Newsroom
The Goldbugg Report – March 16, 2010
March 16, 2010
Special Memo to All Retail Dealers
For many weeks, in multiple memos, we have been discussing the upcoming meeting on March 25th of the US Commodity Futures Trading Commission. This meeting is for the sole purpose of examining and discussing position limits for the trading of futures and options in the precious and base metals markets. The meeting will be open to the public and will be webcast via the Internet and also available as a listen-only conference call as outlined in this CFTC press release:
http://www.cftc.gov/newsroom/generalpressreleases/2010/pr5782-10.html
For years there have been accusations that a handful of banks, namely JPMorgan Chase and HSBC, have been manipulating the prices of precious metals. This has been achieved by the ability of these banks to hold massively concentrated short positions on the New York Commodities Exchange (Comex) that cannot possibly be covered. In January 1999 the Gold Anti-Trust Action Committee (GATA) was formed to expose this manipulation, particularly regarding the price of gold. For more than a year now, GATA has also been investigating manipulation in the silver market as well. Those involved in the manipulation scheme have tirelessly tried to marginalize GATA and question their findings.
In the light of the financial meltdown that nearly sent the entire world into a depression (a meltdown that still appears to be far from over) a pattern has emerged. The same bank names appear almost daily in the news regarding manipulative and surreptitious deals which helped not only to create the conditions that led to the meltdown, but are now helping to extend it. Goldman Sachs has been exposed for helping Greece hide the severity of its debt all the way back to 2001. Entire towns in Iceland were bankrupted by deals backed by worthless mortgages which were set up by US banks. As discussed in our March 12th memo, Italy is now suing several banks for fraud over questionable deals and one of those banks is JPMorgan Chase.
Under an administration clamoring for more transparency, the reporting on gold and silver markets has become even more opaque, specifically the Commitment of Traders report and the monthly Bank Participation reports. In February, 2009, the CFTC “determined that where the number of banks in each reporting category is particularly small, fewer than four banks, there exists the potential to extrapolate both the identity of individual banks and the banks’ positions. As a result, as of December 2009 the CFTC no longer names the number of banks when it is less than four.” This merely illustrates that the massive number of short positions on the Comex are held by FEWER than four banks.
Bill Murphy, chairman of GATA, has been invited by the CFTC to speak at their March 25th meeting regarding the evidence that GATA has amassed over the years on precious metals price manipulation by JPMorgan Chase and HSBC. The public nature of the CFTC’s March 25th meeting will allow the manipulation of the precious metals markets to be exposed to the light of day. This should be viewed as positive news, possibly signaling the “beginning of the end” of price suppression tactics by these two institutions which could lead to incredibly positive upside price activity on the prices of these products. In our February 5th memo, we quoted James Turk, a consultant to GATA as saying “Every once in a great while, the market offers a unique opportunity to buy precious metals “on the cheap”. I believe today is one of those moments.”
The time to help your customers establish, or add to, their precious metals portfolios is BEFORE prices explode to the upside and this certainly appears to be the time for you to take action. Precious metals prices have increased on an overall basis for years and if you’ve sat idly by as both you and your customers have watched the prices climb year after year, then you have missed tremendous opportunities to make you, and your customers, a profit. We do not feel that this is the time for you and your customers to sit idle, but rather is the time to get aggressive. As Mr. Turk says “Every once in a great while, the market offers a unique opportunity to buy precious metals “on the cheap”. I believe today is one of those moments.” Always remember, the key to profitability through the ownership of physical precious metals is to actually own the physical products and hold them for the long term. Your customers should never over-extend their ability to maintain ownership of their 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
-Rob McEwen sticks with $2,000/oz gold by year-end. Goldcorp founder Rob McEwen is standing by his forecast that the price of gold will reach $2,000/oz by the end of 2010, he said on Monday.
While it may still seem a stretch from current levels of around $1,100/oz, it should be noted that McEwen has been making the prediction since at least March 2006. At that time, prices for the yellow metal had not topped $600/oz since January 1980.
“I have been saying for over five years: by the end of this year, we will be at $2,000 and, when the game is over for gold, it will be over $5,000 an ounce,” he said in an interview on the sidelines of the Prospectors and Developers Association of Canada’s annual convention. Read and watch more here-http://www.miningweekly.com/article/mcewen-sticks-with-2-000oz-gold-by-year-end-2010-03-09
-Buy Gold While Supplies Last, Says Fund Manager. Lost in the headlines over the dollar’s resurgence in 2010 is the fact gold is still rising in most worldwide currencies. It is also still faring well in dollar terms. Frank Holmes, CEO and CIO of U.S. Global Investors, a long time gold bull sees no reason for this trend to end.
He tells Aaron in the accompanying clip, “there are many compelling factors both from a supply side and then from the demand side that looks like gold will trade higher.” Holmes’ reasons to bullish on gold:
-Massive federal deficits and low interest rates in the United States and elsewhere will raise inflation risks and keep downward pressure on currencies.
-Rising incomes in Asia, where affinity for gold runs deep, will have a sizable positive impact on demand; Holmes tells Aaron that China is now the largest producer of gold in the world but that won’t drive down prices because the government is “using it as a reserve currency for themselves.” However, bulls should note China’s chief for exchange official said this morning they would limit their purchases.
-Peak Gold? Gold production from mines is not adequate to meet demand. Production is dropping around the world. Holmes notes worldwide production ell 10% in 2008 and is especially dramatic in South Africa the world’s largest producer.
Holmes, however, does have a few words of caution for those looking to get rich on gold. He only recommends a 10% allocation in gold that would be divided evenly between bullion and stocks. Read and watch more here-http://news.goldseek.com/GoldSeek/1268152754.php
-As Confidence Returns, Gold Will Rise-John Embry. Sprott Asset Management’s Chief Investment Strategist believes gold could gain another 30% this year this year as a greater proportion of the public realizes the degree of difficulty that sovereign debt is in. Interview with the Gold Report.
The Gold Report: John, in Investors Digest of Canada you recently said you’re expecting gold to gain another 30% this year.
John Embry: I would say at least 30%. I said that I thought it would be the best year to date. We’ve had nine years consecutive higher year-end prices and the best year in that span for a year’s return was 31%. I think this will be the year that we exceed it in this, the 10th year of the bull market.
TGR: What’s driving this? Why is this year going to be the best year?
JE: I think we’re getting very close to the point when a greater proportion of the public realizes the degree of difficulty that sovereign debt is in. And at that point, when you can’t depend on your government paper as a safe haven, I think that fact puts gold in a much better light in more people’s eyes.
TGR: You might say the first leg down were the individuals who couldn’t pay their mortgages and that caused part of the ‘08 collapse. And now it looks like it’s the government’s.
JE: It’s very simple, actually. Private demand, as you know, was so weak that governments had to step in to maintain order in the economy and in so doing, they spent an enormous amount of money, at the same time that revenue streams fell because of the weakness in the private sector. Governments spent dramatically more money and the results are a budget deficit I never thought I’d see in my life. I’m shocked at the numbers in many places.
TGR: I read that the IMF is going to be selling some gold and India stepped up earlier. What are your thoughts on that?
JE: The whole thing irritates me. The IMF has announced the sale of this gold 500 times and every time with the express purpose of knocking the price of gold down. It was interesting the last time when the Indians actually relieved them of over 200 tons because that was what basically vaulted the market from about $1,045, which the Indians paid, up to $1,225 in the space of less than a month. That has been followed by the third significant correction in the last three or four years.
I think we’ve seen the vast proportion of the correction and I think what may be one of the factors that could get this thing going again is when somebody does relieve the IMF of the gold, the 191 tons to be exact. There’s speculation that India might be prepared to go to the plate again because the Chinese have been reluctant to step up. Number one, I don’t think they want to be seen publicly doing it.
They’d probably rather do it more clandestinely because they’ve got so much money to convert into hard assets. And, secondly, as somebody pointed out, the Chinese at least have a domestic supply of gold. They can buy all their domestic to augment their reserves, where the Indians really don’t have that. So I think the Indians conceivably have a bigger vested interest here in taking that IMF gold.
And there’s also sort of the suggestion that the Chinese wouldn’t want to be seen to be paying more than the Indians did, so they’re reluctant to step up with the gold price $50 higher currently than the Indians paid. If it was really a free market, if they were really prepared to sell it to anybody, I think I could name any number of institutions, organizations, individuals that would be more than glad to relieve them of it. It’s not much money. It’s $6 billion. They throw it around as if it’s a big deal. Heck, given the budget deficits in some of these countries, $6 billion is literally a piss in the ocean.
GR: That’s right. What do you think when Soros came out and said that gold was a bubble?
JE: I wrote about that and I got it right. I was very pleased about that because some people got all upset. The people that were negative on gold thought this was great, brilliant George Soros doesn’t like gold. But if you read between the lines, if you read really what he said, he said gold is the ultimate bubble, but he didn’t say gold is currently the ultimate bubble.
I believe that it will be the ultimate bubble. I think the gold price is going to go crazy and at that point I’d be worried about. And then it came out after the fact that Soros had been a major buyer of gold for his funds in the fourth quarter. So who knows what he was doing. The fact is, depending how you interpreted his remark, he was speaking at Davos, which is a very mainstream event, and he said something that can be interpreted any number of ways.
TGR: Right. And, again, I think the financial talking heads used it as the negative.
JE: Absolutely. The mainstream guys were all over it. The guys who have never like gold have been wrong all the way up and said, oh, my god, George Soros doesn’t like gold. But I think George Soros’ remarks were misinterpreted and if you saw what he was doing, not what he was saying, he was buying gold.
TGR: All right. Any last comments?
JE: The only comment I’d make is I really think things are sufficiently serious here in a financial or monetary debasement sense that everybody-and I have never been a table pounder-but I think every single person with a serious portfolio has got to have a reasonably significant exposure to precious metals. This isn’t something that’s just insurance for those who’ve got cold feet. This is something I think is a mainstream thing that people must have.
TGR: When you say a significant portion, what percentages are you thinking?
JE: I used to say 5% to 10% when it was just an insurance thing and the market was pretty sanguine. I say at least 20% now. I see the other assets as being less attractive. I wouldn’t buy a bond if you gifted me with the money to do it.
TGR: John, once again, I appreciate it. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=100633&sn;=Detail
-John Embry February commentary. Read more here-http://www.sprott.com/Docs/InvestorsDigest/2010/MPLID_022610_pg45Emb.pdf
-The bottom line is the new record highs in euro gold prove this secular gold bull is even healthier than today’s admittedly-impressive dollar-gold prices indicate. Euro gold effectively filters the wild dollar volatility out of the gold chart, leaving a cleaner dollar-neutral view.
And today this is showing gold continuing to power higher in its fourth major Stage Two upleg despite its consolidation in dollar terms. And as the dollar’s latest bear-market rally rolls over, this international strength should soon spill into dollar gold as well.
As American investment buying is added back on top of European investment buying, we ought to see some really impressive gold gains in the coming months. Investors would do well to keep an eye on euro gold, as it offers an important perspective that a myopic dollar-only view cannot. Read more here-http://www.321gold.com/editorials/hamilton/hamilton030810.html
-Forget US Stocks Buy Gold Every Month ‘Forever’: Faber. Investors should buy some gold every month “forever” or look to emerging market stocks rather than US shares, Marc Faber, editor of The Gloom, Boom & Doom Report, told CNBC.
“(Gold’s) quantity cannot increase at the same rate as you can print money, which will eventually weaken the US dollar,” Faber said on Thursday in a live interview. “I’m not saying that the dollar will go straight away down because other currencies like the euro are even worse at the present time,” he added. “But eventually if you print money, the purchasing power will lose [value].” Read and watch more here-http://www.cnbc.com//id/35707348
-Gold is decade’s best performing investment. Gold has proved to be the best value investment over the last 10 years, new research has disclosed. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7375415/Gold-is-decades-best-performing-investment.html
-Gold is the standard! Midas Letter publisher James West believes gold is the store of value everybody resorts to when times are rough. Interview with The Gold Report. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100271&sn;=Detail&pid;=1
-Gold: setting up for its next move to the upside? Expansionary monetary policies, exploding national debt and global currency devaluations, are creating a very favorable scenario for the price of gold. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100539&sn;=Detail&pid;=1
-Reflation, Supply Restraint Lend Support to Gold: Dundee Wealth’s Murenbeeld. Read more here-http://www.kitco.com/reports/KitcoNewsPDAC20100308B.html
-Gold on the move again? Commentary: Gold bugs are bullish, citing sovereign debt concerns. Read more here-http://www.marketwatch.com/story/story/print?guid=61B285CC-4CE6-48EF-A5BB-A0E8E2A5A84F
-”Embrace Inflation”: How to Profit and Protect Your Wealth. Buy Gold. Read more here-http://finance.yahoo.com/tech-ticker/article/434044/%22Embrace-Inflation%22:-How-to-Profit-and-Protect-Your-Wealth
-Seven reasons to invest in gold. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7394180/Seven-reasons-to-invest-in-gold.html
-Four reasons gold will remain firm and strengthen. Blanchard Chairman, Donald Doyle sees numerous reasons that point to gold’s nine-year bull run continuing in both the near and long term. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=100776&sn;=Detail&pid;=1
-Keeping 5% of portfolio in gold isn’t a bad idea as a hedge. Read more here-http://www.usatoday.com/money/perfi/columnist/waggon/2010-03-05-investing05_ST_N.htm
-China assesses its gold strategy. Read more here-http://www.atimes.com/atimes/China_Business/LC11Cb01.html
-China will be prudent in buying gold: official. Read more here-http://www.reuters.com/article/idUSTRE6280XR20100309
-China says committed to U.S. debt, wary on gold. “The U.S. Treasury market is the world’s largest government bond market. Our foreign exchange reserves are huge, so you can imagine that the U.S. Treasury market is an important one to us,” Yi Gang, head of the State Administration of Foreign Exchange (SAFE), told a news conference. Read more here-http://www.reuters.com/article/idUSTRE6280K720100309 or http://www.marketwatch.com/story/story/print?guid=0F69966C-E18F-489A-9927-7C6649D7CD95 or http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7404287/China-says-gold-is-unlikely-to-be-primary-investment.html
-1.5bn Potential Chinese Gold Bugs a New Demand Factor. Read more here-http://news.goldseek.com/PeterCooper/1268231177.php
-Venezuelan central bank to increase gold purchases. Read more here-http://www.gata.org/node/8400 and http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=100263&sn;=Detail&pid;=34
-GATA Claims To Have Evidence Of “Massive Physical Short Gold And Silver Positions That Can Not Be Covered”. Read more here-http://www.zerohedge.com/article/gata-claims-have-evidence-massive-physical-short-gold-and-silver-positions-can-not-be-covere
SILVER
Gold to silver ratio at 80 to 1 with gold at $1,300 the silver price would be $16.25
Gold to silver ratio at 70 to 1 with gold at $1,300 the silver price would be $18.57
Gold to silver ratio at 60 to 1 with gold at $1,300 the silver price would be $21.67
Gold to silver ratio at 50 to 1 with gold at $1,300 the silver price would be $26.00
Gold to silver ratio at 40 to 1 with gold at $1,300 the silver price would be $32.50
Gold to silver ratio at 30 to 1 with gold at $1,300 the silver price would be $43.33
Gold to silver ratio at 20 to 1 with gold at $1,300 the silver price would be $65.00
Gold to silver ratio at 15 to 1 with gold at $1,300 the silver price would be $86.67
-Gold-Silver Ratio Slumps to Six-Week Low as Risk Appetite Grows. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=ajXqH3MmMVjg
-When you factor in inflation and devaluation of the U.S. dollar, $850 gold in 1980 is $2,500 an ounce in today’s dollars. In other words, gold might be at 50% at $1,200, which is the highest of highs. Could there be a run to $2,500?
Your personal answer to that question will depend upon how confident you are in Fed Chairman Ben Bernanke, President Obama, and Wall Street. If you have faith in our leaders of commerce, don’t buy gold. If you do not have faith in them, maybe you should buy gold or silver.
If the dead cat bounce dies and the Dow drops to 5,000 in 2010, as I predict, then the price of gold and silver may die with the dead cat of the Dow, as investors cling to cash. The next question you need to answer is, “If the Dow dies and the price of gold and silver drop, what should you invest in at the bottom…stocks, gold and silver, or cash?”
I know what I will do. I will buy more gold and silver. Why? The answer is because I trust gold and silver more than Central bankers, the Oval Office, and Wall Street. Gold and silver have been real money for thousands of years. Robert Kiyosaki-Read more here-http://finance.yahoo.com/expert/article/richricher/221388
-In 1980 the historic ‘70s gold bull market finally topped out at $850. After adjusting for inflation, to merely equal what it did in 1980, gold would have to go (only) to $2,300, and silver topped out at $50 in 1980. After adjusting for inflation since then, to merely make a new high, silver would have to go over $125 and gold to $2,300!
Silver is the poor man’s gold. Think of gold as large denomination money, and silver as small bills. A one-ounce gold coin is now worth more than $1000, but you can buy a roll of pre-1965, ninety percent silver dimes for under $60 a roll. Partly because it is so much cheaper, the potential buying pool is much larger, and industrial use is so much greater, silver will be more profitable than gold by at least one hundred percent!
Silver is by far the more important industrial metal. There are more than two thousand silver industrial applications, and Uncle Sam has zero stockpiles of silver. It can be polished to be more reflective than any other metal, which is why it is used as backing for glass to make mirrors. It has thousands of essential uses in industry. It is an essential component for the manufacture of all audio and videotape, and all film. But above all, it is routinely accepted as money, especially in India, China, and the Middle East.
And remember, silver went from under $2 to $50 in the last bull market, when the consensus was that there was many times more silver than gold above the ground. Now the ratio is reversed. There is five times more gold above ground than silver. Howard Ruff-Read more here-http://www.kitco.com/ind/Ruff/ruff_mar052010.html
-Silver may break previous high of $50 within 3 years, and at current levels it looks totally undervalued, Lakeshore Trading precious metals analyst David Levenstein said on Thursday.
“For this reason, I suggest every single investor should own some silver,” said Levenstein. Read more here-http://www.busrep.co.za/index.php?fArticleId=5378328&fSectionId;=615&fSetId;=662
-Is it Time for Silver to Outshine? Read more here-http://sovereignsociety.com/2010/03/05/%E2%80%9Cgold-should-get-ready-to-take-a-back-seat%E2%80%A6%E2%80%9D/
-Morgan not yet going short again against metals rally, Butler tells King. Listen here-http://www.gata.org/node/8401
-Once world’s richest man, Bunker Hunt has ‘no regrets’ 29 years after silver collapse. Read more here- http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/032209dnprobunkerhunt.3d93ff8.html
-Gold investor and mining company operator Jim Sinclair has just given another interview to Eric King of King World News, discussing the Hunt Brothers’ famous corner on silver in the 1970s and the use of credit default swaps to attack and destroy currencies today. Listen here for parts 1 and 2-http://www.kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/3/8_King_World_News__Bunker_Hunt_%26_Jim_Sinclair.html
-Altered landscape riles commodity boom-and-bust cycle. Emerging economies, exchange-traded funds help paint the backdrop. Read more here-http://www.marketwatch.com/story/story/print?guid=DDA0E3AB-81C6-4290-BA9E-E9E251FAD145
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-75 Years of Funny Money-http://www.financialpost.com/news-sectors/economy/story.html?id=2668127
-Chart of the week: The Scariest Job Chart Ever. We can debate whether today’s jobs number was good or not, but this much is clear, compared to other recessions, the job losses, and lack of job gains, are truly unprecedented. Read more here-http://www.businessinsider.com/chart-of-the-day-the-scariest-job-chart-ever-2010-3
-Chart of the week: Why You Still Don’t Have A Job. The latest DiscoverCard small business sentiment numbers came out today, and showed that confidence actually dipped in February from January. That’s one reason you don’t have a job yet.
Here’s another nugget from the report: the number of businesses with cash-flow issues is still elevated. Yes, it’s improved a little bit, but at any other time, we’re looking at unprecedented heights.
If we put together a few more months of improvement, then we might really see some job creation again. Read more here-http://www.businessinsider.com/chart-of-the-day-small-business-owners-with-cash-flow-issues-2010-3
-Hockey fans flush with pride. City’s water use spikes during breaks in gold-medal game. Read more here-http://www.edmontonjournal.com/sports/Hockey+fans+flush+with+pride/2660726/story.html
-”You cannot escape the responsibility of tomorrow by evading it today.” Abraham Lincoln
-“Credit-default swaps, where you insure your neighbour’s house just to destroy it and make money from it, that’s exactly what we have to curb.” Angela Merkel-German Chancellor
-JPMorgan Chase & Co. and Citigroup Inc. helped cause the illiquidity that led to the collapse of Lehman Brothers Holding Inc., the bankrupt bank’s examiner said today in a report filed in Manhattan federal court.
Lehman tumbled into its $639 billion bankruptcy, the biggest in U.S. history, because it didn’t have enough liquidity and lost the confidence of its counterparties, according to a 2,200-page report from Anton Valukas, the U.S. Trustee-appointed examiner.
By changing guarantee agreements and making new demands for collateral, JPMorgan and Citigroup helped to precipitate the liquidity crisis that doomed Lehman, Valukas said. Read more here-
-If all the issuers of paper money want to see their currencies depreciate, then the only answer is to own an asset that central banks cannot debase namely, gold. Part of bullion’s rise to more than $1,200 an ounce this year must be attributed to the conviction that governments will inflate away their debts. The Economist, March 4, 2010
-If the global economy recovers, I think gold demand will pick up. There is no new supply of gold available so the gold price will rise. If things continue to worsen, then I think that gold as a non-default, hard asset will be an asset of choice in a world where credit risk is the dominant theme. So I think gold is in a win-win position. Kevin Maclean-Read more here-http://www.theglobeandmail.com/globe-investor/funds-and-etfs/funds/kevin-maclean-sees-more-gains-for-gold/article1473370/
-If there is a lesson learned from the Japanese experience, it is that recessions or “double dips” come faster than you think. After going nearly 20 years without a recession at all, Japan then went on to endure one in every four years after its credit bubble burst two decades ago. David Rosenberg-Gluskin/Sheff
-The propaganda campaign by the US government is trying to mask the fact that the economic recovery plan is failing and that America is rapidly losing confidence in Team Obama. You cannot have a sustained recovery without changing the underlying conditions that caused the failure in the first place.
In addition to the media blitz dissected by Yves Smith in the essay excerpted, I have never seen such a load of rubbish being put forward with regard to the markets in US financial assets and commodities, and I have seen quite a bit in the last twenty years. In particular, the campaigns against gold and silver in particular are heavy-handed, obvious, and reaching the point of hysteria. Read more here-http://jessescrossroadscafe.blogspot.com/2010/03/propaganda-campaign-attempts-to-mask.html
• More than five million homes are behind on their mortgage.
• There are over six million Americans who have been unemployed for at least six months, a record 40% of the ranks of the joblessness.
• Roughly 30% of manufacturing capacity is sitting idle.
• Nearly 19 million residential housing units or about 15% of the stock is vacant.
• One in six Americans are either unemployed or underemployed.
• Commercial real estate values are down 30% over the past year.
• The average American worker has seen his/her level of wealth plunge $100,000 over the last two years even with the recovery in equity markets this past year.
• Bank credit is contracting at an unprecedented 15% annual rate so far this year as lenders sit on a record $1.3 trillion of cash.
• Unit labour costs are down an unprecedented 4.7% over the past year and what has replenished household coffers has been the federal government as transfer payments from Uncle Sam now make up a record 18% of personal income (and the Senate just passed yet another jobless benefit extension bill!). David Rosenberg-Gluskin/Sheff
-At 3.6%, equity cash ratios are back to where they were in September 2007, just as the stock market was hitting its peak. By way of comparison, bond fund managers have 6.4% cash ratios. David Rosenberg-Gluskin/Sheff
-S&P; Rally Slowed by Fastest Cash Depletion Since 1991. Equity mutual funds are burning through cash at the fastest rate in 18 years, leaving them with the smallest reserves since 2007 in a sign that gains for the Standard & Poor’s 500 Index may slow.
Cash dropped to 3.6 percent of assets from 5.7 percent in January 2009, leaving managers with $172 billion in the quickest decrease since 1991, Investment Company Institute data show. The last time stock managers held such a small proportion was September 2007, a month before the S&P; 500 began a 57 percent drop, according to data compiled by Bloomberg. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aPidmY6Nga30
-Emerging-Market Stocks May Retreat 15%, Aberdeen’s Kaloo Says. Emerging-market stocks will drop as much as 15 percent this year as earnings miss estimates and global growth slows, said Devan Kaloo, who oversees $22 billion at Aberdeen Asset Management Plc. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aHMvgOKxsm0c
-Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. who pays the company for postage and personal phone calls, received a $100,000 salary for a 29th straight year as he arranged a $27 billion acquisition. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aBlND9A1hUwk&pos;=4
-Sir John Templeton’s Last Testament: Financial Chaos Will Last Many Years. Read more here-http://newsmax.com/Ruddy/john-templeton-John-Templeton/2010/03/09/id/352142
-It is difficult to figure out what the equity market is really telling us. Since the market bottomed last March, the economy has shed 3.3mln jobs we have never seen the S&P; rally 50%+ with Nonfarm payrolls falling 3.33mln. David Rosenberg-Gluskin/Sheff
-The question must be asked: wasn’t the reach for yield one of the factors that caused the great credit crisis of 2007-08? It is amazing how so many investors have switched from fear to greed despite the fact that we are still writing chapters in this post-bubble-credit collapse book; so many people still do not realize Return of Capital is more important than Return on Capital.
It is almost a given that we will return to this theme at some point and likely sooner rather than later. The economy is not in some sort of equilibrium state it has been fuelled by high-octane government stimulus in all parts of the planet, especially in the U.S.A., the U.K. and China.
So we have today, as per the latest Investors Intelligence poll, 44.9% bulls versus 23.6% bears; the number of optimists doubles the number of pessimists. Nearly 70% of the investing public has also given up on the idea that we will see a correction over the near-term. Investor complacency is running at a dangerously high level. David Rosenberg-Gluskin/Sheff
-There is this illusion that we are in a sustainable recovery, but instead what has happened is that the government fooled the public by printing massive amounts of money and expanded the Fed’s balance sheet to levels nobody ever thought could be possible.
Meanwhile, all the problems in State budgets are being ignored, as are the huge numbers of either empty houses or houses where the owners are not paying their mortgages, not to mention the changes in some basic accounting rules to help banks hide their losses. David Rosenberg-Gluskin/Sheff
-When the balance sheets of US banks are maintained by suspending accounting rules and when banks hold financial derivatives liabilities greater than world GDP, both the stability and credibility of the banks is questionable.
When US economic data consistently seems to reflect a Pollyanna bias and the US federal budget contains unrealistic projections of GDP growth and tax revenues, while public debt and government liabilities (which now include unlimited bailouts for government sponsored entities Fannie Mae and Freddie Mac) are obviously unworkable and the US government’s own central bank is already a major buyer of US Treasuries, the federal government’s credibility is questionable. Ron Hera-Hera Research-Read more here-http://www.321gold.com/editorials/hera/hera031010.html
-Sovereign debt hangs like an albatross around the necks of too many countries. There are 17 medium-size to large countries that are close to, or are bankrupt. Many are being kept solvent by using two sets of books and by marking to model.
As you know we expect these bankruptcies to take place by the end of 2011. That will be accomplished at meetings such as we saw in the 1970s at the Smithsonian, the Plaza Accord of 1985 and the Louvre Accord of 1987. There will be a realignment of currencies. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1267988400.php or http://news.goldseek.com/InternationalForecaster/1268237004.php
-On the same day that the U.S. government ran up its largest monthly deficit ever, at $221 billion, the Senate approved a $138 billion measure that would extend unemployment benefits and provide additional aid to States in lawmakers’ second major effort this year to boost the economy (but don’t call it stimulus package #3). David Rosenberg-Gluskin/Sheff
-In one month, the U.S. government turned in a deficit that in other times in the not-too-distant past, was what was incurred in a full year (1990, 1991, 1992, 1993, 2002, 2003, 2004, 2005 all come to mind). The fiscal year is a mere five months’ old and already we have seen Washington rack up $652 billion of red ink.
The chamber voted 62-36 for the legislation, which would also extend dozens of expiring tax cuts, ease corporate-pension requirements and heads off cuts in Medicare reimbursements to doctors. It begs the question, if things are so great, why the need for this additional stimulus? David Rosenberg-Gluskin/Sheff
-To be sure, almost without debate, all the financial world has turned to crisis mode. One can safely describe the norm to be crisis proliferation. This theme will clearly continue for the full year in progress. The signs are everywhere. The evidence is compelling. The criticism of remedy is replete with denials. The US Govt officials grow more desperate with each passing week.
The Dubai and Greek debt woes seemed to have opened Pandora’s Box. Review a scattering of distress signals, sit back and tell yourself that all is under control. It is only if you live in a Fantasy Land. Since September 2008, the fantasy has blossomed in full bloom.
The list of distress signals is certain to grow, not reduce. Never in my lifetime have so many loud signals simultaneously been flashing. Forgive me if a few dozen other distress signals were overlooked or omitted. Jim Willie CB-Read more here-http://news.goldseek.com/GoldenJackass/1268253673.php
-Oh yes, and in a green shoot of epic proportions, the media today is treating the news that there were “only” 30 States with rising unemployment in January as a really good thing because it was down from 43 the month before (never mind that five states, including some biggies like Florida and California, reported new highs for their jobless rates); and that home foreclosures (as per RealtyTrac) were “just” 6% above year-ago levels, which was the slowest pace in four years.
This slower rate of foreclosures (nobody discusses the fact that the actual level of foreclosure filings, at 308,424 in February, is absolutely alarming) is NOT a sign that fewer homeowners are in distress but that the long arm of the law from prevention programs, to modification plans, to outright bans have managed to not only cap the number at these horrendous levels but also limit the new supply hitting the market.
If the government goes the “short sale” route of paying off the servicer, the holder of the second lien and the distressed homeowner (to vacate the premises) in order to allow the market to clear, then the amount of supply that will hit the market will very likely trigger another huge round of house price deflation. (Wouldn’t it be nice to at least go to a point where we will finally see price discovery in residential real estate again?) David Rosenberg-Gluskin/Sheff
-Volcker Says Too Soon to Cut U.S. Monetary, Fiscal Stimulus. White House adviser Paul Volcker said it’s too soon for U.S. policy makers to withdraw the stimulus measures and interest-rate cuts used to fight the worst slump since the Great Depression.
“This is not the time to take aggressive tightening action, either fiscally or monetary-wise,” said Volcker in an interview in Berlin yesterday, pointing to “high” unemployment. “So I think we have to, as best as we can, maintain the expectation that it will be taken care of in a timely way.” Read more here-http://www.businessweek.com/news/2010-03-06/volcker-says-too-soon-to-cut-u-s-monetary-fiscal-stimulus.html
-Fed’s Evans Says Low Rates Needed for ‘Some Time’. Federal Reserve Bank of Chicago President Charles Evans said low interest rates are likely to be needed “for some time” as high unemployment lingers and inflation stays below his goal.
“With the unemployment rate at 9.7 percent and inflation significantly under my benchmark for price stability, there is no conflict between our policy goals,” Evans said in the text of a speech in Arlington, Virginia. Weakness in the job market, including long-term unemployment, means that “This accommodation will likely be appropriate for some time.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aoeTgCeNT.bY
-Spence Says U.S. Recovery Will Take ‘Several Years’. The U.S. faces an extended recovery from the recession even after the government infusion of cash into stimulus programs and the banking system, said Andrew Michael Spence, a Nobel laureate in economics.
“Right now the expectations are that somehow the government can magically restore the economy to balance,” Spence said in an interview today on Bloomberg Radio. “A more realistic view is it’s going to take several years.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a_yKsEoR3464
-Collapse of the American Empire: swift, silent, certain. Commentary: Historians warning of a sudden ‘thief at night,’ an ‘accelerating car crash’. “One of the disturbing facts of history is that so many civilizations collapse,” warns anthropologist Jared Diamond in “Collapse: How Societies Choose to Fail or Succeed.”
Many “civilizations share a sharp curve of decline. Indeed, a society’s demise may begin only a decade or two after it reaches its peak population, wealth and power.” Now, Harvard’s Niall Ferguson, one of the world’s leading financial historians, echoes Diamond’s warning: “Imperial collapse may come much more suddenly than many historians imagine.
A combination of fiscal deficits and military overstretch suggests that the United States may be the next empire on the precipice.” Yes, America is on the edge. Read more here-http://www.marketwatch.com/story/story/print?guid=A785423B-4D00-4800-B6F0-815BB41065FA
-Mohamed A. El-Erian, whose company runs the world’s biggest mutual fund, said deteriorating public finances may affect the global economy more than is currently realized. “The importance of the shock to public finances in advanced economies is not yet sufficiently appreciated and understood,” El-Erian, co-chief investment officer at Pacific Investment Management Co., wrote in an article on the Financial Times Web site.
The potential damage from increased government borrowings is “at present being viewed primarily and excessively through the narrow prism of Greece.” Governments may have to raise taxes and slash spending to cope with swelling deficits after borrowing unprecedented amounts to stave off the global financial crisis, said El-Erian, 51, who shares his job title with Bill Gross.
A failure to carry out fiscal measures in time would raise the possibility of governments seeking to eliminate excessive debt through inflation or default, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aloE06VqioYM&pos;=4
-Greek tragedy may be dress rehearsal for bigger crisis. Read more here-http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art;_id=95404&sid;=27324052&con;_type=1&d;_str=&fc;=1
-Foreign versions of our coming crisis. Greece and the United Kingdom are suffering a dire funding problem that is headed for US shores. Read more here-http://articles.moneycentral.msn.com/Investing/currency/foreign-versions-of-our-coming-crisis.aspx?page=all
-Countries compete to weaken their currencies. Read more here-http://www.economist.com/business-finance/PrinterFriendly.cfm?story_id=15606339
-’It’s Going to Be Inflation Everywhere:’ Deputy ‘Doom’. The global economy is entering a next “supercycle” phase that will generate inflation necessary for recovery, a strategist and protege of noted economist Nouriel Roubini told CNBC.
Arun Motianey, director of fixed income strategy at Roubini’s RBG Capital, said the supercycles feature periods of commodity booms followed by busts, and the US economy is on the verge of an inflationary period that will generate a sharp rise in prices.
“We’re heading into a world of inflation because we are highly indebted and we are indebted here in the US economy in the household sector and in the financial sector,” said Motianey, author of the book “SuperCycles.” Read more here-http://www.cnbc.com/id/35795076
-Chinese Foreign Minister Yang Jiechi said on Sunday that relations with the United States had been “seriously disrupted,” after a rise in friction between the two big powers. “The responsibility does not lie with China,” said Yang, speaking at a news conference on the sidelines of the annual session of China’s parliament.
Beijing and Washington have recently gone through a rough patch, with quarrels in January and February over Chinese Internet censorship, trade disputes, U.S. arms sales to Taiwan, and President Barack Obama’s meeting with the Dalai Lama, the exiled Tibetan leader.
The United States “must respect China’s core interests” on Taiwan and Tibet, Yang added. “I believe the United States understands very well China’s core interests and major concerns. Read more here-http://www.reuters.com/article/idUSTRE62605720100307?feedType=RSS&feedName;=topNews&rpc;=22&sp;=true
-Cyberwar declared as China hunts for the West’s intelligence secrets. Read more here-http://technology.timesonline.co.uk/tol/news/tech_and_web/article7053254.ece
-Iran’s Ahmadinejad calls Sept 11 “big fabrication”. Read more here-http://www.reuters.com/article/idUSTRE6251AO20100306
-Iranian President Mahmoud Ahmadinejad warned Gulf countries on Thursday against the U.S. presence in the region, saying Washington aimed to dominate their energy resources in the name of fighting terrorism. Read more here-http://www.reuters.com/article/idUSTRE62A1BM20100311
-Mexico’s Carlos Slim beat Bill Gates and Warren Buffett for the top spot on Forbes magazine’s annual list of billionaires, becoming the first person from outside the U.S. to lead the rankings in 16 years. The net worth of Slim, 70, who built a telecommunications empire after buying Mexico’s state-run phone monopoly two decades ago, rose $18.5 billion to $53.5 billion.
Gates, 54, chairman of Microsoft Corp., fell to second as his net worth increased $13 billion to $53 billion. Buffett, 79, chairman of Berkshire Hathaway Inc., was third with $47 billion, a rise of $10 billion.
Slim is the first person other than Gates, last year’s richest person, or Buffett to top the list since 1994, which was also the last time a billionaire from outside the U.S. led the ranking: Japanese real estate tycoon Yoshiaki Tsutsumi. “We’ve been watching Slim for a while and kind of wondered when the stars would align and he would take over,” Forbes senior editor Luisa Kroll said in an interview today.
More than 80 percent of Slim’s holdings are held in five public stocks, she said. “His net worth really reflects how well those stocks are doing. Everything that he owns has done very, very well this year.” Read more here-http://www.bloomberg.com/apps/news?pid=20601108&sid;=aLMWiIhR31KI
-U.S. Millionaires’ Ranks Rose 16% in 2009, Study Says. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aqmrqS4E3H1Y or http://www.bloomberg.com/apps/news?pid=20603037&sid;=aqmrqS4E3H1Y
-43% have less than $10k for retirement. The percentage of American workers with virtually no retirement savings grew for the third straight year, according to a survey released Tuesday. The percentage of workers who said they have less than $10,000 in savings grew to 43% in 2010, from 39% in 2009, according to the Employee Benefit Research Institute’s annual Retirement Confidence Survey.
That excludes the value of primary homes and defined-benefit pension plans. Workers who said they had less than $1,000 jumped to 27%, from 20% in 2009. Confidence in ability to save enough for a comfortable retirement hovered at 16% of respondents, the second lowest point in the 20-year history of the survey. Read more here-http://money.cnn.com/2010/03/09/pf/retirement_confidence/index.htm
-Household wealth in the U.S. grew in the fourth quarter at a slower pace, limited by a drop in home values that indicates the recovery in consumer spending will take time to gain speed. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=al2hTofSgDiQ&pos;=3
-Global box-office sales increased 7.6 percent to a record $29.9 billion last year, helped by 3-D movies and “Transformers: Revenge of the Fallen.” Ticket sales outside the U.S. and Canada rose 6.3 percent to $19.3 billion, the Motion Picture Association of America said today in an e-mailed statement. U.S. box-office sales increased 10.1 percent to a record $10.6 billion, the MPAA said.
3-D movies boosted U.S. ticket sales last year, accounting for 11 percent of total box-office revenue, up from 2 percent in 2008. Hollywood studios are turning to 3-D films to bolster attendance and ticket sales, underscored by the record box- office success of “Avatar,” James Cameron’s 3-D epic. Cinemas on average charge about $3 more per ticket for a 3-D film. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJk5vJMRVaDA
-Agatha Christie Trunk Bought for $150 Reveals Secrets, Sun Says. A leather trunk once owned by thriller-writer Agatha Christie, bought at auction for 100 pounds ($150) three years ago, contained a secret stash of the author’s gold and diamond jewelry which may be worth as much as 100,000 pounds, the Sun reported, citing the owner.
Jennifer Grant, who described herself as a fan of the creator of the Hercule Poirot and Miss Marple mysteries, heard itemns rattling around in the box but didn’t open it as she had no key; after three years a friend forced it for her and inside was another locked box, containing 50 gold coins, a buckle-shaped brooch, and a diamond engagement ring, the newspaper said.
Valuers said the discovery was worth 100,000 pounds but could be worth five times as much because of the Christie connection, the Sun said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aQqTqt29US1Y
-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
-Colored diamonds at the Oscars. Kate Winslet-Tiffany & Co. yellow diamond necklace created exclusively for her by Tiffany & Co., $2.5 million; yellow diamond bracelets; yellow diamond drop earrings, 10 carats.
Mo’Nique-Chopard princess-cut yellow diamond tennis bracelet; radiant-cut light yellow diamond line bracelet, 46 carats; radiant-cut fancy yellow diamond and white diamond earrings, 17 carats.
Read more here-http://www.idexonline.com/portal_FullNews.asp?id=33773
-Color Rules Diamonds. Nilesh Sheth, president of Nice Diamonds, New York City, said the reason the color diamond market is strong is because of big auction results. Pinks, browns and blues have shot up in price by 50 percent to 70 percent. Sheth sees an uptick in clients looking to invest in larger stones. “The way the dollar is devaluating, consumers want to hedge their investment in tangible assets, like gold and color diamonds.”
Sampat Poddar, president of Byrex Gems Inc., in Toronto, Canada, reported a buyer’s market for yellow diamonds, which he said have soared in popularity during this down economy because of their price advantage. He said consumers can invest $60,000 to $100,000 in a 4-carat white diamond, versus $25,000 to $40,000 in a 4-carat fancy yellow.
In fact, David Goldstein of Goldstein Diamonds in Scottsdale, Arizona, concurred that yellow diamonds are selling well not just because they are a good value, but because they’re undervalued. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=30033
-How diamonds are regaining their sparkle. They’ve been seen as a symbol of enduring love since the 16th Century and long been described as a girl’s best friend. But it is only recently that investors have taken a shine to diamonds. Now people are not only buying the world’s most precious stones to wear, but are also investing, just as they would do with stocks and shares.
While the clarity of diamonds has always been treasured, the multi-billion dollar industry has historically been one of the world’s most opaque, which has been seen as off-putting to potential investors. Paris-based jeweller Alexandre Murat says diamonds are a “paradox”.
“There is emotional implication from the customer as they are bought for happy occasions such as weddings, births and birthdays,” he says. Yet recently, Murat, CEO of Adamence, has had clients clamouring to invest in diamonds. “We have had some clients saying they would like to buy five or ten diamonds. They have explained that because of the financial downturn, they would prefer to invest in diamonds,” he told RFI.
Peter Temple, author of the Handbook of Alternative Assets, says that in a financial downturn people look to invest in assets that they can see, as they lose trust in stocks and bonds. He says this is why gold prices keep breaking records, and diamond prices are set to rise.
Temple says there are various similarities between gold and diamonds. “There’s the scarcity aspect, and both are priced in dollars. And they’re both portable,” he says. “Gold in particular is seen as a store of value, something that will protect your cash at times of high inflation. With diamonds, there is an extreme shortage of supply of high quality stones.”
He says that while gold has already benefitted from this recession, diamonds have some catching up to do. This is because diamond dealers typically rely on loans and credit, which were hard to obtain last year, so diamonds didn’t benefit as quickly as other alternative commodities such as gold, art or wine. He predicts that diamond prices may rise up to 15 per cent this year. Read more here-http://www.english.rfi.fr/print/18140?print=now
-Sotheby’s to sell rare blue diamond in Hong Kong. Sotheby’s said Friday it would auction a rare 5.16-carat blue diamond in Hong Kong to capitalise on the growing appetite for fine jewellery among buyers in China and other Asian countries.
The auction house said the pear-shaped blue diamond from a private collector was expected to fetch up to 5.8 million US dollars at its April sale in Hong Kong, which now rivals Geneva and New York as an international auction hub for rare gemstones.
Sotheby’s said its Hong Kong share of international jewellery sales jumped from 19 percent in 1998 to 34 percent in 2008, overtaking New York to be its second biggest market after Geneva. Terry Chu, deputy head of Sotheby’s jewellery department for China and Southeast Asia, said diamonds were particularly appealing to new Asian buyers because of stable prices and assured quality.
“There have been a lot of new diamond buyers from mainland China, Hong Kong, Singapore, Taiwan and elsewhere in the region,” Chu told AFP. “I think after the financial crisis, the Asian buyers realised that the prices of diamond are relatively stable compared to other types of auction items,” she said.
In December, a five-carat chickpea-sized vivid pink diamond set a per-carat world record price for a diamond after it fetched 10.8 million dollars at an auction held by Christie’s in Hong Kong. The price beat a Hong Kong property tycoon’s 10.5 million dollar winning bid for a seven-carat blue diamond in Geneva in May last year.
Both Sotheby’s and Christie’s said last year that the city had overtaken New York and London as the largest wine market, spurred by China’s economic boom and a rapidly growing demand from deep-pocketed Chinese businessmen for top wine. Read more here-http://www.google.com/hostednews/afp/article/ALeqM5iITB9Zpkp00YfaqHn_hhBakZz6rQ
U.S. DEBT CRISIS
-The U.S. budget deficit widened to a record in February as the government boosted spending to help revive the economy. The excess of spending over revenue increased to $221 billion last month, compared with a shortfall of $194 billion in February 2009, according to Treasury Department figures released today in Washington.
The figures show the deficit this year will likely surpass the record $1.4 trillion in the fiscal year that ended in September. Mounting deficits underscore the challenges facing President Barack Obama and Congress as they seek to preserve the recovery, spur job growth and overhaul the health-care system.
The loss of 8.4 million jobs in the last two years has been limiting tax revenue, while stimulus efforts such as the first- time homebuyer credit have added to expenses. “The Obama administration really has its work cut out for it,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The budget deficit numbers are truly frightening.
This deficit is caused not just by over-spending. The receipts side of the budget ledger is suffering from a monumental recessionary hangover.” The February deficit was in line with the $222 billion economists anticipated, based on the median of 31 estimates in a Bloomberg News survey.
Projections ranged from shortfalls of $180 billion to $225 billion. The non-partisan Congressional Budget Office, in a report issued March 5, projected a deficit of $223 billion for February. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=atTyMe8LTqFo&pos;=2
-CBO: $10 trillion jump in debt under Obama budget. If President Obama’s 2011 budget were put into effect as proposed, the U.S. federal government would add an estimated $9.8 trillion to the country’s accrued debt over the next decade, according to a preliminary analysis from the Congressional Budget Office.
Of that amount, an estimated $5.6 trillion will be in interest alone. By 2020, the agency estimates debt held by the public would reach $20.3 trillion, or 90% of GDP. That’s up from 53% of GDP in 2009. Research done by economists Kenneth Rogoff and Carmen Reinhart has shown that such high levels of debt can cause a drag on economic growth.
The CBO cited two big contributors to the jump in debt. Read more here-http://money.cnn.com/2010/03/05/news/economy/cbo_obama_budget/index.htm or http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVDEHvI9WH_Q&pos;=8
-Long-Term U.S. Budget Gap Threat to Borrowing, Economists Say. Annual budget deficits in excess of $1 trillion will, over time, hamper the U.S.’s ability to borrow, and more government stimulus isn’t needed, a survey by the National Association for Business Economics showed.
Budget shortfalls and rising debt relative to gross domestic product will become a bigger problem as entitlement payments grow, according to the poll taken Feb. 4 to Feb. 22. Eighty percent of economists surveyed said a growing deficit will result in higher borrowing costs for the nation.
“The running of large budget deficits and the fiscal stimulus are a natural consequence of a deep recession, but this is definitely a concern in the intermediate and long run,” said Lynn Reaser, president of NABE and chief economist for Point Loma Nazarene University. “It means higher interest rates that will slow potential growth.” Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=adN1GpAzKgr8
-Casey Research Chief Economist Bud Conrad argues interest rates will rise as the U.S. fails to pay down debt. Watch more here-http://www.caseyresearch.com/articles/3261/economist-on-outlook-for-u.s.-debt-/ and http://www.caseyresearch.com/displayCdd.php?id=365
U.S. BANKING CRISIS
-Regulators on Friday shuttered banks in Florida, Illinois, Maryland and Utah, boosting to 26 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.
The Federal Deposit Insurance Corp. took over Sun American Bank, based in Boca Raton, Fla., with $535.7 million in assets and $443.5 million in deposits. Also seized were Bank of Illinois of Normal, Ill., with $211.7 million in assets and $198.5 million in deposits; Waterfield Bank in Germantown, Md., with $155.6 million in assets and $156.4 million in deposits; and Centennial Bank in Ogden, Utah, with $215.2 million in assets and $205.1 million in deposits. Read more here-http://finance.yahoo.com/news/Banks-shuttered-in-Fla-Ill-Md-apf-2958911227.html?x=0
-‘On the Edge’ Banks Facing Writedowns After FDIC Loan Auctions. A Federal Deposit Insurance Corp. plan to auction more than $1 billion in assets seized from failed banks next month, including a loan to build a W Hotel in Atlanta, may trigger writedowns that weaken lenders nationwide.
Almost half of the loans were originated by Silverton Bank N.A., whose collapse last May was the biggest in Georgia history. Community banks that joined Silverton in providing $80 million for the 237-room hotel and condominium complex, as well as backing for 39 other projects, could be forced to write down their stakes to reflect sale prices.
The auctions may have wider repercussions. Of the $41 billion in assets seized from failed banks held by the FDIC as of the end of January, $15.6 billion are real estate loans and about 4 percent of those involve participations by other lenders, according to agency spokesman Andrew Gray.
“These banks can’t believe that the regulator they pay to protect them is going to sell these loans to someone who can flip them and cause them serious losses,” said Robert Reynolds, a lawyer at Reynolds Reynolds & Duncan LLC in Tuscaloosa, Alabama, who represents 25 lenders that took part in financing the W Hotel. “Our banks just cannot believe they’re being treated in a way that ultimately hurts the FDIC’s insurance fund, because some of them are right on the edge.” Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=axnpzq.OM0BY
-Ailing Banks May Require More Aid to Keep Solvent. Some of the nation’s large banks, according to economists and other finance experts, are like dead men walking. A sober assessment of the growing mountain of losses from bad bets, measured in today’s marketplace, would overwhelm the value of the banks’ assets, they say. The banks, in their view, are insolvent.
None of the experts’ research focuses on individual banks, and there are certainly exceptions among the 50 largest banks in the country. Nor do consumers and businesses need to fret about their deposits, which are federally insured. And even banks that might technically be insolvent can continue operating for a long time, and could recover their financial health when the economy improves.
But without a cure for the problem of bad assets, the credit crisis that is dragging down the economy will linger, as banks cannot resume the ample lending needed to restart the wheels of commerce. The answer, say the economists and experts, is a larger, more direct government role than in the Treasury Department’s plan outlined this week. Read more here-http://www.nytimes.com/2009/02/13/business/economy/13insolvent.html?_r=3&emc;=eta1&pagewanted;=print
-Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash. The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system, said people briefed on the matter. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aDuLDy3OUFmg
U.S. STATES AND CITIES IN FINANCIAL CRISIS
-States’ Payrolls Lag as U.S. Austerity Sets In: Chart of Day. U.S. state and local governments are likely to keep cutting jobs even as the broader labor market shows signs of emerging from the worst slump since World War II, economists said.
The chart of the day shows combined employment by state and local governments fell for eight straight months through February. The streak of losses was the longest since two years of declines ending in 1983. State and local governments, which account for about 13 percent of gross domestic product, have so far cut a total of 192,000 jobs since August 2008, when employment peaked at 19.8 million.
“There’s a lot of state and local government cutbacks still coming ahead,” David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto, said in a Bloomberg Radio interview today. State and local governments are scaling back as a decline in property values erodes their tax base. Forty-nine of the fifty states are legally bound to balance their budgets. Read more here-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a0AJDADVP_N8
-State Tax Revenues Plummet By $87 Billion, Biggest Year Over Year Decline In History; Record State Tax Hikes In Progress. Read more here-http://www.zerohedge.com/article/state-tax-revenues-plummet-87-billion-biggest-year-over-year-decline-history-record-state-ta
-This year, more Americans and businesses may be asking: Where’s my tax refund? That’s because cash-strapped states such as North Carolina, Alabama and Hawaii have been forced to slow down issuing income tax refunds to individuals and businesses because of a lack of funds in their budget.
Kansas has hinted that a delay might be possible, and processing paper refunds in Iowa has slowed because the state doesn’t haven’t enough employees to get them processed faster. Another state, New York, is still considering whether they’ll follow the likes of Hawaii and delay refund payments.
“States typically do this when they are tight and they don’t have a budget in place,” said Karla Dennis, CEO of Cohesive, a nationwide tax preparation firm. Things are dire at many states: forty-one states are expected to have mid-year budget gaps totaling $37.7 billion, according to the Center on Budget and Policy Priorities.
Delaying the refund, Dennis says, “gives the state funds to work with in the interim to fill a gap in their revenues.” Hawaii’s Department of Taxation announced last month that it will delay income tax refunds until July 1, when processing and payments will resume on a “first-in-first-out basis,” according to a news release.
The state is delaying the funds to alleviate a $721 million revenue shortfall for the fiscal year ending June 30, 2010. Read more here-http://finance.yahoo.com/news/CashStrapped-States-Delay-cnbc-3787752102.html?x=0&.v=1
-IL Needs $4.7 Billion Loan to Stay Afloat. Read more here-http://www.chicagotribune.com/news/elections/ct-met-quinn-state-budget-0310-20100309,0,4279309.story
-Virginia Hands Out 6996 Traffic Tickets In One Weekend In An Effort To Raise Revenue For The State Government. Read more here-http://theeconomiccollapseblog.com/archives/virginia-hands-out-6996-traffic-tickets-in-one-weekend-in-an-effort-to-raise-revenue-for-the-state-government
-Detroit, the largest U.S. city whose debt is rated below investment grade, will ask investors today to buy $250 million of its debt without having filed annual financial reports on time for five years.
The city, which warned investors in its preliminary official statement of the possibility of filing for Chapter 9 bankruptcy protection, is providing a June 30, 2008, financial statement, its most recent, to investors.
A fiscal 2009 report is expected to be complete by May 31, said city spokesman Dan Lijana, in an e-mail. “This issue is not for the faint of heart,” said Richard Ciccarone, chief research officer of Oak Brook, Illinois-based McDonnell Investment Management, which oversees $6.8 billion of municipal debt. “It certainly raises eyebrows.” Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a0Fn11eGgZIo
-Detroit looks at downsizing to save city. Detroit, the very symbol of American industrial might for most of the 20th century, is drawing up a radical renewal plan that calls for turning large swaths of this now-blighted, rusted-out city back into the fields and farmland that existed before the automobile.
Operating on a scale never before attempted in this country, the city would demolish houses in some of the most desolate sections of Detroit and move residents into stronger neighborhoods. Roughly a quarter of the 139-square-mile city could go from urban to semi-rural.
Near downtown, fruit trees and vegetable farms would replace neighborhoods that are an eerie landscape of empty buildings and vacant lots. Suburban commuters heading into the city center might pass through what looks like the countryside to get there. Surviving neighborhoods in the birthplace of the auto industry would become pockets in expanses of green.
Detroit officials first raised the idea in the 1990s, when blight was spreading. Now, with the recession plunging the city deeper into ruin, a decision on how to move forward is approaching. Mayor Dave Bing, who took office last year, is expected to unveil some details in his state-of-the-city address this month.
“Things that were unthinkable are now becoming thinkable,” said James W. Hughes, dean of the School of Planning and Public Policy at Rutgers University, who is among the urban experts watching the experiment with interest. “There is now a realization that past glories are never going to be recaptured. Some people probably don’t accept that, but that is the reality.” Read more here-http://www.washingtontimes.com/news/2010/mar/09/detroit-looks-at-downsizing-to-save-city//print/
-Michigan public schools will lay off thousands of employees and more than 100 districts could be insolvent if the state doesn’t find a way to plug a $400-per-pupil funding shortfall in funding next year. Read more here-http://www.freep.com/article/201003081206/NEWS06/100308030
-Facing potential bankruptcy, the board that governs the once flush-with-cash Kansas City school district is taking the unusual and contentious step of shuttering almost half its schools. Administrators say the closures are necessary to keep the district from plowing through what little is left of the $2 billion it received as part of a groundbreaking desegregation case.
The Kansas City school board narrowly approved the plan to close 29 out of 61 schools Wednesday night at a meeting packed with angry parents. Although other districts nationwide are considering closures as the recession ravages their budgets, Kansas City’s plan is striking.
In rapidly shrinking Detroit, 29 schools closed before classes began this fall, but that still left the district with 172 schools. Most other districts are closing just one or two schools. Read more here-http://apnews.myway.com/article/20100311/D9ECADAG0.html
-Detroit homes sell for $1 amid mortgage and car industry crisis. One in five houses left empty as foreclosures mount and property prices drop by 80%. Read more here-http://www.guardian.co.uk/business/2010/mar/02/detroit-homes-mortgage-foreclosures-80
U.S. UNEMPLOYMENT CRISIS
-Unemployment rises in 30 states in January. Unemployment rose in 30 states in January, the Labor Department said Wednesday, evidence that jobs remain scarce in most regions of the country.
The data is somewhat better than December, when 43 states reported higher unemployment rates, but worse than November, when rates fell in most states.
Still, five states reported record-high joblessness in January: California, at 12.5 percent; South Carolina, 12.6 percent; Florida, 11.9 percent; North Carolina, 11.1 percent; and Georgia, 10.4 percent.
Michigan’s unemployment rate is still the nation’s highest, at 14.3 percent, followed by Nevada, with 13 percent and Rhode Island at 12.7 percent. South Carolina and California round out the top five. Read more here-http://www.breitbart.com/article.php?id=D9EBTPKO0&show;_article=1 and http://www.bloomberg.com/apps/news?pid=20601110&sid;=aLnS6JIz3joo
-Unemployment tops 20% in eight California counties. The state’s jobless rate of 12.5% in January was its worst on record and fifth-highest in the nation. Read more here-http://www.latimes.com/business/la-fi-cal-jobs11-2010mar11,0,3667613.story
-All of this noise obscures the big picture of what the labour market “should” be doing in the context of all the stimulus in the system and where we are in the economic cycle. If this was a normal post-recession recovery phase, which it clearly is not, we would be seeing over 100,000 in terms of job creation.
(In fact, in the eight months following a bottoming in output, employment normally rises by a million it is down by that amount this time around.) That is actually understating the situation. If this was a normal monetary policy cycle, then we would be creating 150,000 jobs by now because that is what we usually get 2½ years after the Fed begins to ease. David Rosenberg-Gluskin/Sheff
-Most American job losses in recent decades were due to outsourcing to more competitive economies, because of the harmful effects of our domestic government policies. Big spending by government now is unlikely to cure this deleterious situation. The only realistic solution is to shrink government and remove subsidies and guarantees to big business.
The United States must become fundamentally competitive once again by unleashing the power of the entrepreneurial spirit. Otherwise, the “giant sucking sound” of good jobs heading overseas, as Ross Perot famously described it, will only grow louder. John Browne Senior Market Strategist Euro Pacific Capital, Inc-Read more here-http://www.321gold.com/editorials/browne/browne031010.html
-Are unemployment benefits no longer temporary? Millions of Americans have been forced to rely on unemployment payments for extended periods as the nation struggles through its longest period of high joblessness in a generation, and critics are taking aim, saying that the Depression-era program created as a temporary bridge for laid-off workers is turning into an expensive entitlement.
About 11.4 million out-of-work people now collect unemployment compensation, at a cost of $10 billion a month. Half of them have been receiving payments for more than six months, the usual insurance limit. But under multiple extensions enacted by the federal government in response to the downturn, workers can collect the payments for as long as 99 weeks in states with the highest unemployment rates the longest period since the program’s inception.
The unemployed say extensions help to tide them over in unusually difficult times when jobs are hard to come by. Although unemployment held steady at 9.7 percent in February, millions of jobs have been lost in the downturn, particularly in the hardest-hit sectors including real estate, construction, manufacturing and financial services. Those jobs are unlikely to return even when the economy recovers, many experts say. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2010/03/08/AR2010030804927_pf.html
U.K. FINANCIAL CRISIS
-UK ‘would still be recession’ without £200bn Bank of England cash injection. Britain would still be in recession if the Bank of England’s quantitative easing programme had not been introduced, economists said on Thursday, as the Bank’s Monetary Policy Committee (MPC) voted against extending the scheme on the anniversary of its inception. Read more here-http://www.telegraph.co.uk/finance/economics/7370220/UK-would-still-be-recession-without-200bn-Bank-of-England-cash-injection.html
-Fitch warns Britain and questions Greek rescue as sovereign risks grow. Fitch Ratings has delivered a serious blow to the credibility of the Government’s budget plans, warning that Britain risks a loss of investor confidence and erosion of its AAA rating unless it maps out clear austerity measures. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7407663/Fitch-warns-Britain-and-questions-Greek-rescue-as-sovereign-risks-grow.html
-Iceland’s citizens voted “no” in a referendum Saturday on repaying Britain and the Netherlands $5 billion in losses that their governments incurred by repaying account holders after the collapse of the Icesave bank. Read more here-http://www.france24.com/en/20100307-iceland-votes-down-deal-pay-bank-collapse-bill-icesave-referendum
CANADIAN DOLLAR HEADING TO PAR
-The Canadian dollar, or loonie as it is affectionately called here, is likely to soar above parity with the US greenback this year, experts at a Canadian bank said Wednesday. Canadian Imperial Bank of Canada (CIBC) chief economist Avery Shenfeld said the Canadian dollar had already gained several cents in recent weeks as the market firms up expectations of an interest rate hike in July.
If as expected, the central bank “is out in front of the US Federal Reserve by a couple of quarters” in raising interest rates, the Canadian dollar could reach 1.02 dollars versus the US dollar by September, before dipping back to 0.97 dollars by year end,” Shenfeld said.
The Bank of Canada has maintained its key lending rate at a historic low of 0.25 percent since April 2009 to help bolster a fragile economic recovery, but is widely expected to review its position mid-year. CIBC said other factors were also aligning to push up the value of Canada’s currency such as increased demand for oil, minerals and fertilizers; resurgent capital markets; and global debt fears.
“If the capital markets finally get an appetite for M&A; (mergers and acquisitions) then Canada could be one of the first places to see the benefit of foreign inflows,” said CIBC analyst Zafar Bhatti. Or “if the investing world starts looking for a place to park capital in the wake of deteriorating sovereign credits then Canada would look very attractive,” Bhatti said in a report.
Since the beginning of the year, the Canadian dollar has appreciated 2.5 percent against the US dollar and more than seven percent against the euro. The loonie last achieved parity with the US greenback in 2008, and previously hit a record 1.10 dollars in 2007. Read more here-http://news.yahoo.com/s/afp/20100310/wl_canada_afp/canadaeconomyforexus_20100310191857
REAL ESTATE-MORTGAGES-FORECLOSURES
-U.S. home prices fell 13 percent last year to a median of $172,500, the largest annual drop since the 1930s, according to the National Association of Realtors. The decline followed a 9.5 percent drop in 2008, NAR said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aHh4J2rgAp4o
-Home prices continued to weaken in many U.S. markets during January as the impact of government tax credits on housing demand lost momentum, real estate Website Zillow.com said on Tuesday.
Nationally, while the annualized appreciation rate continued to rise, increasing from negative 5.5 percent in December to negative 4.8 percent in January, home values fell 0.33 percent from the prior month, a slightly larger monthly depreciation than the 0.27 percent recorded in December, according to Stan Humphries, chief economist at Zillow. Read more here-http://www.reuters.com/article/idUSN0924758020100309
-Commercial real estate owners are walking away from properties that have become untenable as investments, just as homeowners have walked away from houses they can no longer afford to pay off or sell. The latest commercial property owner to do this is Vornado Realty Trust (VNO), the $13 billion real estate investment trust, which warned last week that it would walk away from two loans totaling $235 million.
The trend is likely to escalate in coming months as more loans mature and refinancing remains difficult and costly. As with residential properties, there is less incentive for owners to hold on to properties when the buildings are worth less than what is owed on their mortgages.
“Frankly, I am surprised that we have not seen a lot more,” said Rob Little, chief investment officer of Cornerstone Real Estate Advisers LLC, with $32 billion under his management. Read more here-http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201003100949dowjonesdjonline000431&title;=commercial-real-estate-owners-beginning-to-walk-away-from-properties
-U.S. foreclosure filings rose at the slowest pace in four years in February as the government sought to reduce record bank seizures, RealtyTrac Inc. said. A total of 308,524 properties received a notice of default, auction or seizure last month, or one in 418 households, the Irvine, California-based seller of default data said today in a statement.
Filings rose 6 percent from a year earlier, the smallest increase since RealtyTrac began tracking annual changes in January 2006. They declined 2 percent from January. The Obama administration’s main effort to keep people in their homes resulted in more than 830,000 trial loan modifications for delinquent borrowers through January, according to the Treasury Department.
Still, filings were up for the 50th straight month in February on an annual basis and topped 300,000 for the 12th consecutive month, RealtyTrac said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aG9baTTb6F.E&pos;=3
-Program Will Pay Homeowners to Sell at a Loss. In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave.
This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions.
More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.
For the administration, there is also the concern that millions of foreclosures could delay or even reverse the economy’s tentative recovery the last thing it wants in an election year. Read more here-http://www.nytimes.com/2010/03/08/business/08short.html?emc=eta1
-Vineyard Defaults Surge as Lost Land Values Undermine Napa Wine. In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands.
As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.”
“We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”
Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak, driven in part by slumping demand for high-end wine, said Robert Nicholson, principal at International Wine Associates, a consulting and financing firm in Healdsburg, California. The decline makes it harder for owners to refinance mortgages, especially if the property is worth less than the loan. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a07OY80yg4Rs
-Hard times for British expats in the Florida sun. Florida’s once-booming housing market is at the heart of America’s financial crisis. In 2006, an average family home was $248,000; by 2009, that had fallen to $142,000. Read more here-http://www.guardian.co.uk/business/2010/mar/08/florida-property-slump-british-expats
© 2012, Worldwide Precious Metals Canada Ltd.
www.wwpmc.com
The Goldbugg Report – March 16, 2010
Posted by Worldwide Precious Metals on Tuesday, March 16, 2010
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