Newsroom
The World Financial Report – May 18, 2010
May 18, 2010
-Silver Price Manipulation Investigation Focused On JPMorgan Chase. Read more…
-$5,000 an Ounce in Sight as Gold Hits New All-Time High. Why buy precious metals now? So why are investors buying gold and silver now? Risk diversification in the face of mounting government debt levels around the world is the simple reason. Read more…
-Investor interest in silver to remain strong over several years, CPM, New York metals consultants.
GOLD
-Yet another reason why you should deal with Worldwide Precious Metals. After gold exchange’s collapse, attorneys hunt for missing $29.5 million. Read more here-http://www.bellinghamherald.com/2010/05/13/1429143/after-gold-exchanges-collapse.html
-Watch Worldwide Precious Metals power point presentation on investing in precious metals. Watch video here-http://www.youtube.com/watch?v=qJ_cjvb-eMo&feature=youtu.be
-Worldwide Precious Metals Live Metals Quotes. See quotes here-http://www.wwpmc.com/quotes.aspx
-Read Testimonial letters from happy Worldwide Precious Metals clients. Read letters here-http://www.wwpmc.com/testimonials.html
-Follow Lucas Bugg from Worldwide Precious Metals on Twitter. Follow Lucas here-http://twitter.com/TheGoldbugg
-Chart of the week: The Ultimate Rejection Of The Euro. Gold is making new highs in dollars, but its performance in Euros is just breathtaking a straight line up in recent days. With its surge today and the euro’s continuous fall, we’re easily taking out all time highs, a clear symbol that with all the printing of Euros in days ahead, folks are flocking to the comfort of gold. Read more here-http://www.businessinsider.com/chart-of-the-day-gold-price-euro-2010-5
-Peter Schiff speaks about $10,000 gold on CNBC Fast Money May 11 2010. Watch video here-http://www.youtube.com/watch?v=ikF54jVGlwE
-JP Morgan: Gold Could Now Face ‘Unlimited’ Demand. JP Morgan’s John Bridges believes the latest breakout for gold was a huge positive sign for the metal. Euro weakness fears, coupled with dollar weakness fears, could lead to an enormous amount of demand.
JP Morgan: A German banker once told us that gold normally trades like a commodity. However, when investors lose confidence in currencies, because the pool of gold is so much smaller than the pool of currencies, demand for gold can effectively become unlimited.
We believe the European version of “QE” is generating serious currency worries and led today to the breakout of the gold price above the previous intraday high at $1,226/oz. We see this breakout as significant: The market might have welcomed the European’s latest solution to the Greek crisis with a weaker gold price.
If the gold price had fallen, bears could have pointed to a “double top” in the chart, and this could have contributed to a period of weakness for the metal. They’re recommending exposure both through gold and gold-related stocks, as insurance, since despite the fact that gold is a record price levels, they believe that it could feasibly go far higher.
Guessing just how wild investors will get for an asset is still a horribly tricky game nonetheless. Read more here-http://www.businessinsider.com/jp-morgan-gold-now-could-face-unlimited-demand-2010-5?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29
-Panic Buying Of Physical Gold In Europe Threatens Depletion Of Austrian Mint. Read more here-http://www.zerohedge.com/article/panic-buying-physical-gold-europe-threatens-depletion-austrian-mint and http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=104788&sn=Detail&pid=34
-U.S. gold coin sales surge as investors flee risk. Read more here-http://www.gata.org/node/8614 and http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=104565&sn=Detail&pid=34
-Investor demand for small gold bars and minted products has jumped tenfold since the start of this year, the Swiss refinery Argor-Heraeus said on Wednesday. Read more here-
http://www.busrep.co.za/index.php?fArticleId=5467265&fSectionId=630&fSetId=662
-Gold glitters. In the aftermath of the Lehman collapse, gold faltered as there was a huge margin call everywhere and investors seeking liquidity sold off their winners. The secular bull market for bullion did not end at the time, no long-term trendline was violated, and gold did rise in non-U.S. dollars and far outperformed other currencies.
But what happened during this recent round of intense European-led volatility and financial market weakness was that gold rallied even in U.S. dollar terms, which is significant seeing as there were large-scale safe-haven inflows into greenbacks.
So this time, gold has managed to hit new highs in all currencies, and gold rallied even with the overall commodity complex slipping noticeably over the past few weeks. This is a sign. Of what, you may ask? That gold is no longer trading just as part of the resource sector but is now taking on the characteristics of a currency.
While the U.S. dollar has gained ground since late last year, there is no doubt that an Administration that has a stated policy of doubling exports in the next five years to “support” two million jobs absolutely craves a depreciating greenback. Meanwhile, a new socialist government in Japan wants a weaker yen.
Sterling has only one way to go in an environment of heightened political uncertainty and a balance sheet that is at least as extended as Greece. And the ECB just gave notice with its agreement to buy sovereign and corporate debt that it is willing to distort the pricing of risk in the bond market for the greater good of helping profligate countries to avoid either defaulting or certainly help them finance their obligations at a subsidized cost.
The Bundesbank, this is not. So gold is no government’s liability and the shape and shift in its supply curve is the shape would seem to be a little easier to make out than fiat currency. We may end up being overly conservative on our peak gold price forecast of $3,000 an ounce. David Rosenberg-Gluskin/Sheff
-$5,000 an Ounce in Sight As Gold Hits New All-Time High. Why buy precious metals now? So why are investors buying gold and silver now? Risk diversification in the face of mounting government debt levels around the world is the simple reason.
Normally a flight to safety would mean buying government bonds but as government debt is at the heart of the economic problems of the world then logically buying government debt is a bad idea. You also do not need to be a hedge fund rocket scientist to understand the position in the bond market.
Governments around the world have forced interest rates to artificially and unsustainably low levels to combat the global financial crisis. Low interest rates mean high bond prices. Ergo as soon as interest rates go up as they will have to sooner or later bond prices will fall.
Hence if you want to keep your money out of bonds and when bond markets correct it can be sudden, without warning and the fall dramatic then precious metals and, or cash are your best option.
The real kicker for gold, and even more for silver, is in the supply and demand position.
Precious metals are in limited supply that indeed is their great strength as a store of wealth so once the shift out of bonds accelerates so will the price of gold and silver. Now government bond markets are far bigger than global stock markets while precious metals are amongst the smallest of major asset classes.
Pouring this quantity of money into a very narrow precious metals market will send gold and silver prices through the roof. $5,000 an ounce for gold is a very conservative forecast under these circumstances. Peter Cooper-Read more here-http://news.goldseek.com/PeterCooper/1273672978.php and http://news.goldseek.com/PeterCooper/1273498423.php
-Louise Yamada-Gold 1,350-1,500 on the way to 2,000. Watch more here-http://www.cnbc.com/id/15840232?video=1487900029&play=1 and http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/5/8_Louise_Yamada__Gold_%241%2C350-%241%2C500_On_The_Way_to_%242%2C000.html
-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1273474800.php
-Gold investment still has a long way to run Murenbeeld. Even as the yellow metal hits new highs, the outlook looks good. Martin Murenbeeld, Chief economist at Dundee Wealth Economics, said, however that he believes investment demand for gold, “investment demand for commodities generally is in early days. This is only just starting to develop.”
He adds, anecdotally, that while travelling around America he notes that more and more people are beginning to question the current financial situation. “Americans and Canadians by and large never thought about currency debasement. This was something that maybe an old German would think about or Asians and Latin Americans.
But not North Americans but that has changed. So that’s number one that there is a concern among investors that not all is right with the financial world and they don’t fully understand it. They think central bankers might be debasing their currencies and so there is an interest developing in gold.”
The second reason for his belief that gold investment is in its infancy is that while in recent times we have gotten used to the idea that jewellery demand was what drove the market, when you go back into a little bit further history, that is not the case.
“Before the Bretton Woods collapse in 1968 or thereabouts, central bankers were big buyers of gold. In fact jewellery offtake that is as a percent of mine supply jewellery offtake was less than 50% because after the Bretton Woods system broke down, there was no immediate offtake by central banks and by default jewellery demand took over.
“I think we’re going back to an earlier period in the gold market where both the emerging central banks are looking at gold and buying gold for investment purposes or portfolio diversification purposes and now, also the private sector is looking at gold for portfolio diversification reasons and precautionary reasons, and that is the role that gold always served – mostly at the central bank level but of course also at the private level.”
On top of this structural shift, he says, everything that’s happened in Europe over the last while is very positive for the gold price.” “The key here is that the European Central Bank is expected to end up having to print money.
One of our fundamental gold factors is world liquidity. For us that’s one of the most important factors in the gold market even more important than for example what the value of the US Dollar is. So when we see central bankers standing ready to “print” that is buy paper in the market, we think gold prices will go higher.
That’s really how the gold market reacted all last week to the developments that were more specifically related to Greece. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=104730&sn=Detail&pid=33
-Has Gold Become A New Reserve Currency? Read more here-http://theeconomiccollapseblog.com/archives/has-gold-become-a-new-reserve-currency
-The gold standard: The case for another look. Read more here-http://www.gata.org/node/8632
-Gold has bugs gasping, gloating but still bullish. Read more here-http://www.marketwatch.com/story/story/print?guid=B29E3FEC-67D2-41F2-BF40-CF6DA59AD06F
-The S&P is now down 8% year to date when expressed in ounces of gold. Read more here-http://www.zerohedge.com/article/it-getting-ugly-quick-fiat-land-sp-now-down-8-ytd-non-dilutable-terms
-James Turk: An interesting perspective on house prices in relation to gold. Read more here-http://goldmoney.com/an-interesting-perspective-on-house-prices.html
-IMF plots world money issuance without accountability, Rickards tells King. Rickards expects gold to rise to $2,000 in the near term and $5,000 in the long term. Listen here-
-Gold bulls in the ascendant in New York. The New York Hard Assets investment conference ended on an upbeat note with gold hitting new highs while speakers were unanimously bullish on gold’s prospects. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=104747&sn=Detail&pid=33
-IMF sells more gold but is it selling into a rising market? The IMF Sold 18.5 tonnes of gold in March. When the IMF sold gold back in the second half of the ‘70s the price rose and rose. Will history repeat itself? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=104076&sn=Detail&pid=33
-In a hugely volatile week gold retains its hedge characteristics. Over the week, the price of gold breach of the key resistance of US$1160 and it’s jump to US$1200 indicates a possible move to US$1260 in the short-term. David Levenstein-Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=104601&sn=Detail&pid=33
-Ron Paul: Is there any gold in Fort Knox? Listen here-http://www.gata.org/node/8629
-Jeff Christian’s CPM Group explains how they make paper gold. Read more here-http://www.gata.org/node/8627
-Manipulation of precious-metals market under fire. Read more here-http://www.gata.org/node/8609
-Metals market manipulation complaints gain credibility, Wealth Daily says. Read more here-http://www.gata.org/node/8628
-Michael Snyder: People are realizing that LBMA system has little gold. Read more here-http://www.gata.org/node/8618
-On CNBC, GLD is dissed for not investing in physical gold. Watch more here-http://www.gata.org/node/8639
-Abu Dhabi hotel installs gold vending machine. There’s no mistaking what’s in this vending machine. The well-heeled in the Gulf can now grab “gold to go” from a hotel lobby in the United Arab Emirates, when the need for a quick ingot strikes. Read more here-http://news.yahoo.com/s/afp/20100513/od_afp/uaegoldoffbeat_20100513120103
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
-First Gold, Now Europe Running Out Of Silver. Earlier we noted that the Austrian mint was on its way to depleting its gold reserves following “panicked buying” from Europeans, who now openly fear the demise of their currency.
Now, courtesy of Slim Beleggen, we understand that the situation in the silver market is just as bad and has also spilled over to Germany: the contagion is no longer one of sovereign debt, but of precious metal physical inventory.
The primarily silver focused (but holding gold as well) Kronwitter precious metal online retailer is not only not accepting any orders, but has entirely taken down its website. Read more here-
http://www.zerohedge.com/article/first-gold-now-europe-running-out-silver
-Silver, in particular, holds explosive potential right now. On Friday May 7, the metal shot up 73 cents (4.13 percent) for no apparent reason. But the cause may have surfaced over the weekend, with a news story in the New York Post that the Commodity Futures Trading Commission and the Justice Department were opening civil and criminal investigations into possible manipulation of the silver market by JPMorgan Chase.
This was blockbuster news, with huge implications. Short-term, it may have prompted a short-covering rally in silver last Friday. Longer-term, it may force JPM and other major silver shorts into covering their positions which could very quickly force silver far higher. Brien Lundin-Read more here-http://www.gata.org/node/8636
-Feds probing JPMorgan trades in silver pit. Read more here-http://www.gata.org/node/8617
-Silver Price Manipulation Investigation Focused On JPMorgan Chase. Read more here-http://www.thestreet.com/print/story/10753883.html
-In Treasury report, shocking evidence of silver price suppression. Read more here-http://www.gata.org/node/8611 and http://news.silverseek.com/SilverSeek/1273257866.php
-Investor interest in silver to remain strong over several years CPM. New York metals consultants CPM Group says investors remain concerned about financial market and economic conditions and continue to hoard large amounts of silver.
New York metals consultants, CPM Group, forecasts that investment demand for silver will remain firm this year and may even surpass last year, when investors bought an estimated 209.7 million ounces of bullion. In its annual Silver Yearbook 2010 which was made public today, CPM projects that investors will purchase another 213.9 million ounces in 2010.
“Given the severity of today’s financial imbalances, and the fact that major governments have allowed them to compound over the ensuing three decades, it seems fair to assume that investors will remain concerned about their financial futures for years to come, and consequently remain interested in buying more silver to add to their portfolio,” CPM’s analysts said.
“Thus it is reasonable to assume that investors will continue to add large volumes of silver to their inventories in 2010 and for the next several years.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=104696&sn=Detail&pid=102055
-Investor Demand for Silver Is Projected to Remain Strong CPM Silver Yearbook 2010. Read more here-http://www.kitco.com/reports/CPM_May112010_A.html
-Slim to dig deep for silver miner. Money is no object for Carlos Slim. The Mexican telecoms and cement tycoon is one of the world’s richest individual and worth around £35bn. He wants to diversify into mining and so his team of top financial advisers have been busy running the slide rule over Fresnillo, the world’s largest primary silver and gold producer. Read more here-
http://www.dailymail.co.uk/money/article-1273418/Carlos-Slim-dig-deep-Fresnillo.html#
-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1273468402.php
-Ted Butler weekly interview with King World News. Listen here-http://www.gata.org/node/8616
-While silver has outperformed gold in recent months, it has massively underperformed gold over the long term. Gold is now nearly 50% above its nominal high in 1980 (1235/850) while silver remains less than 60% (19.4/50) off its nominal high in 1980. In the historic financial and economic times we are living through, it is prudent to have a historic perspective and not get caught up solely in the noise of daily and weekly figures.
Investors continue to view silver as gold’s ugly sister and it is rarely covered in the media. There has been no talk of retail investors, pension funds, or large hedge funds investing in silver as of yet. This will change in the coming months and this is when silver is likely to really move up in price. Goldcore.com
-Silver remains under the radar of investors despite its sterling performance in recent years and strong fundamentals. Silver remains undervalued versus gold and could rise to over $25 per ounce in the coming months. A close above resistance near the high of March 18th, 2008 at $21/oz could see silver go parabolic as it did in the 1970s when conditions were far more benign than they are today. Goldcore.com
-Silver remains very undervalued on a historical basis vis-à-vis commodities, gold and other precious metals. The gold/silver ratio remains favourable to silver at 63.5 and the ratio is falling. The “poor man’s gold” remains far from recent record highs and long term record (nominal) highs near $50/oz in 1980.
Silver could be the surprise outperformer in 2010 as it was in 2009. Silver’s industrial uses should mean that the gold/silver ratio will likely gradually regress to the average in the last 100 hundred years around 45:1. If the tiny silver market was to see real funds enter it, the ratio could return closer to the historical average of 15:1.
This occurred as recently as in 1968 and in 1980 and this time around could result in silver surpassing its 1980 nominal high at $50/oz. Silver reached $50/oz briefly in 1980 when just one billionaire Bunker Hunt (one of a handful of billionaires in the 1970s) attempted to corner the silver market causing the price to surge (in conjunction with many investors seeking to hedge themselves from the stagflation of the 1970s).
Today there are hundreds of billionaires throughout the world. A lot of technically orientated analysts, investors and hedge funds are looking at this figure and as nearly all other asset classes and commodities are at, or have recently reached, all time record highs, there is every reason to believe that silver may do likewise in the coming years.
Silver is priced at some $19.50/oz today. The average nominal price of silver in 1979 and 1980 was $21.80/oz and $16.39/oz respectively. In today’s dollars and adjusted for inflation (government historically adjusted CPI) that would equate to an inflation adjusted average price of some $60/os and $44/os. It is for this reason that we believe silver will be valued at well over $50/oz in the next 2 to 3 years.
Silver remains very undervalued vis-à-vis gold and remains a contrarian play with little or no media coverage and little or no retail investors having any allocation to silver whatsoever. A close above $21/oz could see silver quickly rise to $25 or $30 per ounce. Goldcore.com
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: In early April, Credit Market Analysis (CMA), a credit information specialist part of the CME Group, released its quarterly Global Sovereign Credit Risk Report. The ranking and probabilities of the report’s top contenders have changed slightly since the report’s release, but we want to focus on Greece.
On April 3, the Greek prime minister declared that the worst was behind the country after the EU and the IMF patched together a €12 billion support package. Just four weeks later Greece was facing imminent default, the rescue package had ballooned 10-fold, and credit spreads on Greek government debt exploded higher.
Today CMA rates Greece’s five-year default probability at 40%, right behind Argentina don’t cry for Greece. Read more here-http://www.caseyresearch.com/displayCcs.php?e=true
-Chart of the week: Leading Indicators Around The World Rolling Over. Something interesting to watch here. New data out from the OECD indicates that around the world, leading indicators are showing a big time deceleration.
These numbers include OECD (major developed countries), as well as the largest developing countries as well, so it’s a comprehensive look at what’s going on around the world. We’re still in growth, but there’s a danger that the red hot “v” may come to look more like a square root. Read more here-http://www.businessinsider.com/chart-of-the-day-oecd-cli-for-oecd-plus-six-2010-5
-Chart of the week: The Overhang That Will Smother Any Housing Recovery. Housing continues to be a serious problem for the U.S. economy with a tremendous amount of unsold overhang remaining in the system.
This means that more than 7 million homes remain weighing down the market, due to bank’s having repossessed them or the loans being in delinquency. It’s interesting to note, per this chart from Whitney Tilson’s T2 Partners, this does not include new defaults, which are around 300,000 per month. Read more here-http://www.businessinsider.com/chart-of-the-day-housing-crisis-2010-5
and http://www.businessinsider.com/t2-partners-housing-market-2010-5#-1
-Chart of the week: They call themselves the 99ers, and they are growing into a large, desperate, and angry group of Americans. The number of unemployed who have exhausted state benefits and receive Extended Benefits (EB) or Emergency Unemployment Compensation (EUC) stands at 5.4 million. Their 99 weeks of combined state and federal coverage begins running out June 2nd unless Congress passes another extension.
The average EB/EUC benefit paid is about $300/wk. As the 99ers lose benefit eligibility over the coming year, $1.6 billion in weekly benefit income will incrementally disappear. With over 5 unemployed per job opening, their employment prospects look dim. Read more here-http://www.caseyresearch.com/displayCcs.php?id=95
-“We now see herd behaviour in the markets that are really pack behaviour, wolfpack behaviour.” Anders Borg Swedish Finance Minister
-”Main Street is in the hands of a Roulette Wheel.” Jim Sinclair-JSMineset.com
-The regulatory authorities and those running the exchanges have still do not have a handle on this problem. Little wonder the small investor is so cynical, jaded & mistrustful. Paul Vermilya
-This phase of the panic may be over, but the results of the panic are not over. Bob Hoye-Read more here-http://www.321gold.com/editorials/hoye/hoye051110a.html
-Invest in Inflation. Strictly seen as an investment, as the dollar shrinks in value, gold will be worth thousands of dollars an ounce and silver will be worth hundreds of dollars an ounce. Howard Ruff-Read more here-http://www.kitco.com/ind/Ruff/ruff_apr292010.html
-Stock markets will eventually plunge through the March 2009 lows because the financial crisis that reared its head in 2008 and recently again with the Greek debt crisis is clearly not over. “We pretended we solved the problem but we didn’t”.
“As you look six months forward, I think markets will sell off quite a bit, and in fact I would even say we will probably break the old lows of March, 2009. That could be in a year. That is how grim it is.” The financial crisis got papered over, but did not disappear. “We just essentially took it off the books of private enterprise or the banking system and gave it to governments.
And of course the governments are being questioned because they have all these liabilities and own all this toxic waste so now people now won’t buy their bonds. The markets all of a sudden have come to appreciate that we have a problem out there, but we have always thought that there was a problem.” Eric Sprott, hedge fund manager and chief executive officer of Sprott Inc.
-Once we begin to see gold close above the 1200 level, then we should start to see the Phase Transition type move that will carry it upward to about $2,500. It is still entirely possible for gold to even reach $5,000.
That is the extreme projection that would signal serious decline in public confidence in government as a whole. Reaching $2.500, is a normal stage of market development. This is still not the end of the world. Martin Armstrong
-“Gold has now consistently shown that it does not have to follow the so-called traditional inverse relationship with the dollar. It is front and centre assuming its role as the currency of choice.”
Bill O’Neill-Logic Advisors.
-“The whole bailout is quantitative easing across all of Europe,” said Michael Guido, the director of hedge-fund sales at Macquarie Bank Ltd. in New York, who expects gold to rise to $1,500 by the end of the year. “You’re seeing this big rush into gold ETFs, physical bars and coins out of Europe that’s supporting the thesis that gold is the default currency.” Bloomberg
-“All we can do is to put our money into real assets, because paper money everywhere is being debased.” Jim Rogers, the chairman of Rogers Holdings in Singapore, said in an interview on Bloomberg Television. Read and watch more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aM9oaLqVXTuQ
-Gold may reach $1,500 by the end of the year as concern spreads that other nations will struggle with debt. James Dailey of TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. Bloomberg
“A bubble is forming with sovereign debt,” said Peter Sorrentino, who helps manage $13.8 billion at Huntington Asset Advisors in Cincinnati, adding that gold may soar to $1,800 an ounce within three years. “We want to hold gold as a reserve of wealth, because there’s a big devaluation of G-7 currencies ahead.” Bloomberg
-Gold analysts polled by Bloomberg believe that gold could reach $1500 per ounce in the coming months. Gold may extend gains to a record $1,500 an ounce this year as investors seek an alternative to currencies amid the European sovereign-debt crisis, according to a Bloomberg News survey of traders, analysts and investors. Bloomberg
-A nuclear solution to Europe’s debt problems is simply another way of saying “Quantitative Easing to Infinity.” All national debt will be bailed out. All states of the USA will be bailed out. Paper currencies are headed to dust.
Regardless of the first knee jerk market reaction, gold is going to $1650 and beyond due to nuclear suggestions of adding more debt to entities failing because of debt. This is the EU Helicopter Drop coming up.
Credit default swaps are herein called the “Wolfpack.” About that they are totally correct. Now that they have challenged the “Wolfpack,” whatever additional funds might be required will have to be provided or the “Wolfpack” will slaughter the EU. Jim Sinclair-JSMineset.com
-In my opinion, Greece is the same canary in the coal mine that Thailand was for emerging Asia in 1997, which ultimately led to the Russian debt default and demise of LTCM; the same canary in the coal mine that New Century Financial in early 2007 proved to be in terms of being a leading indicator for the likes of Bear Stearns and Lehman.
So, the most dangerous thing to do now is to view Greece as a one-off crisis that will be contained. Even with this new and aggressive EU-IMF financing arrangement that has managed to trigger a wild short covering rally, the risks are still high that the contagion spreads to countries like Portugal, Spain, Italy and even the U.K., which has already received some warnings from the major rating agencies and is gripped with political gridlock in the aftermath of last week’s uncertain election results.
The problem of there being far too much debt on balance sheets globally has not gone away and in many cases has become worse, and the ability to service these debts especially in countries that have weak economic structures like Greece, Portugal and Spain has become seriously impaired.
It remains to be seen how Greece and the other problem countries in the euro area will manage to cut their deficits without, at the same time, controlling their monetary policy and their currency, which of course we were able to do here in Canada during the 1990s but with the help of a 30% currency devaluation. David Rosenberg-Gluskin/Sheff
-Greece has its immediate financing. Now the question is can they follow the prescription? In all likelihood the answer is no. the bond markets are reflecting that via a lack of confidence. In fact, some bond markets are falling apart and there is no end in sight.
We have bond rating firms lowering ratings, as the rating services themselves are under serious fire and we do not believe they will be around long. The big question is why did it take two years and 10 months to react? Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1273677764.php and http://news.goldseek.com/InternationalForecaster/1273424400.php
-Roach Says Debt Crisis Raises Risk of ‘Double Dip’ Recession. The fallout from the European debt crisis raises the risk of a “double dip” recession for the global economy, said Stephen Roach, chairman of Morgan Stanley Asia Ltd. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=ag29h7Czezxw
-Meet the Economist Who Says the Government’s Economic Numbers Are Lies. Establishment economists think John Williams’ numbers are off. But then, most of them also thought the economy was healthy. Read more here-http://www.alternet.org/economy/146784/meet_the_economist_who_says_the_government%27s_economic_numbers_are_lies/
-PIMCO’s El-Erian says U.S. inflation may accelerate. Read more here-http://news.yahoo.com/s/nm/20100513/bs_nm/us_usa_inflation_outlook_pimco
-Broader U-6 Unemployment Rate Increases to 17.1% in April. Read more here-http://blogs.wsj.com/economics/2010/05/07/broader-u-6-unemployment-rate-increases-to-171-in-april/
-Many of the jobs lost during the recession are not coming back. Read more here-http://www.nytimes.com/2010/05/13/business/economy/13obsolete.html?hp=&pagewanted=print
-16 Reasons Why California Is The Next Greece. Read more here-http://www.businessinsider.com/why-california-is-the-next-greece-2010-05#california-has-a-20-billion-budget-gap-despite-last-years-ravaging-cutbacks-1
-Schwarzenegger Preps ‘Terrible Cuts’ to Close Deficit. California Governor Arnold Schwarzenegger will seek “terrible cuts” to eliminate an $18.6 billion budget deficit facing the most-populous U.S. state through June 2011, his spokesman said. Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid=aMHZOCQK9hC4
-LA will consider repealing a 1974 ordinance that made the city responsible for sidewalk repairs. Read more here-http://www.nbclosangeles.com/news/local-beat/The-Budget-Crisis-Could-Hit-Your-Wallet-and-Twist-Your-Ankle–93229639.html
-Illinois Budget Woes Come to a Boil. Read more here-http://online.wsj.com/article/SB10001424052748703686304575228582377071698.html?mod=WSJ_hpp_MIDDLENexttoWhatsNewsThird
-Major Wall Street firms face criminal probe: source. Federal prosecutors in New York are conducting a broad criminal investigation into whether major Wall Street financial firms misled investors, a person familiar with the matter said on Thursday. Read more here-http://www.reuters.com/article/idUSTRE64C27Z20100513
-Banks, Ratings Agencies Said to Be Subpoenaed by N.Y.’s Cuomo. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aEBewweC6VB0
-Bankers jailed, sued as Iceland seeks culprits for crisis. Read more here-http://www.breitbart.com/article.php?id=CNG.4090f16a5abf84c5a5adff0665cbc792.3a1&show_article=1
-Loonie Will Return to Parity, Citi Says: Technical Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=aNMsqhIfL2fU
-Investors Should Expect Higher Commodity Prices, JPMorgan Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid=adLqcri08p_8
-World Health Organization Moving Ahead on Billions in Internet and Other Taxes. The World Health Organization is moving full speed ahead with a controversial plan to impose billions of dollars in global consumer taxes on such things as Internet activity and everyday financial transactions like paying bills online while its spending soars and its own financial house is in disarray. Read more here-http://www.foxnews.com/world/2010/05/10/world-health-organization-moving-ahead-billion-dollar-internet-tax/
-Italy’s roads are choked with government-owned cars. Renato Brunetta, Italy’s minister for public administration. He reckons that the country runs a fleet of 629,000 official cars, ten times the number in similar European countries and 50,000 more than just a couple of years ago.
The official fleet includes top-of-the-range Maseratis to ferry senior officials around Rome. Italy’s domestic carmakers, which are starting to recover after a tough time, will be hoping that this particular government-efficiency drive goes no further. Read more here-http://www.economist.com/daily/news/displaystory.cfm?story_id=16102798&fsrc=nwl
-James Bond Aston Martin May Sell for $74,670. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aJXSpcWf3S4E
-Gold watch fetches nearly $6 million at auction. Read more here-http://www.reuters.com/article/idUSLDE64A0XJ20100511?loomia_ow=t0:s0:a49:g43:r3:c0.333333:b33899768:z0
-Want to Buy a Bridge? N.Y.-N.J. Port Authority Seeks Investors. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a2N57GFy5sic
-China Subsidy for Rat-Proof Refrigerators Feeds Appliance Boom. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=ad9H.w7xD3MU
-It costs the federal government up to nine cents to mint a nickel and almost two cents to make a penny. So, in addition to overhauling Big Finance, President Barack Obama wants to tinker with America’s small change.
The president’s plan to save money by making coins from cheaper stuff seems simple on its face. But history shows it would rekindle an emotional debate among Americans who fear changing the composition of their currency will hurt its value. Read more here-http://www.gata.org/node/8637
-Food-stamp tally nears 40 million, sets record. Read more here-http://www.reuters.com/article/idUSTRE6465E220100507
-Working 10 Hours or More a Day Raises Heart Risk, Study Finds. Read more here-http://www.bloomberg.com/apps/news?pid=20601124&sid=aK3Z5C06iaMQ and http://www.reuters.com/article/idUSTRE64A2SR20100511
-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 Magnificent Jewels and Noble Jewels, May 11 2010, Beau Rivage Hotel Geneva Switzerland. Read more here-http://www.sothebys.com/app/live/lot/LotResultsDetailList.jsp?action=J&event_id=30000&sale_number=GE1002&lots_per_page=100&page_number=1&show_lot_name=Y
-LOT 425-HIGHLY IMPORTANT AND EXCEPTIONALLY RARE DIAMOND RING, ALEXANDRE REZA. Description-Of cross over design, set with a fancy vivid blue pear-shaped diamond weighing 5.02 carats and a pear-shaped diamond weighing 5.42 carats, to a platinum mount, size 52, signed A. Reza, French assay and maker’s marks. Estimate-4,250,000-7,400,000 CHF. Lot Sold. Hammer Price with Buyer’s Premium: 7,026,500 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=425
-LOT 410-FANCY INTENSE YELLOW DIAMOND RING, CARTIER. Description-Claw-set with a fancy intense yellow round-cornered square modified brilliant-cut diamond weighing 15.85 carats, flanked by triangular diamonds, mounted in yellow gold, size 54, signed Cartier and numbered, French assay and maker’s marks. Estimate-195,000-295,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 458,500 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=410
-LOT 406-VERY RARE FANCY INTENSE BLUE DIAMOND RING. Description-Claw-set with a fancy intense blue cushion-shaped diamond weighing 7.64 carats, mounted in yellow gold and platinum, size 51. Estimate-4,320,000-6,300,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 8,930,500 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=406
-LOT 398-FANCY INTENSE YELLOW DIAMOND AND DIAMOND RING. Description-Centring on a fancy intense yellow cut cornered rectangular step-cut diamond weighing 7.30 carats, to an abstract surround set with circular- and brilliant-cut diamonds, mounted in platinum, French assay marks, size 51½, case. Estimate-90,000-130,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 158,500 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=398
-LOT 278-FANCY YELLOW DIAMOND RING. Description-Claw-set with a fancy yellow circular-cut diamond weighing 11.68 carats, the shoulders set with pear-shaped stones, the mount with single-cut diamonds, mounted in yellow gold and platinum, size 52. Estimate-140,000-200,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 194,500 CHF. Read more here-
http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=278
-LOT 277-PAIR OF FANCY YELLOW DIAMOND EARRINGS. Description-Each set with a fancy yellow brilliant-cut diamond weighing respectively 9.17 and 9.92 carats, to a diamond set border. Estimate-235,000-335,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 290,500 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=277
-LOT 271-FANCY INTENSE YELLOW DIAMOND RING, M. GÉRARD. Description-The square bezel centring on a fancy intense yellow brilliant-cut diamond weighing 9.35 carats, to a diamond set yellow gold mount, size 50, with ring sizer, signed M. Gérard, French assay and maker’s marks. Estimate-150,000-210,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 224,500 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=271
-LOT 242-FANCY YELLOW DIAMOND AND DIAMOND RING, CARTIER. Description-The fancy yellow cushion-shaped modified brilliant-cut diamond weighing 5.04 carats, flanked by trapeze stones, mounted in yellow gold and platinum, size 51½, signed Cartier. Estimate-43,000-63,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 56,250 CHF. Read more here-
http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=242
-LOT 199-FANCY INTENSE YELLOW DIAMOND RING. Description-The fancy intense yellow oval modified brilliant-cut diamond weighing 8.14 carats, bordered by brilliant-cut stones, the shoulders set with similar diamonds, mounted in platinum and yellow gold, size 52. Estimate-130,000-185,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 158,500 CHF. Read more here-
http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=199
-LOT 131-PAIR OF FANCY YELLOW DIAMOND EARRINGS. Description-Each suspending a collet-set fancy yellow round-cornered rectangular modified brilliant-cut diamond weighing respectively 3.07 and 3.44 carats, to a circular-cut diamond set surmount. Estimate-32,000-48,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 38,750 CHF. Read more here-
http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=131
-LOT 83-FANCY BROWNISH ORANGY PINK DIAMOND RING. Description-The fancy brownish orangy pink heart-shaped diamond weighing 3.35 carats, to a mount and border set with brilliant-cut stones, mounted in gold and platinum, size 52. Estimate-90,000-130,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 104,500 CHF. Read more here-
http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=83
-LOT 61-FANCY YELLOW DIAMOND RING. Description-Set with a cut-cornered rectangular modified brilliant-cut fancy yellow diamond weighing 5.24 carats, mounted in yellow gold, size 52.
Estimate-38,000-48,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 57,500 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=61
-LOT 60-PAIR OF FANCY INTENSE AND FANCY VIVID YELLOW DIAMOND AND DIAMOND PENDENT EARRINGS. Description- Each surmount set with a pear-shaped fancy intense yellow diamond weighing respectively 0.54 and 0.65 carat, bordered by brilliant-cut stones, to a pear-shaped fancy vivid yellow diamond weighing 0.47 carat and a similarly-shaped fancy intense yellow stone weighing 0.42 carat, suspending a pear-shaped fancy intense yellow diamond weighing respectively 1.55 and 1.71 carats, bordered by brilliant-cut stones, mounted in yellow gold and platinum. Estimate-38,000-48,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 50,000 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=60
-LOT 49-FANCY LIGHT YELLOW DIAMOND RING, BULGARI. Description-The fancy light yellow cut-cornered rectangular modified brilliant-cut diamond weighing 4.03 carats inset to a plain yellow gold mount, size 51, signed Bulgari. Estimate-16,000-22,000 CHF. Lot Sold-Hammer Price with Buyer’s Premium: 25,000 CHF. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE1002&live_lot_id=49
-Seeking refuge in diamonds. Currencies and gold for investors seeking a refuge this week suddenly paled Tuesday night, when it comes to investments, compared to diamonds the cut and polished variety you put on a girl’s finger.
Sotheby’s latest fine jewels auction saw its top “Very rare Fancy Intense Blue diamond ring” go for nearly double the low end of its estimated price (CHF4.32m) when the gavel came down on CHF8.9 million ($8.03m) and two other lovely diamond rings went for prices nearly as high. The sale netted a total of CHF59,995,700.
The record for the per carat price for diamonds was broken: it had been set at Sotheby’s in Geneva in November 2009: $796,178 per carat for a 3.17 carat round brilliant cut stone at the time. The new top sale at Sotheby’s put the 7.64 carat fancy blue’s per carat price at over $1,050,636. Read more here-http://genevalunch.com/blog/2010/05/11/seeking-refuge-in-diamonds-for-a-cool-chf8-9-million-update/
-Sotheby’s Geneva Jewels Sale Generates $54M. Sotheby’s Magnificent Jewels and Noble Jewels sales garnered a total $54 million (CHF 60 million) in Geneva on Tuesday claiming a new record for a fancy intense blue diamond. The auction house reported that the auction sold 87.9 percent by lot and 96.6 percent by value.
“Today’s outstanding results once again demonstrate the vibrancy and depth of the international jewellery market and the enormous appetite throughout the world for jewels and gemstones of the very best quality,” said David Bennett, chairman of Sotheby’s international jewellery department, Europe and the Middle East.
The highlight of the sale was a cushion-shaped, 7.64-carat fancy intense blue diamond ring which fetched $8 million (CHF 8.9 million), or $1.1 million per carat from an anonymous buyer. Sotheby’s said the ring saw competition from at least three potential buyers before closing.
The second highest lot saw an emerald cut, 52.82-carat, white diamond go to a U.S. dealer for $7.9 million, which Sotheby’s stressed proved “the strength of the market for exceptional white diamonds.” Another blue diamond, a rare toi et moi ring by French jeweller Alexandre Reza, a 5.02 carat, fancy vivid blue diamond set with a 5.42 carat white diamond in a ring sold for $6.3 million (CHF 7 million).
Bennett said prices achieved for these three pieces, each well above the pre-sale estimate, were “well deserved” given their rarity and quality. “Our pre-sale viewing in Geneva was among the busiest that we’ve staged in recent years, and, the general interest and enthusiasm that we saw in all the worldwide locations where we exhibited highlights from the sale were extraordinary,” he reported.
So far this year, Sotheby’s jewellery sales have generated $52.4 million in Hong Kong, $39.6 million in New York, and $1.7 million in London. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=30943
-Jewel prices soar to twice estimates at gem auction. Huge flawless diamonds and pieces by Cartier, Bulgari and other big-name jewellers sold for several times estimated prices at a Sotheby’s sale on Tuesday night, the auctioneer said.
The semi-annual sale in Geneva, Europe’s capital for jewels at auction, netted 60 million Swiss francs ($54.10 million), nearly double the low end of its pre-sale estimate. “There were very, very strong prices for high-quality jewels.
A mix of period pieces, jewels of royal provenance and spectacular gems all found new owners, many times exceeding the estimate,” David Bennett, chairman of Sotheby’s Europe and Middle East jewellery department, told Reuters. Some 50 percent of lots sold for above their estimate, he said. “It’s a tremendous result.”
Top lot was a blue cushion-shaped diamond weighing 7.64 carats, mounted in a yellow gold and platinum ring, which went for a whopping 8.93 million francs to an anonymous buyer who paid double the pre-sale estimate. “This is a world record per carat for a fancy, intense blue diamond at auction,” Bennett told a packed salesroom as he brought down the hammer to applause.
A white emerald-cut diamond weighing 52.82 carats, which he called “one of the most beautiful stones to come to auction for several years”, fetched 8.8 million francs after hectic bidding. It went to a U.S. jewellery dealer, according to Sotheby’s, whose pre-sale estimate was just over 7 million francs for the flawless stone with top grading for polish and symmetry.
A stunning ring by Alexandre Reza mounted with a vivid blue diamond of 5.02 carats alongside a white diamond of the same pear-shape of 5.42 carats sold for 7.026 million francs to a private collector. Bennett said it was a world record at auction for a piece designed by the French jeweller. Sotheby’s pre-sale estimate was $4 million to $7 million.
“It is a sublime ring, the two stones are complementary and perfectly proportional. It’s extraordinarily chic,” he said. Several pieces belonging to Brazilian socialite Lily Marinho found new owners, including an emerald and diamond necklace and matching ear clips and ring which fetched 1.2 million francs, tripling its pre-sale estimate.
“Lily has often been photographed wearing it, to those living in Brazil it is very familiar,” Bennett said. Raju Kothari, a Hong Kong-based jewellery dealer, told Reuters after the sale: “I got four or five items. Prices are high but if you want to own rare things you have to pay.” Read more here-http://www.reuters.com/article/idUSLDE64A2J920100511
-Diamonds, signed jewels soar at Christie’s sales. Christie’s says international market back to full strength. Read more here-http://www.reuters.com/article/idUSLDE64C0CY20100513
EUROPEAN BAILOUT
-EU Crafts $962 Billion Show of Force to Halt Crisis. European policy makers unveiled an unprecedented loan package worth almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to shatter confidence in the euro. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=ap50DW8IqhBo&pos=1
-European Banks Now Feverishly Betting Against Euro, As Bailout Fails, Gold Surges. Read more here-http://www.zerohedge.com/article/european-banks-now-feverishly-betting-against-euro-bailout-fails-gold-surges
-Bailout Is ‘Nail in the Coffin’ for Euro, Rogers Says. Investor Jim Rogers said Europe’s bailout of indebted nations to overcome the sovereign-debt crisis is just “another nail in the coffin” for the euro as higher spending increases the region’s debt.
“I was stunned,” Rogers, chairman of Rogers Holdings, said in a Bloomberg Television interview in Singapore. “This means that they’ve given up on the euro, they don’t particularly care if they have a sound currency, you have all these countries spending money they don’t have and it’s now going to continue.” Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid=auuRue7wyMWM Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T=Rogers%20Says%20EU%20Bailout%20Another%20%60Nail%20in%20Coffin%27%20for%20Euro&clipSRC=mms://media2.bloomberg.com/cache/v4TUpyq1Jxjw.asf
-Volcker Says Crisis Threatens Euro ‘Disintegration’. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=ahe4DfQK7ozQ
-Greek Contagion Myth Masks Real Europe Crisis. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aIgcJWk1zcjY
-Murray Pollitt: The hypocrisy of the Greek ‘rescue’. Read more here-http://www.gata.org/node/8634
-Roubini Says European Resolution an ‘Open Question’. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aHwLirAaqp60
-Roubini Says Greece May Lead Euro Exodus, China Faces Slowdown. Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid=aWx2RrHBu90A
-Faber Says Greece a `Write Off,’ ECB Bailing Out Banks. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T=Faber%20Says%20Greece%20a%20%60Write%20Off,%27%20ECB%20Bailing%20Out%20Banks&clipSRC=mms://media2.bloomberg.com/cache/vVMWsluHACxA.asf
-Germany, France May Hurt AAA Ratings in ‘Ponzi Game.’ Read more here-http://www.bloomberg.com/apps/news?pid=20601010&sid=aIFxBow.FVKU
-IMF Signals Spain, Portugal Must Step Up Budget Cuts. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=afBYbGuJd_WQ&pos=6
-Bank Swaps, Libor Show Doubts on Europe Bailout: Credit Markets. Money markets and the cost of protecting bank bonds from losses show investors are concerned Europe’s almost $1 trillion rescue plan may not be enough to contain the region’s sovereign debt crisis. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid=a.qZEloHDh7g
-Jim Rickards: “Goldman Can Create Shorts Faster Than Europe Can Print Money.” Read and watch more here-http://www.gata.org/node/8633
-Bernanke Said to Tell Senators Euro Aid No Panacea. Federal Reserve Chairman Ben S. Bernanke told U.S. senators today that the euro region’s almost $1 trillion aid package to stem its debt crisis isn’t a cure- all, according to a participant.
“He said, ‘This is basically not a panacea,’” and that the measures are “temporary,” Alabama Senator Richard Shelby, the senior Republican on the Banking Committee, told reporters in Washington after a closed-door briefing Bernanke held with the panel.
“There’s got to be fundamental underlying changes in their economies, not just Greece, but a lot of other countries,” Shelby cited Bernanke as saying. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=aHKewxscnhg4
GLOBAL DEBT-DEFICIT CRISIS
-The Mother of All Bubbles. Huge National Debts Could Push Euro Zone into Bankruptcy. Greece is only the beginning. The world’s leading economies have long lived beyond their means, and the financial crisis caused government debt to swell dramatically. Now the bill is coming due, but not all countries will be able to pay it. Read more here-http://www.spiegel.de/international/europe/0,1518,druck-692666,00.html
-US faces same problems as Greece, says Bank of England. Mervyn King, Governor of the Bank of England, fears that America shares many of the same fiscal problems currently haunting Europe.
He also believes that European Union must become a federalised fiscal union (in other words with central power to tax and spend) if it is to survive. Just two of the nuggets from one of the most extraordinary press conferences I have been to at the Bank. Read more here-http://blogs.telegraph.co.uk/finance/edmundconway/100005657/us-faces-same-problems-as-greece-says-bank-of-england/
-U.S. posts April deficit for 3rd time in 30 years. Read more here-http://money.cnn.com/2010/05/12/news/economy/US_budget_deficit/index.htm
-Budget Deficit in U.S. Widened to $82.7 Billion. The U.S. posted its largest April budget deficit on record as receipts declined in a month that typically sees an increase in individual income tax payments.
The excess of spending over revenue rose to $82.7 billion last month compared with a $20.9 billion gap in April 2009, the Treasury Department said today in Washington. It was the second April deficit since 1983. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aS8ycnpZqsM8
-U.S. posts 19th straight monthly budget deficit. The United States posted an $82.69 billion deficit in April, nearly four times the $20.91 billion shortfall registered in April 2009 and the largest on record for that month, the Treasury Department said on Wednesday. Read more here-http://www.reuters.com/article/idUSTRE64B53W20100512
-US More Bankrupt Than Ever $83 Billion April Deficit Is Record For The Month, $30 Billion Worse Than Expected As Tax Receipts Plunge. Read more here-http://www.zerohedge.com/article/us-more-bankrupt-ever-83-billion-april-deficit-record-month-30-billion-worse-expected-tax-re
-U.S. Debt Shock May Hit In 2018, Maybe As Soon As 2013: Moody’s. Read more here-http://www.investors.com/NewsAndAnalysis/Article.aspx?id=532490
-The U.S. Government Is About To Get Hit With ‘The Perfect Storm’ Of Debt. Read more here-http://www.caseyresearch.com/editorial/3391?ppref=DLC168ED0510A and
http://www.businessinsider.com/us-debt-casey-report-2010-5
-The Western world keeps spending its way to disaster. The Swiss-based Bank of International Settlements (BIS), the oldest international financial institution in the world, has functioned as the central bank of central bankers for 80 years.
In a working paper written by three senior staff economists (“The future of public debt: prospects and implications”), released in March, BIS warns that Greece isn’t the only Western economy with hazard lights flashing.
Indeed, it names 11 more: Austria, France, Germany, Ireland, Italy, Japan, the Netherlands, Portugal, Spain, Britain – and the United States. Without “drastic measures,” BIS says, all of these countries will hit a wall of debt. Read more here-http://www.theglobeandmail.com/report-on-business/commentary/the-western-world-keeps-spending-its-way-to-disaster/article1565375/
-Has the deficit picture gotten any better? According to data from the Treasury, not so much. Check out the following table comparing federal receipts and outlays over the first six months of this fiscal year to the first six months from last year.
Even though receipts are down through the first six months of fiscal 2010 compared to last year, outlays are down slightly more so. The overall deficit at this point in 2010, at about $717 billion, is marginally better than it was at this time last year.
But keep in mind that we’re still talking about a projected deficit north of $1.3 trillion this year and that Obama’s $3.83 trillion budget for fiscal 2011, nearly a 9% increase in spending over the 2009 level, ensures a near record deficit in that year as well. Read more here-http://www.caseyresearch.com/displayCdd.php?id=425
FOUR U.S. BANKS FAILURES BRING 2010 TALLY TO 68
-FDIC shuts banks in Fla., Minn., Ariz., Calif. Regulators on Friday shut down banks in Florida, Minnesota, Arizona and California, bringing the number of U.S. bank failures to 68 this year. The Federal Deposit Insurance Corp. took over The Bank of Bonifay, based in Bonifay, Fla., which had $242.9 million in assets and $230.2 million in deposits; and Access Bank, in Champlin, Minn., with $32 million in assets and $32 million in deposits.
The agency also seized Towne Bank of Arizona in Mesa, Ariz., with $120.2 million in assets and $113.2 million in deposits; and 1st Pacific Bank of California in San Diego, with $335.8 million in assets and $291.2 million in deposits. Read more here-http://finance.yahoo.com/news/FDIC-shuts-banks-in-Fla-Minn-apf-2475780035.html?x=0
STOCK MARKET PLUNGE STILL NO ANSWERS
-Wall Street crash exposes world of stock market electronic trading. Regulators picking through the rubble of last week’s dramatic Wall Street crash have exposed a Byzantine system of electronic trading in the stock market that may have propelled the sell-off. Read more here-http://www.telegraph.co.uk/expat/expatnews/7709832/Wall-Street-crash-exposes-world-of-stock-market-electronic-trading.html
-CEOs of Biggest Exchanges Called to SEC to on Plunge. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=and.BFidKbYE
-Nasdaq’s Noll Says Trading in E-Mini Helped Spur Drop. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a9UfkaP0mlBE&pos=4
-Dick Grasso Says Halts Could Have Stopped May 6 Drop. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a0FYir4fnTE8
-Did a Big Bet Help Trigger ‘Black Swan’ Stock Swoon? Read more here-http://online.wsj.com/article/SB10001424052748704879704575236771699461084.html?mod=WSJ_hpp_LEFTWhatsNewsCollection
-Taleb Says Focus on Single Trades in Crash Misguided. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=asIfMkujHP5k
-Dylan Ratigan’s Explanation For The Crash. Read more here-http://www.zerohedge.com/article/dylan-ratigans-explanation-crash
-Stocks ‘Tornado’ May Prompt Electronic Trading Rules. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aEldB2Is5YUM
-Why the champion of circuit breakers wants humans back in control. Read more here-http://money.cnn.com/2010/05/11/markets/brady_circuit_breakers.fortune/index.htm
JONATHAN WEIL-RIGGED MARKET THEORY SCORES A PERFECT QUARTER
-Score another triumph for the rigged market theory. In a feat that would seem to defy the odds, Goldman Sachs, JPMorgan Chase and Bank of America this week each said its trading desk made money every day of the first quarter.
Goldman said its daily net trading revenue topped $100 million 35 times last quarter out of 63 trading days. JPMorgan and Bank of America disclosed similar eye-popping stats. Citigroup, too, recorded a profit on each trading day, Bloomberg News reported, citing unnamed people who knew the results.
The intrigue is high. If a too-big-to-fail bank’s traders were able to make money every day of a quarter, were they really trading in any normal sense of the word? Or would vacuuming be a more accurate term? What kinds of risks do such incredible profits entail, for the banks and the rest of us taxpayers? And are results such as these too good to be true?
There seems to be no satisfying way to answer those questions, or even the more basic inquiry: How exactly do these banks’ trading divisions make money? Reading the companies’ impenetrable financial reports is of little help. However they did it, the data suggest it was as easy last quarter as hitting the side of a barn with a baseball from three feet away.
This isn’t the way “trading” works in the real world. A simple exercise in measuring probabilities is instructive here. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&sid=ax0kTsl0dBXw
THE NEW NORMAL
-Pacific Investment Management Co. said the debt crisis in Europe shows its outlook for an extended period of below-average economic growth remains valid, even after global markets rebounded from the financial crisis.
“What is happening in Europe is a vivid illustration of an underlying theme of the new normal,” Mohamed El-Erian, the chief executive officer of Pimco, said in an interview. There are “structural forces overwhelming traditional cyclical ones.”
European policy makers this week unveiled an unprecedented loan package of almost $1 trillion and a program of bond purchases to stop a sovereign-debt crisis that threatened to shatter confidence in financial markets and the euro. El-Erian has said Europe’s problems may spread across the globe because of investor concern that governments have borrowed too much to revive their economies.
Pimco, which coined the phrase “new normal” a year ago to describe a world characterized by high unemployment rates, more regulation, and a shrinking importance of the U.S. in the global economy, reiterated the view at its annual investment meeting last week in Newport Beach, California, the firm said today on its website. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a0Q7VMe4bTdM&pos=4
MORE MASSIVE FREDDIE-FANNIE LOSSES
-Fannie Mae Seeks $8.4 Billion in New Aid After Loss. Fannie Mae, the mortgage-finance company operating under federal conservatorship, said it will seek $8.4 billion in aid from the U.S. Treasury Department after reporting an 11th-straight quarterly loss.
The company lost $11.5 billion in the first three months of this year, it said today in a Securities and Exchange Commission filing. Fannie Mae had posted $136.8 billion in losses in the preceding 10 quarters, and the new aid request would bring its total draw from the Treasury to $84.6 billion since April 2009.
Fannie Mae said the quarterly loss was largely attributable to new accounting rules that required the company to move $1.5 trillion in mortgage guarantees to its balance sheet. The company and Freddie Mac, its McLean, Virginia-based rival, have been under U.S. conservatorship since September 2008, when they were seized after losses on subprime mortgages pushed them to the brink of collapse.
The so-called government sponsored enterprises, which own or guarantee more than $5 trillion in U.S. residential debt, financed or backed more than 70 percent of single-family mortgage loans in 2009. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=abcRVUIeOVS0&pos=6
-Freddie Finances Scarier Than Bad Slasher Flick. Freddie Mac’s disclosure that it lost $6.7 billion of taxpayer dollars in the first quarter of 2010, and that bigger losses may follow, suggests the Congressional Budget Office may have been kind in estimating that Freddie and Fannie Mae could gobble up $389 billion in U.S. aid by 2019.
The carnage of America’s government-sponsored housing agencies continues. It’s a remake of “A Nightmare on Elm Street,” only Freddy Krueger now goes by Freddie. The hapless victims are played by taxpayers. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aJc8svVLQCVk
-Ignoring the Elephant in the Bailout. Read more here-http://finance.yahoo.com/news/Ignoring-the-Elephant-in-the-nytimes-3670078648.html?x=0&sec=topStories&pos=9&asset=&ccode
REAL ESTATE
-Strategic Default: Walking Away from Mortgages. A Million Have Walked Away; Trend Could Undermine the Fragile Economic Recovery. Read and watch more here-
-U.S. Home Seizures Reach Record as Recovery Delayed. U.S. home foreclosures climbed to a record in April, a sign that government mortgage relief efforts have yet to turn the tide of property seizures, according to a report by RealtyTrac Inc.
“Right now it appears that the banks are focusing on processing the loans already in foreclosure, and slowing down the initiation of new foreclosure proceedings as a way of managing inventory levels,” Rick Sharga, RealtyTrac’s executive vice president, said in an e-mail. “We’ll probably see this trend continue for a while.”
Bank repossessions rose to 92,432 in April, up 45 percent from a year earlier, Irvine, California-based RealtyTrac said today in a statement. Foreclosure filings, including default and auction notices, fell 2 percent to 333,837. One out of every 387 households received a filing.
Unemployment of 9.9 percent and a rising percentage of homes worth less than the mortgages on them are combining to thwart a housing recovery, according to RealtyTrac. About 5 million delinquent loans will probably end up in the foreclosure process in addition to the 1.2 million homes already taken back by lenders, Sharga said.
Defaults may not peak until 2011 depending on how lenders process them, Sharga said. “The underlying conditions mostly unemployment and millions of ‘underwater’ loans haven’t improved,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=akVDiuetiH5I
-Mortgage Holders Owing More Than Homes Are Worth Rise to 23%. More than a fifth of U.S. mortgage holders owed more than their homes were worth in the first quarter as repossessions climbed to a record, according to Zillow.com.
Twenty-three percent of owners of mortgaged homes were underwater during the period, up from 21 percent in the previous three months, the Seattle-based property data provider said today in a report. More than one in 1,000 homes were repossessed by lenders in March, the highest rate in Zillow data dating back to 2000. Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid=allDMOrP8m3M
-High-End Homeowners Falling Into Foreclosure Trap. Read more here-http://www.usatoday.com/money/economy/housing/2010-05-10-milliondollarhomes10_ST_N.htm?csp=patrick.net
-Home prices at risk. I had the pleasure of debating Jim Paulsen yesterday at a Club X conference in Montreal. During his presentation, I found a snippet in one of his slides needed to be updated U.S. home prices are up eight months in a row.
Indeed, this is what most investors want to believe, like how they wanted to believe in the tech bubble and how they wanted to believe in the credit bubble. Illusions are one thing, reality is another, and it’s the latter that bites in the end. Home prices WERE up eight months in a row, until the Case-Shiller 20-city index decided to take a 0.1% MoM (seasonally adjusted) dip in March.
And, on a raw basis, prices were down 0.9% on the month and have actually been deflating now each of the past five months (raw as in not seasonally adjusted and the CS officials have confirmed that the seasonal factors did give an upward skew to the data in prior months). The LoanPerformance national home price index is also down now for three months running.
The FHFA home prices series is also down three months in a row. And, the total unsold housing inventory, when accurately calculated, is running between 16 and 21 months’ supply, and it is this imbalance that is still exerting downward pressure on residential real estate valuation in the U.S.
If we end up truly reverting to the mean this cycle, in classic Bob Farrell Rule #1 fashion, then there is 20% downside potential to home prices from here. We had said that the two biggest risks to Mr. Market’s nirvana view of the world was a reversal in both the unemployment rate and home values and the latest data do suggest that this is on track. David Rosenberg-Gluskin/Sheff
-U.S. home prices still overvalued. If you haven’t already done so, you should check out Robert Shiller’s website where he provides the underlying data for the charts in his book “Irrational Exuberance” (for free!). We often quote the Shiller P/E (which goes back to the 1880s).
In addition to long-term stock prices, Professor Shiller also provides data on long-term home prices going back to 1890 (which he painstakingly cobbled together from various data series and real estate listings from newspapers).
The chart below shows this index of home prices, adjusted for inflation. Relative to long-term trends, it shows just how overvalued the U.S. housing market was at its peak in 2006 prices were 3.5 standard deviations above the long-term average.
Currently, prices are nearly one standard deviation above historical norms, which suggests in ordet to mean-revert to the long-term average, home prices need to fall by another 20%. David Rosenberg-Gluskin/Sheff
-Grim outlook for the housing sector. Even though housing starts have been cut all the way down to around 600,000 units at an annual rate, historic lows indeed, the lingering problem is that we still have too much supply. There are over 19 million empty residential housing units in the U.S., which is 5 million higher than the pre-bubble norm.
Moreover, based on months’ supply, we are talking about anywhere from 16 to 21 months when the foreclosed pipeline ‘shadow inventory’ is included 4-to-5 times larger than a typical balanced market.
Meanwhile, even with great affordability conditions and government programs aimed at promoting homeownership, the house-buying intentions segments of the various consumer confidence surveys, are still flirting with record lows.
The demographics are also awful with net household formation running at 900,000, or less than half what we were seeing during the boom times just five years ago as one would expect with a declining labour force population.
Plus, one of the aftershocks of the “Great Recession” has been a return to a higher average family size the “bundling up” effect for the first time in a century (see In Shift, More Fill the Same Home: Occupancy Trend Seen as Harm to Housing Demand on the front page of the USA Today).
Even counting in obsolescence of the housing stock, absorbing the vacant housing inventory under the current demographic profile could take at least a decade. You heard that right, housing is in secular decline. David Rosenberg-Gluskin/Sheff
GEOPOLITICAL NEWS
-Taliban Ties to Times Square Plot May Spark Wider Pakistan War. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a1LHHsl_LoB0
-Uncovering the Roots of Homegrown Terrorism. Steve Kroft Reports on Homegrown Terrorists and Why They Have Turned Against Their Country. Read and watch more here-
-Iran could fire nuclear missile within two years, says think tank. Iran will be able to deploy a missile capable of carrying a one-tonne nuclear warhead within two years, according to a report from a leading security think tank. Read more here-http://www.telegraph.co.uk/news/worldnews/middleeast/iran/7705953/Iran-could-fire-nuclear-missile-within-two-years-says-think-tank.html
-Russia warns U.S. against unilateral Iran sanctions. Read more here-http://news.yahoo.com/s/nm/20100513/ts_nm/us_russia_iran_us_1
-Israel says N.Korea shipping WMDs to Syria. Read more here-http://news.yahoo.com/s/afp/20100511/wl_mideast_afp/mideastconflictisraelsyriankoreajapan
-The Pentagon would consider a military response in the case of a cyber attack against the United States, a US defense official said on Wednesday. Asked about the possibility of using military force after a cyber assault, James Miller, undersecretary of defense for policy, said: “Yes, we need to think about the potential for responses that are not limited to the cyber domain.” Read more here-http://www.breitbart.com/article.php?id=CNG.7c80ff42024d3ea21b818758f7a7eb3a.bf1&show_article=1
-Almost three-quarters of Americans support a provision of a new Arizona immigration law that requires people to produce documents verifying they are in the U.S. legally, a survey said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aanEpu8OEdv0
© 2012, Worldwide Precious Metals Canada Ltd.
www.wwpmc.com
The World Financial Report – May 18, 2010
Posted by Worldwide Precious Metals on Tuesday, May 18, 2010
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