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The Goldbugg Report – August 3, 2010
August 3, 2010
-Gold best performing asset class over 6 months, 1, 3, 5 and 10 years.
- Gold will trade at $1650 on or before January 14th 2011, Jim Sinclair
-CFTC’s Chilton explains hope for freer, more transparent gold, silver markets. Watch video here.
GOLD
-Gold best performing asset class over 6 months, 1, 3, 5 and 10 years. Over the past ten years gold’s annual return has been 14.3% in sterling terms, compared with 5.9% pa from bonds, 1.6% in cash and just 1.2% in real estate. Equity returns were negative. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=108861&sn=Detail&pid=102055
-Gold will trade at $1650 and beyond. The timing remains the same. Gold will trade at $1650 on or before January 14th 2011. Martin Armstrong is eyeing a higher number, but later in June of 2011. Jim Sinclair
-Gold prices could range from $3,000 to $7,600 based on today’s rate of inflation. Silver will follow in lock step and could have an even more powerful move. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1280326652.php and http://news.goldseek.com/InternationalForecaster/1280073600.php
-There is no question that gold’s allure as a safe-haven has taken a bit of a beating with the more confident tone coming out of European markets, but be assured that in a global post-bubble credit collapse, skeletons come out of the closet when you least expect it. The surprises are not over; not by a long shot.
And the gold price will ebb and flow, but it is in a secular bull market and will retain its natural hedge against recurring concerns surrounding the integrity of the global financial system. Watering down financial regulation bills in the U.S.A., kicking the can down the road via less-than-onerous Eurozone stress tests and reduced capital stringency as per Basel III does not alter the deleveraging game that much and the rounds of market instability that will come our way.
The investment demand for gold remains quite solid at a time when production growth is still anaemic the World Gold Council just released data showing that investors bought 273.8 metric tons of gold via ETF’s in Q2, the second highest tally on record (and brings net investment in these finds to over 2,000 tons value at just under $82 billion). David Rosenberg-Gluskin/Sheff
-Gold cannot really be in a bubble when a BCA report is featured in Barron’s telling people to bail bubbles usually involve universal love. More fundamentally, gold scrap supply plunged 43% in Q1 and the World Gold Council has recommended that central banks hold 8.5% of their FX reserves in bullion (the WSJ cites research indicating that China would need to buy 4,400 tons to meet that requirement and Russia is now at 5.5% and India at 7.5% so the potential demand from the entities with the deepest pockets would seem to be rather significant). David Rosenberg-Gluskin/Sheff
-I believe that more and more observers will recognize the nascent sovereign debt crisis as merely the precursor to a currency collapse. If I am correct, then investors will likely continue to pour into assets with intrinsic value, including precious metals. From my vantage point, the choice between gold and silver is of secondary concern. Investors should be more wary of clinging irrationally to an anachronistic US dollar regime. John Browne-Read more here-http://www.321gold.com/editorials/browne/browne072310.html
-Jeff Clark: I don’t have a crystal ball, but I’ll bet I can tell you how much a house will cost in five years. UBS released some interesting research last month on how much gold it takes to buy the average-priced home in the U.S. I put the data to a chart, and it’s quite revealing.
What’s interesting is that as much as house prices have fallen and as much as gold has risen, today’s ratio is still above the historical average. You can see we’re at the same number today as 1970, and yet look where it was 10 years later when gold peaked.
Here’s another interesting observation: the ratio was 100 during both high inflation (1980) and high deflation (1930). The connection between house prices and gold prices during economic extremes seems awfully compelling.
So, if gold peaks and real estate bottoms in about five years, then a house will cost you about 100 ounces of gold in 2015. Maybe it will take ten years, but the point is, I think we can count on the ratio moving lower this decade, and probably significantly so. Even for the modest budget, 100 ounces almost sounds manageable.
Think gold’s too volatile to use as a savings vehicle? Better reconsider that assumption, because we’re convinced a third dynamic will be at work: a falling dollar. Ergo, you can sock away lots of cash for your offspring, but if it’s denominated in dollars, it won’t buy them as much as gold will. Think about it: if gold doubles, that means your dollars will have lost a significant amount of purchasing power.
The fine print here, of course, is that you sell when the gold price is high, and that you pay the tax on the sale. But I would counter that argument by saying that gold is probably not stopping when it doubles from today’s levels.
If we’re right about the direction of real estate down and Doug Casey is correct in his projection for the gold price, then I think I’ve got a solid plan to buy my kids a house. Read more here-http://www.caseyresearch.com/editorial/3543?ppref=DLC014ED0710C
-Analysts expect gold prices to mark 11th year of gains in 2011. Read more here-http://in.reuters.com/article/idINIndia-50311420100722
-Peter Brimelow: Gold down but radical bugs aren’t out. The Aden Report declared in its weekly update Wednesday evening: “The gold price fell to a three-month low yesterday in both dollars and the euro. It’s clearly in a D decline, and it’s weak by staying below $1,200, basis December.
If gold now stays below $1,180, it’s very weak and it could test the $1,135 level. In a worst case, it could test its rising 65-week moving average, now at $1,080.” But editors Mary Anne and Pamela bravely add: “If it does, it would provide an excellent buying area.” Read more here-http://www.gata.org/node/8872
-Heat exhaustion and holidays make July tough month for gold. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=108874&sn=Detail&pid=33
-Bullion buyers bank on gold coins. Precious metal glitters for investors seeking to hedge financial chaos. Read more here-http://www.marketwatch.com/story/story/print?guid=558C73B0-34B8-403E-9D75-8EB19857945A
-Bullion, coin dealers call for investigation of U.S. coin blanks supply. A congressional subcommittee has been asked to investigate the growing backlog in and foreign procurement of U.S. bullion and collectors’ precious metals coin blanks manufactured by the U.S. Mint. Read more here-http://www.gata.org/node/8863
-Gold Will Hit $5,000 an Ounce Long Term But the Near-Term Profit Prospects Are Even Bigger. Read more here-http://moneymorning.com/2010/07/25/gold-8/
-Gold to climb above US$1,500 an ounce: Barisheff. Read more here-http://www.investmentexecutive.com/client/en/News/DetailNews.asp?Id=54372&IdSection=148&cat=148
-Very bullish on long term gold price: Pierre Lassonde. Continued debt concerns and booming demand from China is likely to further bolster investment demand but, there is potential to see casino-level pricing. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=108787&sn=Detail&pid=33
-Peter Schiff: Don’t Worry About A Precious Metal Bubble, Worry About The Dollar. Read more here-http://www.businessinsider.com/is-there-a-precious-metal-bubble-2010-7
-Mining Stock Talk interviews Peter Grandich on gold and silver. Listen here-http://www.gata.org/node/8853
-GoldMoney’s Turk interviewed by GoldSeek Radio on the death of money. Listen here-http://www.gata.org/node/8871
-James Turk: Deciphering the BIS Gold Swap. Read more here-http://www.kitco.com/ind/turk/turk.html
-Gold moving towards global reserve status Dennis Gartman. As economic recovery begins quietly, so gold is likely to stay in a tight range till year end but, changes are afoot. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=108442&sn=Detail&pid=33
-Gold remains muted, despite bullish signals. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=108636&sn=Detail&pid=33
-What is George Soros up to in the gold market? Read more here-http://news.goldseek.com/GoldSeek/1280171607.php and http://www.usagold.com/publications/newsletter1008.pdf
-Stewart Thompson: Central banks will push gold up to rescue asset prices. Read more here-http://www.gata.org/node/8867
-Longwave’s Ian Gordon shows how gold’s war with paper runs in long cycles. Read more here-http://www.gata.org/node/8857 and http://www.theaureport.com/pub/na/6855
-Gene Arensberg: Enormous and fast short-covering in gold. Read more here-http://www.gata.org/node/8856
-Hold cash and gold against further market plunge Ron Struthers. Struthers predicts America will face a whole new set of debt problems at the state level and recommends investors fortify their portfolios with physical gold and cash. Read more here- http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=108559&sn=Detail&pid=33
-Schmidt’s Gold Thoughts. Read more here-http://www.kitco.com/ind/Schmidt/jul262010.html
-10 Charts, 10 Stories of the ‘Real’ Gold Price. Read more here-http://seekingalpha.com/article/216269-10-charts-10-stories-of-the-real-gold-price?source=email
-Time to Accumulate metals according to UBS. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page67?oid=108588&sn=Detail&pid=102055
-Addison Wiggin: The golden shell games of ETFs. Read more here-http://www.gata.org/node/8852
-Adrian Douglas: LBMA restores access to gold, silver clearing data. Read more here-http://www.gata.org/node/8861 and http://www.gata.org/node/8858
-FOFOA: Lease rates falsified to hide gold backwardation. Read more here-http://www.gata.org/node/8862
-Gordon Long: Gold swaps signal the road map ahead. Read more here-http://www.gata.org/node/8851 and http://www.zerohedge.com/article/antal-fekete-responds-fofoas-speculation-gold-backwardation-manipulation
-To Jim Rickards, a bureaucratized, debt-ridden modern empire looks worse than declining Rome. Listen here-http://www.gata.org/node/8869
-Jim Rickards: Fundamental analysis, fair value nullified by government intervention. Listen here-http://www.gata.org/node/8865
-Jim Rickards: Stay alert in the month of August. Read more here-http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/7/26_Jim_Rickards_-_The_Myth_of_August.html
-Why do U.S. asset managers fear government confiscation of gold? Read more here-http://news.goldseek.com/GoldForecaster/1280278800.php and http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=108646&sn=Detail&pid=33
-Major German business magazine publicizes gold price suppression scheme. Read more here-http://www.gata.org/node/8864
-Hinde Capital’s Ben Davies talks gold price suppression on CNBC. Watch more here-http://www.gata.org/node/8866
SILVER
Gold to silver ratio at 80 to 1 with gold at $1,500 the silver price would be $18.75
Gold to silver ratio at 70 to 1 with gold at $1,500 the silver price would be $21.43
Gold to silver ratio at 60 to 1 with gold at $1,500 the silver price would be $25.00
Gold to silver ratio at 50 to 1 with gold at $1,500 the silver price would be $30.00
Gold to silver ratio at 40 to 1 with gold at $1,500 the silver price would be $37.50
Gold to silver ratio at 30 to 1 with gold at $1,500 the silver price would be $50.00
Gold to silver ratio at 20 to 1 with gold at $1,500 the silver price would be $75.00
Gold to silver ratio at 15 to 1 with gold at $1,500 the silver price would be $100.00
-Some of you may be aware that a hedge fund trader purchased 7% of the world’s annual cocoa production last week. Big cocoa users were up in arms and complaining to the exchange that the purchase represented a market corner and would leave prices subject to a short squeeze. There was a big story about it in the Saturday edition of The New York Times.
Ted Butler had this to say about it and I’m paraphrasing a bit here. “If The New York Times and others imply that holding 7% of the world production of cocoa would artificially influence prices why are they not also implying that ‘8 or less’ bullion banks holding from 25% to over 40% of world silver production short would influence prices even more?
If holding 7% of the world production of any commodity is worthy of the front page, isn’t holding a short position many times larger than that, a story that’s fit to be printed as well?” Ed Steer-Casey Research
-Metals now strongly bullish, Ted Butler tells King World News. Listen here-http://www.gata.org/node/8855
-CFTC’s Chilton explains hope for freer, more transparent gold, silver markets. Watch video here-http://www.gata.org/node/8854
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Americans Have A Serious Household Net Worth Problem. The state of U.S. household net worth is dismal, as this chart shows, with the country falling back to levels last seen in the late 1980s and early 1990s.
This collapse happened once prior, after the deflation of the dot com bubble. But now, as a result of the housing bubble collapsing, household net worth has fallen even lower. The rebound after the dot com collapse was dramatic. The rise from 2009 lows has been less pronounced, with it clearly slowing in 2010.
We are only back to levels first reached in the early 1990s. Read more here-http://www.businessinsider.com/chart-of-the-day-household-net-worth-as-a-percent-of-disposable-personal-income-2010-7
-20% of Americans hit by major economic loss. A new study released Wednesday estimates that 20% of Americans suffered a significant economic loss last year the highest level in the past 25 years. The new Economic Security Index looks at the interaction of three key variables that have a direct bearing on a person’s economic security: income loss, medical expenses and debt.
The index, which tracks data since 1985, shows that economic insecurity has risen across all groups, not just among low-income families and those without much education. Read more here-http://money.cnn.com/2010/07/21/news/economy/economic_insecurity/
-Bernanke has the deepest rolodex, more than any CEO. And when he deliberately says “unusually uncertain” to describe the economic outlook, I find it irrational to ascribe anything fundamental to this rally. David Rosenberg-Gluskin/Sheff
-Pacific Investment Management Co.’s Bill Gross said deficit spending by governments that seek to maintain artificial levels of consumption “can be compared to flushing money down an economic toilet.” Read more here-http://www.bloomberg.com/news/2010-07-28/gross-equates-spending-to-lift-consumption-with-flushing-money-down-toilet.html
-My views are not all that negative. I think they’re just realistic. I want to face reality. You have people like Paul Krugman who thinks we should have another bubble to pull us out of this. He actually said that. But he said the same thing in 2001. And you know how that turned out. Marc Faber-Read more here-http://www.zerohedge.com/article/marc-faber-relax-will-hurt-lot
-It is amazing that we have all this joy for a stock market that has made its way back to the middle of the range and a market that is basically flat for the year. David Rosenberg-Gluskin/Sheff
-Through all the zigs and zags, this market has done diddly squat now for over eight months. You were better off clipping coupons, even at these low bond yield levels. And as for that 80% rally from March/09 to April/10, we wonder aloud how many are going to remember it once we retest the lows the market rallied 50% in the opening months of 1930, as an example.
Do you ever hear anyone today talking about the great rally of 1930? Does anyone today ever have much to say about 1930, or if they do, is it a fond memory? Well, the market rallied 50% at one point that year. There’s not much left to say on this one. David Rosenberg-Gluskin/Sheff
-The Nikkei has enjoyed 260,000 rally points in the past twenty years and the market is still down 70%. David Rosenberg-Gluskin/Sheff
-Jim Rogers Calls CNBC A Market PR Agency Whose Sole Purpose Is To Make Stocks Go Higher. Read and watch more here-http://www.zerohedge.com/article/jim-rogers-calls-cnbc-market-pr-agency-whose-sole-purpose-make-stocks-go-higher
-Volatility Trade Buffett Embraced Backfires for Wall Street Hedge Experts. Read more here-http://www.bloomberg.com/news/2010-07-29/volatility-trade-buffett-embraced-backfires-for-wall-street-hedge-experts.html
-Obama signs a bill that lets banks have US over a barrel once more. Last week, President Obama signed into law the Dodd-Frank Wall Street Reform bill hailed as the most sweeping overhaul of US financial regulation since the 1930s. Read more here-http://www.telegraph.co.uk/finance/comment/liamhalligan/7908516/Obama-signs-a-bill-that-lets-banks-have-US-over-a-barrel-once-more.html
-SEC says new financial regulation law lets it keep everything secret. Read more here-http://www.gata.org/node/8870
-Niall Ferguson: Empires Fall Abruptly, And The American Empire Is On The Brink. Read more here-http://www.businessinsider.com/niall-ferguson-american-empire-2010-7
-AP survey: A bleaker outlook for economy into 2011. Read more here-http://www.google.com/hostednews/ap/article/ALeqM5ioRXliVfpQrwlEITOiWDGlofCQfAD9H8FSJ80
-Jim Rogers predicts a new recession in 2012. Jim Rogers, the market sage, has warned the global economy is just two years away from another recession, but remains ill-prepared to cope with the after-effects. Read more here-http://www.telegraph.co.uk/finance/economics/7913302/Jim-Rogers-predicts-a-new-recession-in-2012.html
-Fed Governor James Bullard: The U.S. is closer to a Japanese-style outcome today than at any time in recent history. Read more here-http://www.businessinsider.com/james-bullard-paper-japan-2010-7 and http://www.bloomberg.com/news/2010-07-29/fed-should-resume-treasury-purchases-if-deflation-risk-grows-bullard-says.html and http://www.nytimes.com/2010/07/30/business/economy/30fed.html?_r=3&pagewanted=print
-India warned of stagflation risk as price of food soars. Read more here-http://www.gata.org/node/8859
-Bank of England chief says stimulus still needed. Read more here-http://finance.yahoo.com/news/Bank-of-England-chief-says-apf-3334221110.html?x=0&sec=topStories&pos=9&asset=&ccode
-U.K. Economic Growth Forecasts Cut on Budget Squeeze, Ernst & Young Says. Read more here-http://www.bloomberg.com/news/2010-07-24/u-k-economic-growth-forecast-cut-on-budget-curbs-ernst-young-will-say.html and http://www.businessinsider.com/ernst-and-young-the-uk-recovery-is-so-weak-that-they-wont-be-able-to-raise-interest-rates-for-many-years-to-come-2010-7
-China may switch to currency basket for forex rate. Central bank official suggests move away from dollar as benchmark. Read more here-http://www.marketwatch.com/story/story/print?guid=59B08656-4DDF-4C9B-A526-4F8D2A663789 and http://www.businessinsider.com/china-yuan-currency-basket-change-2010-7
-Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local government infrastructure projects, according to a person with knowledge of data collected by the nation’s regulator. Read more here-http://www.businessweek.com/news/2010-07-23/chinese-banks-see-risks-in-23-of-1-1-trillion-loans.html
-21 Reasons Why The So-Called Recovery Is A Joke For Most Americans. Read more here-http://www.businessinsider.com/21-saddest-facts-about-this-so-called-recovery-2010-7
-According to earlier White House projections, that $800 billion fiscal gorilla unveiled last year was supposed to pull down the unemployment rate to 7% by now. Instead, we are at 9.5%. In fact, it’s really even worse than that, for if the participation rate had stayed constant at the April level, than unemployment rate would be 10.2% today. David Rosenberg-Gluskin/Sheff
-The Scariest Unemployment Graph I’ve Seen Yet. Read more here-http://www.theatlantic.com/business/archive/2010/07/the-scariest-unemployment-graph-ive-seen-yet/60086/
-U.S. Cities, Counties Poised to Cut 500,000 Jobs, Report Finds. Read more here-http://www.bloomberg.com/news/2010-07-27/job-cuts-of-500-000-next-year-predicted-for-cities-counties-over-budget.html
-Consumer Confidence in U.S. Fell in July to a Five-Month Low. Read more here-http://www.bloomberg.com/news/2010-07-27/consumer-confidence-in-u-s-declines-to-a-five-month-low-on-labor-outlook.html
-The Death of Paper Money. As they prepare for holiday reading in Tuscany, City bankers are buying up rare copies of an obscure book on the mechanics of Weimar inflation published in 1974. Read the book here-http://www.zerohedge.com/article/guest-post-read-sought-after-dying-money-hyper-inflation-here and http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7909432/The-Death-of-Paper-Money.html
-North Americans are Getting a lot Less but it’s Costing Them More. Read more here-http://www.321gold.com/editorials/benson/benson072710.html
-Record number of fake £1 coins could force reissue. There are now so many fake £1 coins in circulation the Royal Mint could be forced to scrap all of the coins and reissue the entire denomination. Read more here-http://www.telegraph.co.uk/finance/personalfinance/consumertips/banking/7910602/Record-number-of-fake-1-coins-could-force-reissue.html
-Doomsday shelters making a comeback. Read more here-http://www.usatoday.com/news/nation/2010-07-28-doomsday28_ST_N.htm?loc=interstitialskip
-World’s oldest champagne found on Baltic seabed. Read more here-http://www.bbc.co.uk/news/world-europe-10673322
-Why 3-D is already dying. Read more here-http://money.cnn.com/2010/07/27/technology/3D_technology_dying.fortune/index.htm
-Top 10 consumer complaints. Read more here-http://money.cnn.com/2010/07/27/news/economy/consumer_complaints/index.htm
-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
-In 1817, R.J. Hauy an eminent French mineralogist wrote “Gems are the flowers of the mineral kingdom fancy color diamonds are the orchids.” “Fancy color diamonds, like orchids, are truly exotic and rare beauties of nature.” Jewelryexpert.com
-“I have come to the realization that colored diamonds, or other gemstones, should first be considered as a unique and individual work of art, and second as a commodity to be analyzed, computerized, and categorized.” Stephen Hofer, 1998
-“Exceptionally fine colored diamonds have no fixed price, and as with fine paintings set rules do not hold” S.H. Ball
-“Diamonds are nature’s art, nature’s most beautiful art. Every stone is a story, every stone tells a story.” Diamond DVD-PBS Nature Series
-“A colored diamond is a touch stone of the universe, a little something God created that man can’t always find, they are the last frontier of collectibles.” R. Winston
-“I remember that stone it was an incredible color, it had its own personality I have never seen another one quite like it.” R. Winston
-“After all, it really is an investment.” “It is only when the thing I buy creates a show for those around me that I get my money’s worth.” Evalyn Walsh McLean “Queen of Diamonds” Early owner of the Hope diamond
DAVID ROSENBERG-YOU KNOW YOU ARE IN A DEPRESSION WHEN
-Congress moved to extend jobless benefits seven times, as has been the case over the past two years, at a time when almost half of the ranks of the unemployed have been looking for at least a half year.
-The unemployment rate for adult males (25-54 years) hit a post-WWII this cycle and is still above the 1982 recession peak, and the youth unemployment rate is stuck near 25%. These developments will have profound long-term consequences social, economic and political.
-The fiscal costs of the depression continue to mount, with the White House on Friday raising its deficit projection for 2011 to $1.4 trillion from $1.267 trillion. That gap in the forecast $133 billion was close to the size of the entire budget deficit back in 2002. Amazing.
-You also know it is a depression when you find out on the weekend that the FDIC seized and shuttered another seven banks, making it 103 closures for the year. What a recovery!
-Meanwhile, how are the surviving banks making money? By cutting their provisions for bad debts (at a time when the household debt/income ratio is still near record highs of 120% and at a time when one-quarter of the consumer universe has a sub-600 FICO score which means they are also ineligible for Fannie or Freddie mortgage financing. The banks thus far have reduced their loan loss reserves between 23% (Cap One) and 73% (First Horizon) as Jamie Dimon said last week, these are not real earnings.
-You also know it’s a depression when a year into a statistical recovery, the central bank is still openly contemplating ways to stimulate growth. The Fed was supposed to have already started the process of shrinking its pregnant balance sheet four months ago and is now instead thinking of restarting Quantitative Easing. Of course, we are in this bizarre environment where bank credit continues to contract last week alone, bank wide consumer credit outstanding fell $2.2 billion; real estate lending contracted $9.2 billion; and commercial & industrial loans slid $5.1 billion.
-What did the banks do this past week? They replaced cash with government securities the $47.5 billion net buying was the second largest in the past three years. As the banks find few opportunities to lend households are either not creditworthy enough to lend to or are busy paying off debts and companies that do have any expansion plans have enough cash on their balance sheet to finance their initiatives they are likely to use their $1 trillion in excess reserves buying government and related securities, especially with the yield curve so steep and the Fed ensuring that it has no intention of taking the ‘carry’ away for a long, long time. Read more here-http://www.zerohedge.com/article/ever-wondered-how-you-know-you-are-depression-david-rosenberg-explains
U.S. DEBT CRISIS
-White House predicts record $1.47 trillion deficit. Read more here-http://news.yahoo.com/s/ap/20100723/ap_on_bi_ge/us_budget_deficit_2
-Taleb: Government Deficits Could Be the Next ‘Black Swan’. Read more here-http://www.businessweek.com/investor/content/jul2010/pi2010078_530571.htm?campaign_id=rss_topStories and http://www.zerohedge.com/article/nassim-taleb-government-debt-becoming-pure-ponzi-scheme
-The Real Nightmare In U.S. Debt May Be Hidden In Entitlements. Read more here-http://www.businessinsider.com/unfunded-liabilities-jpmorgan-2010-7
-CBO: Federal Debt and the Risk of a Financial Crisis. Read more here-http://cboblog.cbo.gov/?p=1249 and http://www.cbo.gov/ftpdocs/116xx/doc11659/07-27_Debt_FiscalCrisis_Brief.pdf
SEVEN MORE U.S. BANKS FAIL
-Seven More U.S. Banks Shut by Regulators, Pushing Year’s Failures Past 100. Seven banks were seized in seven U.S. states, marking the second year in a row in which at least 100 lenders have collapsed.
Banks with total deposits of about $2 billion were shut down Friday, according to statements on the Federal Deposit Insurance Corp. website. The failures cost the FDIC’s deposit- insurance fund $431 million. The U.S. bank-failure count this year rose to 103. Read more here-http://www.bloomberg.com/news/2010-07-24/seven-more-u-s-banks-shut-by-regulators-pushing-year-s-failures-past-100.html
EU BANK STRESS TESTS
-The EU Banking Stress Test is a total Joke. Only trading books are being tested, not bank inventory and operations. In order to fail you really have to be crushed. Still 7 banks have failed. Jim Sinclair
-The reason for the European stress tests, which are truly a charade, was a way for policymakers to calm down the markets. Just the notion that there was going to be a stress test was enough and then, wonder of wonders, only 7 of the 91 banks failed the test.
At least in the U.S., in the Geithner led charade back in early 2009, we had 10 of 19 banks failing the stress test and forced to raise an extra $75 billion of capital. And even though the Eurozone banks are in even worse shape, somehow the 7 who failed the test only have a capital shortfall of $4.5 billion.
What would the Mad Hatter say to that? Just the notion that there was going to be a stress test was enough and then, wonder of wonders, only 7 of the 91 banks failed the test. Then again, how could the banks fail this one the ‘double dip’ recession that balance sheets were shocked for only took into account the sovereign debt that was held on trading books as to opposed to hold to maturity books.
Moreover, there was no accounting in the stress test for an outright Club Med government default or debt restructuring. Meanwhile, as the weekend WSJ editorial pointed out, five of the troubled banks are Spanish. To wit: “A Spanish default, all by itself, would sorely test the ability of the EU to prop its struggling sovereigns. But don’t worry.
A sovereign default in Europe has been declared impossible. Now we can all relax”. The bottom line is that all that was tested in this process were trading books from a double-dip recession not the complete balance sheet impact of a sovereign debt default. We fail to see how the veil of uncertainty has been lifted by Friday’s results. David Rosenberg-Gluskin/Sheff
-The Triumph of the Financial World’s Lobbyists. The European stress tests failed to reveal much about the true state of the banks scrutinized. In order to prevent future crises, politicians in the EU are pushing for tough new financial sector regulations. But the financial lobby is extremely powerful.
Europe’s banks or at least most of them have passed a test that they more or less wrote themselves. A total of 91 banks were checked out. Of these, seven were singled out for being undercapitalized, including five Spanish savings banks, a Greek bank and Germany’s Hypo Real Estate (HRE), the Munich-based bank that was bailed out by the German government in the financial crisis and remains on life-support.
Does this mean that the rest of the banks are in good shape and that the crisis is over? Will the European authorities in charge of setting economic and financial policies be able to head off future financial crises?
Have they at least figured out whether all the hundreds of billions of Euros in taxpayer money that they shelled out to stop speculators wrecking entire economies was soundly invested? Have the executives of financial institutions gotten any more cautious? Has the infamous “systemic risk” now become controllable?
No one can really answer any of these questions because the stress tests didn’t measure such things. In fact, the test’s hurdles were set so low that Wolfgang Gerke, a banking specialist at the state-government sponsored Bavarian Financial Center in Munich, quipped that it was more like “giving tranquillizer pills to the market.” Read more here-http://www.spiegel.de/international/europe/0,1518,druck-708494,00.html
-Seven EU Banks Fail Stress Test, Face $4.5 Billion Shortfall. Read more here-http://www.bloomberg.com/news/2010-07-23/seven-of-91-eu-banks-fail-stress-test-face-4-5-billion-capital-shortfall.html and http://blogs.wsj.com/source/2010/07/23/the-seven-banks-that-failed/
-12 Charts That Expose Europe’s Bank Stress Tests As Way Too Easy. Read more here-http://www.businessinsider.com/12-charts-that-expose-the-european-stress-tests-as-way-too-easy-2010-7
-Bank stress tests ‘too little, too late’ says City. Markets delivered a clear thumbs down to the European bank stress test results last night as a case of “too little, too late”. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7907600/Bank-stress-tests-too-little-too-late-says-City.html
-Giant UK Fund Manager: Stress Tests Tested The Wrong Thing And Banks Will Ultimately Fail The Real Tests. Read more here-http://www.businessinsider.com/giant-uk-fund-manager-stress-tests-tested-the-wrong-thing-and-banks-will-ultimately-fail-the-real-tests-2010-7
-JPMorgan Shreds The Stress Tests, Says 54 Banks Should Have Failed, And That Investors Will Lose Confidence. Read more here-http://www.businessinsider.com/jpmorgan-shreds-the-stress-tests-says-54-banks-should-have-failed-and-that-investors-will-lose-confidence-2010-7
-Jim Rogers: The Stress Tests Were A Huge PR Gimmick And Now More Problems Are Coming. Read more here-http://www.cnbc.com/id/38409464 and http://www.businessinsider.com/jim-rogers-the-stress-tests-were-a-huge-pr-gimmick-2010-7
-Europe’s €30 trillion headache. European banks have amassed €30 trillion in liabilities and face a serious funding threat over the next two years as authorities withdraw emergency support, according to a new report by Standard & Poor’s. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7915246/Europes-30-trillion-headache.html
REAL ESTATE
-Foreclosure Filings Rise in 75% of U.S. Cities on Unemployment. Foreclosure filings climbed in three-quarters of U.S. metropolitan areas in the first half as high unemployment left many homeowners unable to pay their mortgages, according to RealtyTrac Inc.
The number of properties receiving a filing more than doubled from a year earlier in Baltimore, Oklahoma City and Albuquerque, New Mexico, the mortgage-data company said today in a report. Notices of default, auction or bank seizure rose more than 50 percent in areas including Salt Lake City; Savannah, Georgia; and Atlantic City, New Jersey.
“Foreclosures are spreading out from areas that had been hardest hit,” Rick Sharga, senior vice president for marketing at Irvine, California-based RealtyTrac, said in a telephone interview. “We’re dealing with underlying economic weakness as opposed to unsustainable home prices and bad loans.” Read more here-http://www.bloomberg.com/news/2010-07-29/foreclosure-filings-rise-in-75-of-u-s-cities-as-joblessness-hurts-owners.html and http://money.cnn.com/2010/07/29/real_estate/new_face_of_foreclosure/index.htm
-Chart of the week: The Housing Market Is Ugly Everywhere. This week, the Case-Shiller Home Price Index numbers were released and Las Vegas was the only city that showed a decline in values, falling 0.5%.
But that exclusivity belies the reality that many markets across the U.S. are not performing well. Charlotte continues to not show an improving year-over-year trend, according to Deutsche Bank. That could be a result of layoffs from two of the city’s biggest employers, Wachovia and Bank of America.
But many other U.S. cities are also not experiencing the growth they’d hope for, with Detroit a notable depressing site. Read more here-http://www.businessinsider.com/chart-of-the-day-case-shiller-20-cities-2010-7
-May home prices gain but no sustained recovery. Home prices rose in May but display no signs of a sustained rebound as long as unemployment flirts with 10 percent and a record stockpile of foreclosed houses looms over the market, a separate report showed on Tuesday.
Single-family house prices remain 29.1 percent below peaks four years ago, according to a Standard & Poor’s/Case-Shiller index. The deepest housing crash since the Great Depression dragged the U.S. economy into recession, and is doing little to stimulate broader growth as many economists fret about a possible double-dip recession. Read more here-http://www.reuters.com/article/idUSTRE65M2WK20100727 and http://www.bloomberg.com/news/2010-07-27/home-prices-in-20-u-s-cities-rise-more-than-estimated-case-shiller-says.html
-June Sales of U.S. New Homes Climb More Than Forecast. Read more here-http://www.bloomberg.com/news/2010-07-26/sales-of-u-s-new-houses-climb-to-330-000-more-than-economists-forecasts.html
-Home Vacancies Rise as U.S. Ownership Falls to Lowest in Decade. About 18.9 million homes in the U.S. stood empty during the second quarter as surging foreclosures helped push ownership to the lowest level in a decade.
The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.6 million in the year-earlier quarter, the U.S. Census Bureau said in a report today. The ownership rate, meaning households that own their own residence, was 66.9 percent, the lowest since 1999. Read more here-http://www.bloomberg.com/news/2010-07-27/vacancies-climb-as-u-s-home-ownership-falls-to-lowest-level-in-a-decade.html and http://money.cnn.com/2010/07/27/real_estate/home_owners/index.htm
-Don’t Hold Your Breath for a Bounce in Home Prices. Read more here-http://abcnews.go.com/print?id=11253383
-Not only have American households paid down a record $258 billion of consumer debt over the past year (or perhaps walked away from it) but there is a move afoot to restore homeowner equity by paying off the mortgage more rapidly.
In fact, 33% of refinancings are now ‘cash-ins’ instead of ‘cash-outs’, a record since Freddie Mac began tracking the data back in 1985 (see “Doubling Down on Housing” on page B7 of the weekend WSJ). David Rosenberg-Gluskin/Sheff-Read more here-http://www.businessinsider.com/just-a-reminder-of-how-much-deleveraging-households-still-have-to-do-2010-7
-Americans Tap $8.3 Billion in Home Equity, Least in a Decade. Americans in the second quarter tapped the smallest amount of home equity in a decade, showing households are focused on repairing tattered finances.
Owners took out $8.3 billion while refinancing prime home loans as borrowing costs dropped from April through June, down from $8.4 billion in the previous three months and the least in 10 years, according to a report today by McLean, Virginia-based Freddie Mac. Twenty-two percent chose to reduce loan principal, matching the third-highest rate since records began in 1985. Read more here-http://www.bloomberg.com/news/2010-07-28/americans-use-of-8-3-billion-in-home-equity-last-quarter-least-in-decade.html
-Apartment Rentals Surge in U.S. on Home Foreclosures, Job Gains. Read more here-http://www.bloomberg.com/news/2010-07-27/apartment-rentals-surge-in-u-s-as-foreclosures-rise-job-growth-resumes.html
-U.K. Housing at ‘Turning Point’ as Prices Drop, Hometrack Says. U.K. house prices fell in July for the first time in 15 months as the government’s budget squeeze curbed demand and more people tried to sell their properties, Hometrack Ltd. said. Read more here-http://www.bloomberg.com/news/2010-07-25/u-k-economic-growth-forecasts-cut-on-budget-squeeze-ernst-young-says.html
-U.K. house prices will fall over the next five years. Read more here-http://www.telegraph.co.uk/finance/economics/houseprices/7913776/House-prices-will-fall-over-next-five-years-says-Niesr.html
-Greek Villas Marked Down 45% as Crisis Hits Island Homes. Read more here-http://www.bloomberg.com/news/2010-07-27/greek-villas-get-45-markdowns-as-economic-crisis-devalues-island-property.html
-Property Prices in China May Fall Much as 15% in Next 12 Months, HSBC Says. Read more here-http://www.bloomberg.com/news/2010-07-26/property-prices-in-china-may-fall-much-as-15-in-next-12-months-hsbc-says.html
-The Ultimate Bubble in Australia is Real Estate. Read more here-http://www.kitco.com/ind/charnock/jul262010.html
GEOPOLITICAL
-Ahmadinejad says expects U.S. to attack Mideast soon. Read more here-http://www.reuters.com/article/idUSTRE66Q26X20100727
-Ex-CIA chief: Strike on Iran seems more likely now. Read more here- http://www.washingtonpost.com/wp-dyn/content/article/2010/07/25/AR2010072500978_pf.html
-With Iran And Afghanistan Heating Up, Here Are The Threats The U.S. Air Force Is Really Worried About. Right now, Iran is posturing after the EU and U.S. just initiated a new batch of sanctions against the country. They are targeting the weak links of the Iran 6, and claiming that the U.S. is planning an attack on two Middle East countries.
All the while the U.S. military just conducted exercises with their South Korean partner this weekend, after an alleged North Korean attack on the South Korean military vessel, the Chenoan. Read more here-http://www.businessinsider.com/us-airforce-iran-2010-7
-Possible Reaction Scenarios To A Pre-emptive Israeli Strike On Iran. Read more here-http://www.zerohedge.com/article/guest-post-possible-reaction-scenarios-preemptive-israeli-strike-iran
-Nuclear Sabotage In Iran? Read more here-http://www.zerohedge.com/article/nuclear-sabotage-iran
-Chavez threatens U.S. oil cut in Colombia dispute. Read more here-http://www.reuters.com/article/idUSN2514507120100725
-Al Qaeda No. 2 Threatens More U.S. Attacks. Ayman Al-Zawahiri Also Mentions Times Square Attack in Audio Message. Read more here-http://abcnews.go.com/Blotter/al-qaeda-message-ayman-zawahiri-threatens-us-attacks/story?id=11262121
-The U.S. Defense Department is unable to account for $8.7 billion of the $9.1 billion in Development Fund for Iraq monies in received for reconstruction in Iraq. This according to a study published today by the Special Inspector General for Iraq Reconstruction. Read more here-http://www.federalnewsradio.com/?sid=2012362&nid=35
© 2012, Worldwide Precious Metals Canada Ltd.
www.wwpmc.com
The Goldbugg Report – August 3, 2010
Posted by Worldwide Precious Metals on Tuesday, August 3, 2010
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