $1000 an ounce. Gold has also recently hit record highs in other currencies, specifically the euro and British pound. Sovereign debt concerns across the world have investors spooked and it would appear that those spooked investors are turning to precious metals to alleviate their concerns. Bullman Investment Management Managing Director Nick Bullman said: “Long-term investors are beginning to realize that gold is the only thing that is going to protect you from governments who decide that the way out of this problem is to borrow more.” Increasing demand for a limited resource usually means only one thing, an explosive increase in prices. Remember, the key to profitability through the ownership of physical precious metals is to actually own the physical product 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

-Central Bank Gold Holdings Expand at Fastest Pace Since 1964. Central banks added the most gold to their reserves since 1964 last year amid the longest rally in bullion prices in at least nine decades, data compiled by the World Gold Council show.

Combined holdings rose 425.4 metric tons to 30,116.9 tons, an increase worth $13.3 billion at last year’s average price, according to the data. India, Russia and China said last year they added to reserves. The expansion was the first since 1988, the data from the London-based council show.

Central banks, holding about 18 percent of all gold ever mined, are expanding their holdings for the first time in a generation as investors in exchange-traded funds amass bullion as an alternative to currencies. Holdings in the SPDR Gold Trust, the biggest ETF backed by the metal, are at 1,115.5 tons, more than the holdings of Switzerland.

“There’s clearly been a renaissance of gold in central bankers’ minds,” said Nick Moore, an analyst at Royal Bank of Scotland Group Plc in London. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.”

Official reserves of central banks and governments may expand by another 187 to 218 tons this year, CPM Group forecast last month. The council’s data also includes the holdings of the International Monetary Fund, European Central Bank and other international and regional bodies.

Gold climbed 24 percent last year, reaching a record $1,226.56 an ounce in December. World holdings rose 527 tons in 1964 and climbed 832.7 tons the year before that, according to the London-based industry group.

“Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar,” Dennis Gartman, a Suffolk, Virginia-based economist and hedge-fund manager, said in his Gartman Letter today. “The trend shall continue months, if not years, into the future.” Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=amBRPzwyB9SY

-WGC sees gold demand recovering in 2010. Read more here-http://www.reuters.com/article/idAFLDE62H14E20100318?rpc=44

-America, The King Of Gold, China, The Pauper. Read more here-http://www.businessinsider.com/america-the-king-of-gold-china-the-pauper-2010-3

-McEwen still positive on $2,000 gold this year and $5,000 ahead. In an interview at last week’s PDAC, Rob McEwen restated his forecast that gold will hit $2,000 this year and $5,000 longer term. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100972&sn;=Detail&pid;=1

-Barratt Says Gold Price May Surpass $1,200 by Year End. Read and watch more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aWyb2npP0.FQ

-$1,000 gold now more floor than ceiling. The price that was once an invisible ceiling, is now more likely to be the level at which a fall in the gold price bottoms out. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=100933&sn;=Detail&pid;=1

-Marc Faber: We Have a New Gold Standard. The markets have created their own gold standard because of uncertainties regarding other asset classes, Marc Faber, author of “The Gloom, Boom and Doom Report,” told CNBC Thursday.

“I think we already have now a gold standard created by the market place,” Faber told “Squawk Box Europe.” “We have the (exchange traded funds) that have proliferated and we have more and more physical buying of gold,” he said. Read and watch more here-http://www.cnbc.com/id/35912043

-Gold’s $1140 Hurdle. Gold has been stopped time and again in its decade-long bull market by recurring hurdles that appear at an ever-higher price. During these encounters, several things happen, most notable of which is the growing bearish sentiment in the face of a seemingly insurmountable price barrier. We are seeing that pattern repeat with gold’s inability to climb above $1140.

It is curious that this pattern repeats. It suggests that few learn from it, and more to the point, that somehow the fundamental outlook for gold has changed each time one of these barriers is hit. It hasn’t. The same factors driving gold higher all decade continue to drive it, mainly the ongoing debasement of national currencies by governments and central banks.

It is also worth noting that the same factors stopping gold at these recurring hurdles, or to put it into technical terms, “resistance levels”, have not changed. It is central bank intervention aimed at capping the gold price. At each of these key resistance points, central banks succeed for awhile. But eventually the demand for physical gold overpowers their ability or willingness to deliver gold at the then prevailing price.

Consequently, central banks retreat and ‘circle the wagons’ at a higher price, which is a phrase I have used as far back as 2001 to describe the actions taken by the gold cartel. Despite the formidable resistance central banks have displayed in recent months above $1140, I expect that they will be forced to retreat again, as indicated by the following chart.

Gold is moving higher from a huge base, illustrated by the “V” pattern in purple lines. Note also the “head & shoulders” pattern within this base formed from 2007-to-2009, the importance of which I highlighted in April 2009. After the break-out from the base, gold jumped all the way to $1200, but has since been correcting.

Importantly, note how strong gold has been throughout this correction. The price did not retreat to the $1000 neckline of the H&S; pattern or even to its 200-day moving average. This strength, though subtle, is very significant because it signals the power of the underlying demand for physical metal. It is this demand that I expect will soon send gold hurdling above $1140 and to overhead resistance around $1200. James Turk-Read more here-http://www.fgmr.com/golds-usd1140-hurdle.html

-Further currency woes bode well for gold. The yellow metal is relooking at all time highs in euros but, continues to track largely sideways in dollar terms. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page31?oid=100989&sn;=Detail&pid;=31

-The evolution of gold. Record highs in euro and sterling terms are indicative of the yellow metal’s broadening appeal as insurance. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=101009&sn;=Detail&pid;=1

-Gold is Money. Gold is money because it cannot be created out of thin air by government decree. Unlike bonds, gold does not represent someone else’s liability and, unlike stocks, gold does not rely on someone else’s promise of performance. Gold is money because, unlike currencies, impatient monetary policymakers cannot change its value.

The rising gold prices we have experienced for the last eight years do not signal a bull market in precious metals, but rather a vote of decreasing confidence in the future value of paper currencies. Currency-denominated financial assets are a disaster waiting to happen. The current economic rebound is a mirage, being entirely dependent on something artificial and unsustainable: massive government spending.

A new crisis is building out of unprecedented fiscal and monetary mismanagement. Fortunately, smart investors can protect their wealth from the coming storm. The true level of risk has not been priced into the markets. The time to shelter your wealth from the storm is now. And there is no safer investment on earth than bullion, because bullion is and always will be money. Forty years ago it took 66 ounces of gold to buy a compact car.

Today it takes only 14 ounces. If you had put your money in gold instead of dollars, the same car would actually be 79 percent cheaper, because gold keeps its value. Houses, stocks and virtually every other asset on earth would also be cheaper if bought with physical gold. The more investors learn about bullion, the better for their portfolios.

If you are already a bullion investor, now is the time to add to your portfolio. If you are new to investing in bullion, now is the time to start dollar-cost-averaging into bullion. I encourage investors to learn as much as they can about bullion and about the markets in general. Nick Barisheff-Read more here-http://news.goldseek.com/GoldSeek/1268756265.php

-The bottom line is the US Mint’s latest bullion-coin sales data reveals very strong American retail investment demand for physical gold and physical silver. High sustained gold Eagle and silver Eagle production shows physical demand in 2009 was the highest yet seen by far in this secular bull.

The ranks of gold and silver investors are growing as news of their bulls spreads, which is a very bullish omen. More investors drive up prices which entice in still more investors, creating a self-feeding circle. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton031210.html

-Gold production in South Africa fell 5.8 percent in 2009 from a year earlier, making the nation the fourth-biggest producer after China, Australia and the U.S., an industry body said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aodBnmyGa8HA

-Jim Rickards talks to King World News about China’s plans for gold. Listen here-http://www.gata.org/node/8424

-King World News interviews Jim Rogers on gold and commodities. Listen here-http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/3/13_Jim_Rogers.html

-Rob Kirby: Smoke, mirrors, SDRs, and gold why central banks cannot tell the truth. Read more here-http://www.gata.org/node/8439

-Gold miners bullish; hedges out of favor. Read more here-http://in.reuters.com/article/businessNews/idINIndia-46911920100315

-Gold Global Hedge Book down to just 236 tonnes. At just under five weeks’ world mine production the global hedge book is far cry from its peak of 2,064 tonnes at its peak in 2000. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=101003&sn;=Detail&pid;=1

-Eric Sprott commentary, It’s Déjà Voodoo Economics All Over Again. Read more here-http://www.sprott.com/Docs/MarketsataGlance/03_10%20Deja%20Voodoo%20Economics.pdf

-Murray Pollitt commentary, Bananaland. Read more here-http://www.gata.org/node/8431

-David Ranson: Who ‘owns’ the bullion in a precious metal ETF? Read more here-http://www.gata.org/node/8433

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,400 the silver price would be $17.50

Gold to silver ratio at 70 to 1 with gold at $1,400 the silver price would be $20.00

Gold to silver ratio at 60 to 1 with gold at $1,400 the silver price would be $23.33

Gold to silver ratio at 50 to 1 with gold at $1,400 the silver price would be $28.00

Gold to silver ratio at 40 to 1 with gold at $1,400 the silver price would be $35.00

Gold to silver ratio at 30 to 1 with gold at $1,400 the silver price would be $46.67

Gold to silver ratio at 20 to 1 with gold at $1,400 the silver price would be $70.00

Gold to silver ratio at 15 to 1 with gold at $1,400 the silver price would be $93.33

-Silver ‘Struggles’ at $17.63, Barclays Says: Technical Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=afxIllCJwhd8

-Idaho Bill Permits State Taxes Be Paid With Silver. Idaho lawmakers are backing a plan that would allow state tax bills to be paid down with silver medallions instead of cash. Read more here-http://www.thestreet.com/story/10703026/1/idaho-bill-permits-state-taxes-be-paid-with-silver.html

-Ted Butler silver commentary. Read more here-http://www.gata.org/node/8422

-Ted Butler: It’s the message, not the messenger. Read more here-http://www.gata.org/node/8440

-Morgan not building shorts in silver, Butler tells King World News. Listen here-http://www.gata.org/node/8423

-Got Gold Report COMEX Commercials Halt Silver Advance. Read more here-http://news.silverseek.com/SilverSeek/1268838249.php

-Record demand pushes US Mint silver coin sales up over 40% so far this year. Silver sales hit 3.59 million ounces in January, a record in the history of the Mint’s bullion programme. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=100096&sn;=Detail&pid;=32

-Jon Matonis: Hunt Brothers demanded physical delivery too. Read more here-http://www.gata.org/node/8432

-CFTC invites GATA to speak at March 25 hearing on metals trading. Read more here-http://www.gata.org/node/8427

-GATA Chairman Murphy’s planned testimony to CFTC. Read more here-http://www.gata.org/node/8441

-Peter Grandich: Time to support GATA financially. Read more here-http://www.gata.org/node/8435

-Change needed as Argentina coin shortage grows. The Argentina coin shortage is growing as inflation makes a coin’s metal worth more than its face value. Read more here-http://www.csmonitor.com/World/Global-News/2010/0315/Change-needed-as-Argentina-coin-shortage-grows

CHARTS OF THE WEEK-QUOTES-QUICK HITS

-Chart of the week: How The Fed Backed Itself Into A Corner, And Is Doomed To Pumping Cheap Money Forever. Foreign governments are finally slowing down their purchases of US treasuries, but it’s okay because banks are well-known to be putting their money into treasuries, rather than loans. That’s what the chart below shows.

But as David Goldman brilliantly explains, it also means the Federal Reserve has backed itself into a corner: Most of this reflects use of the carry trade by foreign banks, or hedge funds, who are doing exactly what the American banks are doing: borrowing at 0.25% from central banks and lending it back to the US government at 1% or 2%, depending how far out the curve they go.

The demand isn’t not coming from the oil exporters, who appear to be net sellers. On a geographic basis, the main buyers are “United Kingdom” and the “Caribbean,” that is, banks and hedge funds.

Raise rates and the carry trade comes crashing down. And so does the Treasury market and the mortgage market and the US economy. The Fed is stuck with loose money just as the Bank of Japan was during the 1990s, and for the same reasons. Read more here-http://www.businessinsider.com/chart-of-the-day-securities-vs-commercial-and-industrial-loans-2010-3

Source: chartoftheday.com

Today’s chart illustrates how the recent rise in earnings has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive.

From 1936 into the early 1990s, the PE ratio tended to peak in the low 20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s), surged even higher during the dot-com bust (early 2000s), and spiked to nosebleed levels during the financial crisis (late 2000s).

Currently, with 99% of US corporations having reported for Q4 2009, the PE ratio stands at 22 which is at the high end of a range that existed from the mid-1930s up until the early 1990s. Read more here-http://www.chartoftheday.com/20100312.htm?T

Source: chartoftheday.com

-U.S. Debt Crisis, National Debt Up $2 Trillion on Obama’s Watch-Read more here-http://www.cbsnews.com/8301-503544_162-20000576-503544.html and http://news.goldseek.com/MillenniumWaveAdvisors/1268578800.php

-We are spending more money than we have ever spent before, and it does not work. After eight years, we have just as much unemployment as when we started and an enormous debt to boot. U.S. Treasury Secretary Henry Morgenthau May 1939

-From the Russell standpoint, there is only one item that I consider a long-term holding. And that is gold. I note a lot of publicity regarding gold, some of it bullish and some of it cautionary. I am shocked, shocked at some of the ignorant pronouncements by supposed highly-intelligent analysts and investors. They seem to be completely in the dark about the meaning of gold and its history. They fail to understand that only gold is timeless money. In fact, they fail to understand that gold IS money. Richard Russell

-As far as precious metals are concerned, gold and silver are trying to build a base. It is worth noting that precious metals are in the seasonally strong time of the year and a spring rally is still possible. As George Soros stated in Davos, “with near-zero interest-rates, gold is the ultimate asset bubble”. We agree with his assessment and believe that monetary inflation together with the massive debt overhang in the West will propel gold and silver to new highs. Puru Saxena-Read more here-http://www.321gold.com/editorials/saxena/saxena031710.html

-Remember, the equity market at any given moment of time is one part reality and three parts perception. This is a market being driven by few buyers, no sellers, a lack of fundamentals and technicals. David Rosenberg-Gluskin/Sheff

-The Dow in the 1930s saw no fewer than 30,000 rally points that would get investors periodically juiced up that the post-bubble economy was heading back on track from the New Deal stimulus. But go back and you will see that the next bull market did not begin until 1954 even if the ultimate lows in the Dow were turned in 22 years earlier. It was a multi-year tumultuous period that was racked by volatility and manic market performance. David Rosenberg-Gluskin/Sheff

-S&P; 500: The median and average of 12 models we run point to fair value around 970 (the range of model results is from 850 to 1,100). With the S&P; 500 currently at around 1,150, these models suggest that the U.S. equity market is overvalued by about 20%.

Another metric we follow is the Shiller P/E ratio, which goes back to the early 1880s. We took a quick look at Shiller’s latest data point for March and, at 20.6x versus the long-term average of 16.4x, this ratio continues to suggest that the market is overvalued by about 25%. David Rosenberg-Gluskin/Sheff

-S&P;/TSX Composite Index: The median and average of the fair value models are around 11,100 and 11,000, respectively, with values ranging from 10,700 and 11,300. The TSX is currently trading just under 12,000 and so on aggregate our work suggests that Canadian equities are overvalued by 8-9%. David Rosenberg-Gluskin/Sheff

-Michael Panzner, who writes the blog Financial Armageddon, say bulls are “blind to the worsening economic reality all around them,” and in danger of getting hurt again by falling asset prices.

Headwinds are plentiful, Panzner says.

There has been little improvement in bank lending or credit availability, he says. The “long-term unemployment situation is getting worse” and economic data, which had been pointing up, have flattened out recently, suggesting a growing risk of a double dip, or economic relapse, he says.

The banking system also remains weak, as is the financial position of sovereign states such as Greece as well as states such as California. He predicts a not-too-pretty fallout. “In my view, the effect will be, at the least, a retest of what we saw last March,” Panzner says. “At worst, much lower lows. It may not happen in 2010. However, it could be over the next couple of years.” Read more here-http://www.usatoday.com/money/markets/2010-03-09-bullanniversary09_CV_N.htm

-”You can’t rule out a drop of 20% now or ever,” says Michael Farr, president of money management firm Farr Miller & Washington. Risks to the economic outlook remain, Farr stresses. He points out that Federal Reserve Chairman Ben Bernanke said recently that the “recovery is not yet self-sustaining.”

Farr worries that it will be tough to get a consumer-led expansion going with so many people saddled with high debt and job insecurity. Consumers are key to a revival because they account for roughly two-thirds of economic activity in the U.S. “This is a wait-and-see period for the economy,” Farr says.

“The main cliffhanger is whether the ample supply of government dollars will find traction and, in time, lead to renewed growth and hiring. Markets are plenty vulnerable to shock and disappointment right now. Investors are undecided. Yell ‘Boo!’ and they may all run for the door at once.” Read more here-http://www.usatoday.com/money/markets/2010-03-09-bullanniversary09_CV_N.htm

-So far, the market has been able to digest California, Dubai, and Greece, but what about China? That could be the next shoe to drop (before Iran have a look at Israel and the Crisis with Obama on page A21 of the WSJ) specifically the new spat between the U.S. and China over currency policy.

Make no mistake, if China does not make a move away from the peg with the U.S. dollar over the next few weeks, there is a very good chance that trade sanctions are going to come our way. April 15 looms large as that is the day when the U.S. Treasury could well declare the Renmimbi as being “manipulated”.

Gold will be a very nice safe haven in this environment (also have a look at Martin Wolf’s article today on page 9 of the FT China and Germany Unite to Weaken the World Economy). Also see Prompted by Economy, Lawmakers Press China to Address Value Of Its Currency on page B3 of the NYT. David Rosenberg-Gluskin/Sheff

-The U.S. (not counting contingent liabilities) is within a year of seeing is debt-to-GDP ratio pierce the 100% threshold (it is estimated to rise to 94% this year from 84% last year), the deficit is well over 10% of GDP (7% on a cyclically-adjusted basis) and so is the ratio of debt-service payments to revenues.

This trifecta in the past were the harbingers of credit downgrades. These numbers, by the way, are not at all far off and in some cases worse than in Greece, Spain, Portugal, Ireland, Italy or the U.K. David Rosenberg-Gluskin/Sheff

-In a nutshell, Corporate America has managed to only delay an inevitable refinancing spree that is expected to commence in 2012 when $700 billion of high-yield corporate debt comes due, and this rollover process is expected to last three years (compare that to the miniscule $21 billion in refinancing requirements this year). David Rosenberg-Gluskin/Sheff

-Fed Pledges to Keep Rate Low for ‘Extended Period’. Federal Reserve officials repeated their pledge to keep the main interest rate near zero for an “extended period” and confirmed that emergency measures to prop up the housing market will end as planned this month.

While the economy has “continued to strengthen,” policy makers noted that “housing starts have been flat at depressed levels” and “employers remain reluctant to add to payrolls.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aznK2HwZgBoM

-Loonie May Revisit Record High, SocGen Says: Technical Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aHzbNDZdylaQ

-U.S. employers won’t hire enough workers this year to lower the jobless rate much below the level of 9.7 percent reached in February, three Obama administration economic officials said today. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aXaMufrB.FA0

-How a New Jobless Era Will Transform America. The Great Recession may be over, but this era of high joblessness is probably just beginning. Before it ends, it will likely change the life course and character of a generation of young adults.

It will leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years to come. Read more here-http://www.theatlantic.com/magazine/archive/2010/03/how-a-new-jobless-era-will-transform-america/7919/

-U.S. states: Running with the PIIGS. Read more here-http://money.cnn.com/2010/03/15/news/international/greece_debt.fortune/index.htm

The Domestic Pigs

Source:
(1) Pew Center
(2) Realty Trac
(3) Bureau of Labor Statistics

-States may hold onto tax refunds for months. Residents eager to get their state tax refunds may have a long wait this year: The recession has tied up cash and caused officials in half a dozen states to consider freezing refunds, in one case for as long as five months.

States from New York to Hawaii that have been hard-hit by the economic downturn say they have either delayed refunds or are considering doing so because of budget shortfalls. “It’s an indicator of how bad it is,” says Scott Pattison, executive director of the National Association of State Budget Officers. “You know things are bad when you have to do that.”

New York, hit with a $9 billion deficit, may delay $500 million in refunds to keep the state from running out of cash, says Gov. David Paterson. Read more here-http://www.usatoday.com/news/nation/2010-03-11-tax-refunds_N.htm?csp=34

-State tax collections drop; Louisiana Gov. Bobby Jindal plans for more budget cuts. An unexpected drop in state tax collections has created a mid-year budget deficit that could be as high as $400 million, adding dark new clouds to the state’s bleak financial forecast as lawmakers prepare for the start of their annual session in two weeks. Read more here-http://www.nola.com/politics/index.ssf/2010/03/state_tax_collections_drop_gov.html

-44 of 172 Detroit schools slated to close in June. Read more here-http://www.breitbart.com/article.php?id=D9EGGS680&show;_article=1

-Pink slips sent to thousands of Calif. teachers. Read more here-http://www.sfgate.com/cgi-bin/article.cgi?file=/n/a/2010/03/15/state/n131126D27.DTL

-Regulators shut LibertyPointe Bank in NYC. Regulators on Thursday shut down LibertyPointe Bank in New York City, boosting to 27 the number of bank failures in the U.S. so far this year following the 140 brought down in 2009 by mounting loan defaults and the recession. Read more here-http://www.google.com/hostednews/ap/article/ALeqM5hThvm2HJ4hbMZVWIHSErop-reTbgD9ECPH680

-AIG Was Unprepared for Crisis, Former Top Lawyer Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=adhwKOUDjy_U&pos;=1

-Lehman Shows Auditors Fail Investors After Reforms. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aMsBaD8UZJz4

-Deutsche Bank AG, JPMorgan Chase & Co., UBS AG and Hypo Real Estate Holding AG’s Depfa Bank Plc unit were charged with fraud linked to the sale of derivatives to the City of Milan. Judge Simone Luerti scheduled the trial of the four firms, 11 bankers and two former city officials for May 6, Prosecutor Alfredo Robledo said after a hearing in Milan today.

The banks allegedly misled the city over swaps that adjusted interest payments on 1.7 billion euros ($2.3 billion) of bonds sold in 2005. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aC.ZO2bOdS2A&pos;=3

-Is China’s Politburo spoiling for a showdown with America? The long-simmering clash between the world’s two great powers is coming to a head, with dangerous implications for the international system. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7442926/Is-Chinas-Politburo-spoiling-for-a-showdown-with-America.html

-China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP. The Chinese central bank’s balance sheet resembles that of a hedge fund buying dollars and short-selling the yuan, said Rickards, now the senior managing director for market intelligence at McLean, Virginia-based consulting firm Omnis Inc.

“As I see it, it is the greatest bubble in history with the most massive misallocation of wealth,” Rickards said at the Asset Allocation Summit Asia 2010 organized by Terrapinn Pte in Hong Kong yesterday. China “is a bubble waiting to burst.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aNZe4JWeV1aw

-China, Japan Reduced Holdings of U.S. Treasury Debt in January. Read more here-http://www.bloomberg.com/apps/news?pid=email_en&sid;=avsB.BdWGdIE

-China’s Wen Rebuffs U.S. Calls for Stronger Currency. Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid;=adgSFPqllr68

-Europe’s banks brace for UK debt crisis. UniCredit has alerted investors in a client note that Britain is at serious risk of a bond market and sterling debacle and faces even more intractable budget woes than Greece. Read more here-http://www.telegraph.co.uk/finance/economics/7423138/Europes-banks-brace-for-UK-debt-crisis.html

-Pound Bears Bet More Than When George Soros Beat BOE. Wagers on the pound weakening against the dollar outnumber futures that profit on a rise by eight times more than when George Soros made $1 billion betting against the currency in 1992, the year Prime Minister John Major’s Conservative government was forced to withdraw from the European Exchange Rate Mechanism. Sterling fell 19 percent that year. Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid;=anZYsKwNSuiY

-U.S., U.K. Move Closer to Losing Rating, Moody’s Says. The U.S. and the U.K. have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt rose, according to Moody’s Investors Service. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=a8c_1vtVGzD8

-Eurozone could risk ’sovereign debt explosion’. Europe’s governments are at increasing risk of an interest rate shock this year as the lingering effects of the Great Recession drive debt issuance to record levels and saturate bond markets, according to Standard & Poor’s. Read more here-http://www.telegraph.co.uk/finance/economics/7424555/Eurozone-could-risk-sovereign-debt-explosion.html

-Moody’s fears social unrest as AAA states implement austerity plans. The world’s five biggest AAA-rated states are all at risk of soaring debt costs and will have to implement austerity plans that threaten “social cohnesion”, according to a report on sovereign debt by Moody’s. Read more here-http://www.telegraph.co.uk/finance/economics/7450468/Moodys-fears-social-unrest-as-AAA-states-implement-austerity-plans.html

-Almost 39 million Americans received food stamps in December, the most ever, as the jobless rate hovered near a 26- year high, the government said. Recipients of the subsidies for food purchases climbed 23 percent from a year earlier and rose 2.1 percent from November, the U. S. Department of Agriculture said Thursday in a statement on its Web site. The number receiving the benefit has set records for 13 straight months.

Food aid climbed as the national unemployment rate reached 10.1 percent in October, the highest since June 1983, and remained at 10 percent through December before easing to 9.7 percent in January. An average of 40.5 million people will get food stamps each month in the federal fiscal year that began Oct. 1, Agriculture Secretary Tom Vilsack said last week. The figure is projected to rise to 43.3 million in 2011.

Nevada had the biggest increase in the percentage of the population receiving the coupons, up 49 percent from December, USDA figures show. Texas had the most recipients, at 3.31 million, topping California’s 3.11 million. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1268586000.php and http://news.goldseek.com/InternationalForecaster/1268838000.php

-Hundreds of powerful US “bunker-buster” bombs are being shipped from California to the British island of Diego Garcia in the Indian Ocean in preparation for a possible attack on Iran. The Sunday Herald can reveal that the US government signed a contract in January to transport 10 ammunition containers to the island. According to a cargo manifest from the US navy, this included 387 “Blu” bombs used for blasting hardened or underground structures.

Experts say that they are being put in place for an assault on Iran’s controversial nuclear facilities. There has long been speculation that the US military is preparing for such an attack, should diplomacy fail to persuade Iran not to make nuclear weapons. Read more here-http://www.heraldscotland.com/news/world-news/final-destination-iran-1.1013151

-Tehran aiding al Qaeda links, Petraeus says. Iran is assisting al Qaeda by facilitating links between senior terrorist leaders and affiliate groups, the commander of U.S. forces in the Middle East told Congress on Tuesday.

Army Gen. David H. Petraeus, commander of the U.S. Central Command, also said Iran’s nuclear program is facing problems, and as a result, Tehran is not expected to emerge with a nuclear weapon this year.

The exact details of when U.S. intelligence agencies estimate Iran will have a nuclear bomb are classified, but the timeline for developing a nuclear device has “thankfully slid to the right a bit,” he said. Read more here-http://www.washingtontimes.com/news/2010/mar/17/tehran-aiding-al-qaeda-links-petraeus-says//print/

-Bin Laden Unlikely to Be Captured Alive, Holder Tells Lawmakers. Al-Qaeda leader Osama bin Laden is unlikely to face trial because he probably would be killed before being captured, said Attorney General Eric Holder. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ahdptnIoG7Ak&pos;=9

-Nigerian prince still wants your money. Internet fraud cases surged by 22% in 2009, and financial losses doubled compared to the year before as scammers took advantage of Americans rendered desperate by the recession. Read more here-http://money.cnn.com/2010/03/16/news/economy/internet_fraud_fbi/index.htm

-‘Historic Flooding’ Possible in U.S., NOAA Says. One-third of the U.S. faces the possibility of “historic flooding” in coming weeks, especially the upper Midwest states of North Dakota, South Dakota, Minnesota and Iowa, government forecasters said.

“Once again we are delivering an urgent message to get ready,” John Hayes, director of the National Weather Service, said in a conference call today. “The flood risk is above- average over one-third of the country.”

The flood potential is driven in part by El Nino, a warming in the Pacific Ocean, which steered storms that have left the ground saturated from record rains and heavy snows. The area designated for above-average risk stretches from New Mexico in the west to Maine in the east, federal maps show.

“We are looking at potentially historic flooding in some parts of the country this spring,” Jane Lubchenco, administrator for the National Oceanic and Atmospheric Administration, said in the conference call. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aom6bk2Uy6U0

-Bentley Fetches Top Price at $1.5 Million Classic-Car Auction. The 1956 S1 Continental Sports Saloon made 166,500 pounds, against an estimate of 150,000 pounds to 180,000 pounds. The 120 mph car had wind-tunnel-developed fastback coachwork by H.J. Mulliner and was bought by a U.K. collector bidding by phone, said auction house Bonhams, which held the sale in Oxford. Read more here-http://www.bloomberg.com/apps/news?pid=20601096&sid;=ahzIkTDH7OVc

-Christie’s puts record price tag on “key” Picasso. “Portrait of Angel Fernandez de Soto (The Absinthe Drinker),” dated 1903, is expected to fetch 30-40 million pounds ($45-60 million), the highest pre-sale estimate for any work of art offered at auction in Europe.

The June 23 auction follows a February sale at rival Sotheby’s where a Giacometti sculpture went under the hammer for $104.3 million, just beating the previous record for another Picasso that sold for $104.2 million in New York in 2004.

Wednesday’s announcement of the June sale underlines growing confidence in the art market after a sharp contraction during the financial crisis. The Picasso, featuring a seated man with a glass of absinthe and a pipe, the smoke curling upwards, is being offered by composer Andrew Lloyd Webber, and the proceeds will go to his foundation which promotes arts and culture in Britain. Read more here-http://www.reuters.com/article/idUSTRE62G17A20100317

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 and

http://www.b-tv.com/features/watch-now.html?id=326

-Sotheby’s Jewels Sales Brings in Over $1.75 Million. The second highest-selling item, a fancy intense pink diamond and diamond necklace, more-than doubled its lowest sales estimate of 14,000-18,000 GBP when it was sold at the hammer price of 30,000 GBP ($45,843). The necklace is of negligée design with a fancy intense pink pear-shaped diamond weighing 0.91 carats and another similarly shaped near-colourless stone weighing 0.98 carats. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=33831

-Rare Jewels Set to Shine at Upcoming Auction. Up to three and a half million dollars that’s how much a rare pinkish orange diamond ring is expected to fetch at the Magnificent Jewels Auction in New York. It’s one of more than a hundred pieces of spectacular diamond and colored stone jewels at the collection previewed in London.

Victoria Major of Sotheby’s said the Gemological Institute of America’s grading confirms this ring’s rarity. Victoria Major, V.P, Jewelry Department, Sotheby’s said “As of September 2009, it was the largest such diamond ever to be graded by the GIA (Gemological Institute of America).

It is exceptionally rare. The GIA actually just supplied us with a letter attesting to how rare it is and that this orange color, which is the dominant color in the stone, is one that is a miracle of nature, it really is a true miracle.”

The other major highlight is a magnificent vivid yellow diamond necklace set with 42 GIA certified diamonds weighing just over 100 carats. The necklace is expected to sell for between two to three million dollars.

After the London preview, the jewels will travel to Hong Kong and California for further auction previews until they are finally sold off in New York on April 20. Read and watch more here-http://english.ntdtv.com/ntdtv_en/ns_europe/2010-03-17/234161149173.html

-Sotheby’s picks Hong Kong for blue diamond ring auction. Hong Kong’s rising status as an international centre for fine jewellery auctions has received a boost from Sotheby’s decision to put a 5.16-carat blue diamond ring on sale in the Chinese territory instead of in one of its more traditional markets.

The sale of the pear-shaped stone, estimated to fetch up to $5.8m (£3.8m, €4.3m) at auction, will add momentum to the diamond trade in Hong Kong, which now rivals that in New York and Geneva. Hong Kong has benefited from the proximity of wealthy Chinese buyers and their growing purchases of diamonds , platinum and sapphires.

But Patti Wong, chairman of Sotheby’s Asia, said the auctioneer had persuaded the unidentified private owner to sell the diamond in Hong Kong because of the city’s increasingly wide appeal to jewellery buyers. “In the past, people thought Hong Kong could only attract Asian buyers. It is totally not true. We have been drawing intense interest from international collectors as some of the best items are offered here,” said Ms Wong.

At Sotheby’s, Hong Kong’s share of international jewellery sales has jumped from 19 per cent in 1998 to 34 per cent in 2008, overtaking New York to be its second-biggest market after Geneva. For rival Christie’s, Hong Kong was the second-largest jewellery market last year, just after New York.

Last December, Christie’s sold a ring with a five-carat pink diamond in Hong Kong for $10.7m, or $2.1m per carat, which set a record per-carat price for any gemstone. The auctioneer said it had advised the US-based collector to sell the stone in Hong Kong, which boosts a large number of Chinese buyers.

The previous record belongs to a 7.03-carat stone Star of Josephine brought by Joseph Lau, the Hong Kong tycoon, for $9.48m, or $1.35m per carat, in May 2009 in Geneva. “When we sold the pink diamond, the buyer was Chinese, the under bidder was Chinese, the under under bidder was Chinese,” said François Curiel, Asia president.

Hong Kong, the world’s third largest auction market after New York and London, is also becoming a centre of wine sales for auction houses. Last year, Sotheby’s fetched $14.3m from wine sales in Hong Kong, just shy of London’s $14.7m but ahead of New York’s 12.7m. Asian collectors accounted for more than half of global wine sales in 2009.

In January, Sotheby’s held the first stand-alone wine auction in Hong Kong, which realised $6.8m, or the highest total achieved by the auctioneer for a single day wine sale. The blue diamond will be one of the top lots offered by Sotheby’s at its five-day spring auction in April, which is expected to fetch more than $128m. Read more here-http://www.ft.com/cms/s/0/eb58cd1e-2277-11df-a93d-00144feab49a.html

THE BLACK SWAN WORRIED ABOUT HYPERINFLATION

-Nassim Nicholas Taleb, author of “The Black Swan” about how unforeseen events can roil markets, said he is concerned about hyperinflation as governments around the world take on more debt and print money.

“We are facing an environment with a huge amount of debt,” he said in a speech in New Delhi today. “The next mistake is going to be overprint, which is going to be the way out for them, which is why I fear hyperinflation.”

Taleb joins Mohamed A. El-Erian, co-chief investment officer at Pacific Investment Management Co., in warning governments about rising public debt. Failing to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, El-Erian said yesterday.

“Why is the state converting private debt into public debt?” said Taleb, who advises Universa Investments LP, a $6 billion fund that bets on extreme market moves. It’s “because public debt is permanent.”

The U.S. budget deficit widened to a record in February as the government spent more to help revive the economy. The gap grew to $221 billion after a shortfall of $194 billion in February 2009, the Treasury Department said on March 10. The figures indicate the deficit this year will probably surpass the record $1.4 trillion in the fiscal year that ended in September. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aR3nmFNR2KeM

THE 2 TRILLION HOLE

-Promised pensions benefits for public-sector employees represent a massive overhang that threatens the financial future of many cities and states. Like a California wildfire, populist rage burns over bloated executive compensation and unrepentant avarice on Wall Street.

Deserving as these targets may or may not be, most Americans have ignored at their own peril a far bigger pocket of privilege the lush pensions that the 23 million active and retired state and local public employees, from cops and garbage collectors to city managers and teachers, have wangled from taxpayers.

Some 80% of these public employees are beneficiaries of defined-benefit plans under which monthly pension payments are guaranteed, no matter how stocks and other volatile assets backing the retirement plans perform. In contrast, most of the taxpayers footing the bill for these public-employee benefits (participants’ contributions to these plans are typically modest) have been pushed by their employers into far less munificent defined-contribution plans and suffered the additional indignity of seeing their 401(k) accounts shrivel in the recent bear market in stocks.

And defined-contribution plans, unlike public pensions, have no protection against inflation. It’s just too bad: Maybe some seniors will have to switch from filet mignon to dog food. Most public employees, if they hang around to retirement, can count on pensions equal to 75% to 90% of their pay in their highest-earning years.

And many public employees earn even more in retirement than their best year’s base compensation as a result of “spiking” their last year’s income by working ferocious amounts of overtime and rolling in years of unused sick and vacation days into their final-year pay computation.

A survey by the watchdog group California Foundation for Fiscal Responsibility found that some 15,000 Golden State public employees are knocking down $100,000 or more, while some 200, mostly police and fire chiefs and school administrators, are members of the $200,000-a-year-and-up club. Read more here-http://online.barrons.com/article/SB126843815871861303.html?mod=BOL_hps_emr#articleTabs_panel_article%3D1

REAL ESTATE-FORECLOSURES-MORTGAGES

-More homeowners are opting for ’strategic defaults’. Underwater on their mortgages and angry at banks, more borrowers are choosing to hand over the keys, even if they can afford the payments. Read more here-http://www.latimes.com/business/la-fi-walkaway17-2010mar17,0,2149033,full.story

-Homeowners take ‘cash for keys’ to escape debt. Borrower loses house, but gets fresh start without black mark on credit. Jon Daurio, chief executive officer of mortgage investor Kondaur Capital Corp., recently offered a $4,000 check to Barry Culver for the deed to his Bryan, Ohio, house.

With the exchange, and a pay-off to a second-lien holder, Culver was freed of $120,000 in crushing mortgage debt on the house, said Daurio, who had bought the right to cut the deal when he purchased the mortgage months earlier. The house, after repairs, is now on the market for $47,500. Read more here-http://www.msnbc.msn.com/id/35839839/ns/business-real_estate/?source=patrick.net

-New round of foreclosures threatens housing market. The housing market is facing swelling ranks of homeowners who are seriously delinquent but have yet to lose their homes, and this is threatening a new wave of foreclosures that could hit just as the real estate market has begun to stabilize.

About 5 million to 7 million properties are potentially eligible for foreclosure but have not yet been repossessed and put up for sale. Some economists project it could take nearly three years before all these homes have been put on the market and purchased by new owners. And the number of pending foreclosures could grow much bigger over the coming year as more distressed borrowers become delinquent and then, if they can’t obtain mortgage relief, wade through the foreclosure process, which often takes more than a year to complete.

As these foreclosed properties add to the supply of homes for sale, they could undercut housing prices, which have increased modestly through December, according to the most recent figures in the S&P;/Case-Shiller home prices index. That rise partly reflected a slowdown in the flow of foreclosed homes onto the market.

The rate at which J.P. Morgan Chase seized properties, for example, peaked in the middle of 2008 and fell steadily last year, according to a February investor report. But the bank expects repossessions to increase this year, nearly doubling to 45,000 by the fourth quarter.

“Some of the positive housing data may not be signaling a true turning point, as many servicers are holding back on foreclosures and the related houses are not yet being offered for sale,” said Diane Westerback, a managing director at Standard & Poor’s. Westerback said it could take 33 months to clear the backlog.

Data released Thursday by RealtyTrac illustrate the dynamic. While banks repossessed fewer homes in February than a month earlier, borrowers continued to fall behind on their payments, adding to the inventory of properties headed toward foreclosure that have yet to be put on the market, said Daren Blomquist, RealtyTrac’s spokesman.

“Just looking at the numbers, we would expect there to be a bigger percentage of properties” repossessed by banks by now, he said. This “shadow market” reflects the increasing lag between defaults and foreclosures. Many lenders are struggling to keep up with the overwhelming number of borrowers who can’t make their payments, and they’re reluctant to rush repossessed homes onto the market when prices are depressed. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2010/03/11/AR2010031104866_pf.html

-972 Foreclosure Filings in Hawaii in February. The figure reported Thursday by foreclosure listing firm RealtyTrac represents an 81 percent increase over 537 filings in February 2009. Read more here-http://www.nytimes.com/aponline/2010/03/11/business/AP-US-Hawaii-Foreclosures.html?_r=3&source;=patrick.net

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

The Goldbugg Report – March 23, 2010
Posted by Worldwide Precious Metals on Tuesday, March 23, 2010

As featured on: