Newsroom

Market Alert for All Retail Dealers

September 7, 2010

Retail Dealers:

It has been rumored for many months that JP Morgan Chase is under parallel criminal and civil investigations for its trading activity in the silver market. The CFTC is supposed to be handling the civil charges and the Department of Justice would be handling the criminal charges, as reported by the New York Post on May 9^th of this year. JP Morgan’s response to that article was, predictably, “There is no criminal or civil Department of Justice investigation of J.P. Morgan for its silver trading practices.” Conspicuously absent from JP Morgan’s response to the article is mention of the CFTC. In other words, JP Morgan specifically said there was no DoJ investigation, while neither confirming nor denying that one is being carried out by the CFTC. The original article by Michael Gray and JP Morgan’s response can be viewed by clicking the following link: Michael Gray – JP Morgan Article. The alleged investigations may be the result of communications to the CFTC by a London based metals trader named Andrew Maguire which we first reported to you in our March 26 memo.

Typically a public company will be issued a Wells Notice when it comes under investigation by the Securities and Exchange Commission or another regulator. There is no rule or regulation requiring that the investigators send that notice however. A Wells Submission may also be filed by the company under investigation in response to a Wells Notice but, again, there is no rule or regulation requiring that the company make such a response. We find it interesting that JP Morgan Chase, and now Goldman Sachs as well, are shutting down their proprietary commodities trading units this year, perhaps as soon as within two months. There is no requirement in the new Dodd-Frank Act that requires them to dispose of these units immediately; in fact they were given years to do so in the final version of the legislation. The fact that they are running away from commodities futures trading as fast as they can just as the CFTC is going to establish position limits, and at the first whisper of investigations into their activities in these markets only serves to reinforce our opinion that the precious metals market is extremely close to being set free from the shadow of the manipulative practices of these big banks.

If, as an investor, you have money sitting on the sidelines and are waiting for metals prices to come down and present a “perfect buying opportunity”, we leave you with these sobering thoughts: What if prices are already at the “perfect buying opportunity” levels? What if the evidence of manipulation, by the very banks that are now running for the exits as fast as they can, that has been presented by so many intelligent people, for so many years, really has been keeping metals prices suppressed for years? Where do prices go once the precious metals markets are free to trade as they should?

We believe that once the market is set free in the coming months, prices should skyrocket to the upside and if that happens, those investors that are still sitting on the sidelines with their cash will have missed the chance to have gotten on board while the rocket was being fueled. It is time for you to make your choice: are you getting on board for the ride, or are you going to stand in the crowd with the rest of the spectators watching the liftoff?

Trading Department – Precious Metals International, Ltd.

This is not a solicitation to purchase or sell.

GOLD

-You have to choose [as a voter] between trusting to the natural stability of gold and the natural stability of the honesty and intelligence of the members of the Government. And, with due respect for these gentlemen, I advise you, as long as the Capitalist system lasts, to vote for gold. George Bernard Shaw

-Maybe one of the lessons of history is that periodically paper currency loses credibility so much that we have to revert to commodity standards, and I think that may well be happening. When you look at what’s happening in the gold market, it’s not so much fundamentals that are driving gold up from a $1,000 towards $2,000.

It’s a fact that more and more people feel that they should hold gold as perhaps 10 percent of their portfolios. If everybody thinks that, if that becomes a standard investment strategy, then gold is going to go a lot further than its present price. So I’ve really re-thought my attitude towards gold almost on that momentum basis. Niall Ferguson

-Investors sometimes get caught up in the day to day and week to week movements in gold and silver. Don’t waste your time or energy on that, just accumulate. Standing in front of us is the greatest transfer of wealth in history. When the dust settles, those holding the gold will make the rules. Richard Russell-Read more here-http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/8/30_Richard_Russell_-_Fiat_Money_To_Meet_Its_End.html and http://www.321gold.com/editorials/russell/russell090210.html

-Gold Rallying to $1,500. Investors are accumulating enough bullion to fill Switzerland’s vaults twice over as gold’s most accurate forecasters say the longest rally in at least nine decades has further to go no matter what the economy holds.

Analysts raised their 2011 forecasts more than for any other precious metal the past two months, predicting a 10th annual advance, data compiled by Bloomberg show. The most widely held option on gold futures traded in New York is for $1,500 an ounce by December, or 18 percent more than the record $1,266.50 reached June 21.

Holdings through bullion-backed exchange-traded products are already at more than 2,075 metric tons, within 0.1 percent of the all-time high. “Either a swift economic recovery or further dismal economic performance should bring new buyers into the market,” said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt who was the most accurate forecaster in the first quarter and expects the metal to rise as high as $1,400 next year.

“A stronger economy would create more jewelry demand. If the economy stays weak or gets worse, then investors will be looking for a safe haven.” People “fear another crisis and so they will diversify into gold,” said Thorsten Proettel, an analyst at Landesbank Baden-Wurttemberg in Stuttgart, Germany, who was also the most accurate forecaster in the first quarter. He expects gold to trade as high as $1,350 next year.

Anne-Laure Tremblay, an analyst at BNP Paribas SA in London whose forecast was also the best in the period, is estimating a 2011 high of $1,370. “Investors’ interest is still growing and still hasn’t reached a reasonable part of their portfolio,” UniCredit’s Hitzfeld said. “Gold is still an under-owned asset, that’s perfectly clear.” Read more here-http://www.bloomberg.com/news/2010-08-30/gold-rallying-to-1-500-for-analysts-as-soros-s-bubble-inflates.html

-Gold price to double in five years Frank Holmes. With the start of the festive season, September is likely to be a good time for gold and things should continue to do well into 2011. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=110586&sn=Detail&pid=33

-Gold May Jump to $1,300 an Ounce Fuelled by Investment Demand, GFMS Says. Read more here-http://www.bloomberg.com/news/2010-08-26/gold-may-jump-to-1-300-this-year-fueled-by-investment-demand-gfms-says.html

-IMF sells 16.85 tons, Russia buys 16.2 tons in July. The International Monetary Fund’s gold reserves fell by 16.85 metric tons in July as Russia added 16.2 tons to its holdings, according to figures from the Washington-based lender.

Reserves of gold at the IMF were 2,917.07 tons at the end of July, compared with 2,933.92 tons a month earlier, data on the IMF’s website show. Russia increased holdings to 726.02 tons last month from 709.81 tons, according to the figures.

The IMF plans to sell a total of 403.3 tons of gold. India, Mauritius, and Sri Lanka bought 212 tons last year, and the IMF in February said it would begin selling the remainder on the open market. Central banks have increased holdings and gold-backed exchange-traded fund assets owned by investors yesterday climbed to the highest since at least 2003, according to data compiled by Bloomberg. Read more here-http://www.gata.org/node/8974

-Gold demand seen soaring in Vietnam amid devaluations, stock slump. Read more here-http://www.gata.org/node/8963

-Meet gold’s evangelist, Thomas Kaplan doing everything he can to get his hands on the stuff. “I’m not a goldbug, but there are times when I feel like an evangelist for it,” says Thomas Kaplan, an Oxford-educated historian and chairman of Manhattan-based Tigris Financial Group.

“To my amazement, it’s a hard sell. The conventional wisdom is that gold is for primitives. That derision shows me that contrary to the notion we’re in a bubble, we haven’t yet begun the real bull market.” Read more here-http://www.msnbc.msn.com/id/38883209/ns/business-bloomberg_businessweek/

-Gold and silver analysts Haynes and Arensberg join King World News. Listen here-http://www.gata.org/node/8967

-Bubble is in dollar, bonds, not gold, James Turk tells King World News. Listen here-http://www.gata.org/node/8968

-James Turk: Big Money Buying Pullbacks In Gold & Silver. Read more here-http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/9/2_James_Turk_-_Big_Money_Buying_Pullbacks_In_Gold_%26_Silver.html

-NIA The U.S. Path to Collapse: Own gold and silver. Read more here-http://www.inflation.us/pathtocollapse.html

-HSBC’s Morris Says He Sold 30-Year Treasuries, Kept Gold. Watch video here-http://www.bloomberg.com/news/2010-09-01/hsbc-s-morris-says-he-sold-30-year-treasuries-kept-gold-video.html

-Gryphon’s Steve Parsons reckons gold bull market has only just begun. “World gold production is decreasing year on year and will only go down in the next few years due to less and less discoveries, and within that, very few major new deposits,” Mr Parsons said. “The diminishing number of new reserves is failing to compensate for dying mines.

“Alarmingly, mining costs are increasing with 50% of global gold production now costing US$900 an ounce,” he said. “The demand for gold will be exacerbated with an easing in worldwide monetary environments.

“Countries are printing more and more money hand over fist. “With the move away from the US dollar and other major currency determinants, global debt and inflationary fears, this will only favour the swing to gold evidenced by the Central Bank’s position now as a net buyer of gold.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=110631&sn=Detail&pid=34

-The gold debate: Will gold be as good going forward. Gold bugs have spent the last ten years in the sun but, in relative terms the price of gold is rather expensive now, how much higher can it go?More importantly though, owning gold and gold stocks is an insurance policy against financial catastrophes in the world.

And while this particular insurance policy is not as cheap as it has been at times in the past, our assessment is that in the context of a portfolio of predominantly high quality businesses, it is still a prudent allocation of capital given the tumultuous state of global government finances and the likely longer term impact of global fiscal and monetary activities over the past two years.

If the tail risks in the global economy (that most financial market participants tend to disregard) come to pass, gold will probably be the last man standing, just as it has been through the ages. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=110683&sn=Detail&pid=33

-Clive Maund gold market update. Read more here- http://news.goldseek.com/CliveMaund/1283148900.php

-China central bank researcher suspects ‘intensive gold sales’ by U.S. Read more here-http://www.gata.org/node/8977

-Ron Paul in his own words to Kitco News on gold price manipulation. Read more here-http://www.gata.org/node/8964

-Ron Paul questions whether there’s gold at Fort Knox, NY Fed. Read more here-http://thehill.com/blogs/blog-briefing-room/news/116341-ron-paul-plans-bill-to-audit-us-gold-reserves

-New York Sun: As dollar diminishes, why shouldn’t gold be audited? Read more here-http://www.gata.org/node/8976

-Fox News takes Ron Paul gold audit story national. Read more here-http://www.gata.org/node/8975

-Robert Kientz: Gold, silver market suppression failures flash buy signal. Read more here-http://www.gata.org/node/8972

-GATA figures heavily in Financial Times report on gold. Read more here-http://www.gata.org/node/8966

-GATA cited in TheStreet.com’s analysis of gold price movement. Read more here-http://www.gata.org/node/8960

-Now that GATA can be quoted, can central banks be asked? Read more here-http://www.gata.org/node/8971

-On same day Nadler denies, admits central bank interest in suppressing gold. Read more here-http://www.gata.org/node/8962

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

-Silver rose 8% in August and is looking very well technically. There is now strong support around the $17.50/oz level. Should resistance at $19.53/oz be breached than silver could make the sharp moves upwards, long anticipated by many analysts, and challenge the high seen in March 2008 near $21/oz. Goldcore

-Silver is looking very well technically after its recent consolidation. The price action in silver has been impressive with every sell off being greeted by the large buy orders and short inter day rallies of some 50 cents in a matter of hours. There is resistance at the $19.50/oz level once breached, silver could rapidly rise to $20/oz before taking a breather.

Silver prices in the futures market continue to exhibit signs if backwardation which could be a sign of tightness in the silver market. Standard Bank’s senior commodity analyst, Walter de Wet notes “a tightening in the physical silver market with increased demand from mainland China absorbing much of the silver supply traditionally coming to the wider market from Hong Kong.” Goldcore

-While gold is very close to new record nominal highs, silver remains well below its all time record high of nearly $50/oz in 1980. The metal also remains below the multi year record price reached in March 2008 at $20.81/oz.

Silver is looking extremely positive technically and the correction and consolidation of the last 2 and a ½ years may be the foundations for higher prices in the coming months. Value buyers continue to see silver as very attractive with the gold-silver ratio near 65.

Most analysts believe that the gold-silver ratio will fall over time, resulting in higher silver prices versus gold. This is for a few reasons, one of which is silver’s significant industrial uses, meaning that its supply and demand fundamentals become more favourable versus gold over time.

Silver’s safe haven credentials have been seen in recent months and silver appears to be increasingly trading like a currency rather than simply as a commodity. Should this trend continue, which seems likely, then silver’s ratio to gold could return to the levels seen in the 1970s between 40 and 15. Goldcore

-Top on our list of newsworthy items is that JP Morgan Chase will be shutting down its proprietary commodities trading group in order to comply with the new Dodd-Frank act. The company informed its traders in London that their positions are now “at risk” and will likely be eliminated within two months.

Goldman Sachs and Morgan Stanley are also said to be in discussion with their own “prop” desks on winding them down as well. Combine this fact with the position limits that the Commodities Futures Trading Commission is in the process of establishing and this could be a boon for precious metals investors everywhere.

We may finally be seeing the end of the market manipulation that these big banks have been able to get away with for so many years. PMI International

-Morgan Chase said to end proprietary trading in commodities. Read more here-http://www.gata.org/node/8973 and http://www.bloomberg.com/news/2010-08-31/jpmorgan-is-said-to-shut-proprietary-trading-to-comply-with-volcker-rule.html

-JPMorgan Pretends To Shut Down All Prop Trading Desks, In Latest Smoke Screen Act Of Volcker Rule “Compliance”. Read more here-http://www.zerohedge.com/article/jpmorgan-shutting-down-all-prop-trading-desks

-Gene Arensberg: Something changed in silver market last week. Read more here-http://www.gata.org/node/8969

-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1283144640.php

-Roger Wiegand: Opportunity in Crisis. Silver is more volatile than gold because it’s a smaller market. However, I think silver is really coming into its own. We’ve been hanging around $18 on the futures silver price. We have touched as high as $21.50. Today, the futures are $19.50. Before this fall is over, we could go to $20 (resistance).

There’s harder resistance at $21.50. Once we breakthrough $21.50-$22, I think you’ll see a big push to $25, $26 and then $30. The question remains: Can we see $25-$26 this fall? I’m not sure, but there’s an excellent chance. Can we see $25–$26 by April 2011? I think we could. Read more here-http://www.theaureport.com/pub/na/7226

-David Morgan silver commentary. Read more here-http://news.silverseek.com/SilverInvestor/1283178931.php

-Silver Could Gain On Gold, But Gold Likely To Outperform Oil. “Silver is poor man’s gold,” said Gijsbert Groenewegen, managing partner of Silver Arrow Capital Management, who looks for the ratio to eventually fall below 52. “When people don’t want paper money, they will go for gold and silver. And the man in the street will go for silver because that’s something he can buy.”

David Morgan, analyst with Silver-Investor.com, said he looks for gold and silver to do well for the rest of this year and next, but with silver to have the upper hand and eventually drive the gold/silver ratio below 50. He cited silver-investment demand coupled with potential for increasing industrial-type uses for the versatile metal.

As such the market is likely to return to an annual supply/demand deficit by 2012, he said. At some future point, Morgan looks for silver to suddenly narrow the ratio with gold dramatically maybe even as low as 16 near the time when the bull market for the metals might be ending, just as happened back in 1980 when silver briefly shot up to the $50 region as gold got around $850.

“Say the ratio gets back to 45 to 1. In the last blow-off phase (of a bull) market, you could see it drop from 45 to 1 down to 16 to 1 in a couple of months,” Morgan said. He described the 1980 bull market as a horse race in which silver lagged, then put on a charge near the finish line.

The Hunt Brothers massive purchases played a role in silver’s surge back then, but now there are far less silver stockpiles around the world, thereby supporting silver, Morgan said. Read more here-http://www.kitco.com/reports/KitcoNews20100901AS_silverandgold.html

-Jeff Nichols: Silver is Set to Shine. Based on silver’s own improving supply/demand fundamentals, I expect higher silver prices in the months and years ahead. Consistent with my forecast of $2,000 gold in the next few years, I expect silver to hit and surpass its 1980 all-time peak around $50 an ounce.

For those who want to know, this works out to a gold/silver ratio of 40. From an historical perspective this is certainly not an unrealistic relationship between the two precious metals. Read more here-http://www.resourceinvestor.com/News/2010/8/Pages/Silver-is-Set-to-Shine.aspx

-David Levenstein: As silver consolidates above $19/oz technical’s look bullish. Considered a key resistance level, if the white metal remains above $19 an ounce more strength could be on the way. According to Dick Poon, a Hong Kong based manager of the precious metals trading at Heraeus Ltd., “Silver is looking cheap and we’re seeing strong investment demand for small ingots, as well as good industrial demand from solar-panel makers.”

The solar industry will consume up to 1,500 metric tons (48 million ounces) this year, Poon estimates. “Even if investors are expecting another downturn, there will always be demand for alternative sources of energy,” said Poon. “We could see prices back up above $20 very soon.”

Silver last traded at more than $20 in March 2008. I believe that this price prediction is conservative and as I mentioned at the beginning of the year, my target for the end of 2010 is around $25/oz. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=110684&sn=Detail&pid=32

-Silver seen as safe-haven Cinderella. While not for widows and orphans because of its volatility, a number of analysts expect silver’s latest run, it is up15% so far this year, to have a bit more staying power. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=110677&sn=Detail&pid=32 and http://af.reuters.com/article/metalsNews/idAFLDE68117U20100902

-Silver and gold showing upside promise and still the best safe havens. With gold and silver steadily moving up in price and looking perhaps to test a new high in the next week or so as the holiday season ends, the serious downside risk looks relatively limited. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=110561&sn=Detail&pid=33

-Nuts and Bolts of COMEX Silver Manipulation. Read more here-http://news.silverseek.com/SilverSeek/1283447660.php

BANKING

-Problem bank list climbs to 829. The government’s list of troubled banks hit its highest level since 1993 during the second quarter, although the pace of growth continued to slow, according to a government report released Tuesday.

The number of banks at risk of failing rose by 53 to 829, the Federal Deposit Insurance Corp. said in its quarterly survey of the nation’s banking system. That increase marks the smallest rise since the first quarter of 2009.

However, it’s still nearly double the 416 banks that were on the FDIC’s watch list a year ago and is up from 775 in the first quarter of this year. Read more here-http://money.cnn.com/2010/08/31/news/companies/fdic_problem_bank_list/index.htm and http://www.bloomberg.com/news/2010-08-31/u-s-banks-post-21-6-billion-quarterly-profit-as-problem-lenders-rise.html

-Chart Of The Week: Number Of “Problem” Banks Hits Brand-New High. The FDIC’s latest quarterly banking profile generally shows an industry nursing itself back to health. Total quarterly earnings of $21.6 billion compared to losses of $4.4 billion in the year-ago quarter.

And the $40.3 billion that banks set aside for loan-losses is the lowest level since Q1 2008. But the industry still has a long way to go, and one obvious statistic is that the total number of problem institutions hit a new high in Q2. When this starts coming down, that will be a reason to rejoice. Read more here-http://www.businessinsider.com/chart-of-the-day-number-of-fdic-insured-problem-institutions-2010-8

-Banks Need New Capital on Housing Dip, Whitney Says. U.S. banks need more capital to withstand a renewed drop in the housing market, according to analyst Meredith Whitney. Banks aren’t prepared for a “double-dip” in housing, which “it looks like we are having,” Whitney said today on Bloomberg Radio’s “The Hays Advantage.”

“They need higher capital,” said Whitney, chief executive officer of Meredith Whitney Advisory Group in New York. Read more here-http://www.bloomberg.com/news/2010-08-27/banks-will-need-new-capital-to-withstand-renewed-housing-dip-whitney-says.html

-Banks back switch to China’s renminbi for trade. A number of the world’s biggest banks have launched international roadshows promoting the use of the renminbi to corporate customers instead of the dollar for trade deals with China.

HSBC, which recently moved its chief executive from London to Hong Kong, and Standard Chartered are offering discounted transaction fees and other financial incentives to companies that choose to settle trade in the Chinese currency.

“We’re now capable of doing renminbi settlement in many parts of the world,” said Chris Lewis, HSBC’s head of trade for greater China. “All the other major international banks are frantically trying to do the same thing.” Read more here-http://www.gata.org/node/8961

CHART OF THE WEEK-QUOTES-QUICK HITS

-U.S. Economy Grew a Revised 1.6% in Second Quarter. Read more here-http://www.bloomberg.com/news/2010-08-27/economy-in-u-s-grew-1-6-in-second-quarter-revised-from-2-4-.html

-Chart of the week: Without Government Spending, GDP Growth Would Have Been Less Than Half Of What It Was. The latest revision for U.S. Q2 GDP came in at 1.6%, which was higher than the 1.3% reading expected by consensus, but well below the 2.4% value previously reported by the government.

Thing is, the latest GDP report shows just how dependent the U.S. economy was on government spending during the second quarter. Government spending contributed +0.86% to the 1.6% GDP growth value, which was one of the highest quarterly government contribution to GDP since at least 2007.

The only quarters to beat it since the beginning for 2007 were Q3 of 2008 and Q2 of 2009, at +1.04% and +1.24% respectively. Sans the 0.86% government spending boost, U.S. GDP would have grown by just 0.74% during Q2 of this year. This is shown by the right-hand bar below. Read more here-http://www.businessinsider.com/without-government-spending-gdp-growth-would-have-been-less-than-half-of-what-it-was-2010-8

-We believe the U.S. economy is in a modern day depression. David Rosenberg-Gluskin/Sheff

-To say we don’t have a form of economic depression on our hands is pure denial, it’s only not the 1930s version. David Rosenberg-Gluskin/Sheff

-As we are finding out, even with an extremely aggressive central bank, just because you turn the key doesn’t mean the engine turns over. David Rosenberg-Gluskin/Sheff

-But more fundamentally, in a recession, the economy is revived by government stimulus; in depressions, the economy is sustained by government stimulus. David Rosenberg-Gluskin/Sheff

-We are kicking off September with a positive tone to what remains a highly volatile and schizoid stock market. David Rosenberg-Gluskin/Sheff

-The quote of the day has to go to Alan Blinder in his comment on Ben Bernanke’s menu of quantitative easing options outlined last Friday (why this could elicit a rally in anything is truly a mystery). Here it goes: “The Fed has run out of the strong tools, and is turning to weak ones. When you’re fighting in a foxhole and you’ve used up the machine guns and hand grenades, then you pull out the sword and start throwing rocks.” David Rosenberg-Gluskin/Sheff

-As for the economy, here we are 33 months later and the levels of everything from home prices, to GDP, to credit outstanding, to organic personal income, to employment are all, to varying degrees, lower now than they were just before the “Great Recession” began.

We can understand that this is not exactly cocktail conversation, but this is a Japanese-style (even worse perhaps) modern-day depression. It’s not the 1930s because soup lines have been replaced with unemployment insurance lines over 10 million checks and for up to 99 weeks. The poor souls who endured the bitter 1930s had no such relief. David Rosenberg-Gluskin/Sheff

-Here we are, almost three years after the recession bomb was detonated, and our beloved policymakers are still tinkering with their chemistry set to figure out how to stop a post-bubble credit collapse in its tracks. The Fed is now openly contemplating QE2 (though admittedly, with no broad consensus just yet they want to see if things get worse first. Thanks!). David Rosenberg-Gluskin/Sheff

-We now see that a $1.5 trillion deficit just isn’t enough for the folks at the White House who, the WSJ reports today, are “considering a range of new measures to boost economic growth, including tax cuts and a new nationwide infrastructure program.” Wait a second these are “new”? Wasn’t this part of the ballyhooed round of fiscal stimulus unveiled a year-and-a-half ago? David Rosenberg-Gluskin/Sheff

-In a depression, radical changes occur in terms of social norms and spending behaviour. In recessions, people don’t cancel their life insurance policies as one example. But in a depression, tragically, this is what happens almost 35 million Americans now have no such coverage, up from 24 million five years ago.

This reflects the focus by households to pay down their debts at all costs and how companies have bolstered profits by eliminating benefits. See More Go Without Life Insurance on page C1 of the Monday WSJ. David Rosenberg-Gluskin/Sheff

-Société Générale tells clients how to prepare for potential ‘global collapse’. Société Générale has advised clients to be ready for a possible “global economic collapse” over the next two years, mapping a strategy of defensive investments to avoid wealth destruction. Read more here-http://www.telegraph.co.uk/finance/economics/6599281/Societe-Generale-tells-clients-how-to-prepare-for-global-collapse.html

-Bernanke Says Fed Will Do `All It Can’ to Ensure U.S. Recovery. Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank “will do all that it can” to ensure a continuation of the economic recovery, and outlined steps it might take if the growth slows. Read more here-http://www.bloomberg.com/news/2010-08-27/bernanke-says-fed-will-do-all-it-can-to-ensure-u-s-economic-recovery.html

-El-Erian Says `Alarming’ Data Show U.S. Economy Slowing. U.S. economic data are “alarming,” signaling the recovery is losing momentum, Mohamed A. El-Erian, Pacific Investment Management Co.’s chief executive officer, wrote in an opinion piece in the Washington Post.

Unemployment is high, consumer credit is shrinking and small companies are having trouble obtaining bank lines of credit, wrote El-Erian, who is also co-chief investment officer at Pimco, which runs the world’s largest bond fund. Increased government spending and additional debt purchases from the Federal Reserve are unlikely to spur a rebound, he wrote.

“Throughout the summer, data signals have become more alarming,” wrote El-Erian, who is based in Newport Beach, California. “Current policy approaches here and abroad are unlikely to deliver a durable and robust U.S. recovery.” Read more here-http://www.bloomberg.com/news/2010-08-27/pimco-s-el-erian-says-alarming-data-signals-show-u-s-economy-faltering.html

-Feldstein Sees `Significant Risk’ of Recession Again. The U.S. economy remains “weak” and “fragile” and has a “significant” chance of falling back into a recession, Harvard University economics professor Martin Feldstein said in an interview with Bloomberg Radio.

“I would say there’s still a significant risk, maybe one chance in three, that there will be a double dip, real GDP falling, before we’re in the clear,” said Feldstein, member of the committee at the National Bureau of Economic Research that dates the beginning and end of recessions. Read more here-http://www.bloomberg.com/news/2010-08-27/feldstein-sees-significant-risk-of-u-s-falling-into-second-recession.html

-Roubini Says Fed Is ‘Running Out of Policy Bullets.’ Read more here-http://www.bloomberg.com/news/2010-08-27/roubini-says-fed-is-running-out-of-policy-bullets-for-stimulating-growth.html

-What is obvious for whatever reason, is that quantitative easing, or throwing money at the problem, doesn’t work. We have just witnessed the greatest monetary expansion ever and no one seems to notice it didn’t work. In fact the Fed is creating another bubble in relation to interest rates and the bond market. This could be much worse than 2005 and 2006.

In spite of this probable outcome, banking, Wall Street and corporate America are clamouring for more stimuli as consumption again fades. Again there is no historical basis to believe that today’s corporate fascist Keynesianism will work, in fact history tells us just the opposite.

The extreme fiscal and monetary measures that have been chosen simply do not work. If QE or fiscal spending does not create inflation, then deflationary depression will become predominate and the entire financial system will collapse taking the world economy with it.

This cycle of inflation to deflation has been going on since the 1960s and each time finance and the economy were resurrected a new cycle began with greater damage. Today we have finally reached the end of the line. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1283148720.php and http://news.goldseek.com/InternationalForecaster/1283350920.php

-The Most Fiscally Irresponsible Government in U.S. History. Current federal budget trends are capable of destroying this country. Read more here-http://politics.usnews.com/opinion/mzuckerman/articles/2010/08/26/the-most-fiscally-irresponsible-government-in-us-history_print.html

-National Debt Poses Security Threat, Mullen Says. The single biggest threat to national security is the national debt, the chairman of the Joint Chiefs of Staff said yesterday, underscoring the importance of good fiscal stewardship and a need to stimulate economic growth.

American taxpayers are going to pay an estimated $600 billion in interest on the national debt in 2012, Navy Adm. Mike Mullen told local leaders and university students here. Read more here-http://www.defense.gov/news/newsarticle.aspx?id=60621

-Study says most corporations pay no U.S. income taxes. Read more here-http://www.reuters.com/article/idUSN1249465620080812

-U.S. Consumer Bankruptcies to Reach 1.6 Million This Year, Institute Says. Bankruptcy filings by U.S. consumers are projected to reach 1.6 million this year, the executive director of the American Bankruptcy Institute said.

More U.S. consumers filed for bankruptcy through the first eight months of the year than for the same period in 2009, according to the institute. So far this year, about 1 million consumers have sought court protection from their debts, compared with about 920,000 at this time last year. Read more here-http://www.bloomberg.com/news/2010-09-01/u-s-consumer-bankruptcy-filings-fall-8-percent-in-august-institute-says.html

-Trichet Says Failure to Cut Government Debt Risks ‘Lost Decade’. Read more here-http://www.bloomberg.com/news/2010-08-27/trichet-says-failure-to-cut-public-debt-risks-lost-decade-of-weak-growth.html

-IMF warns over UK debt in call for global fiscal reform. The International Monetary Fund has warned that long-term fiscal reforms will be required among advanced economies as it projected the UK’s gross debt to gross domestic product would rise to 90.6pc in 2015. Read more here-http://www.telegraph.co.uk/finance/economics/7976075/IMF-warns-over-UK-debt-in-call-for-global-fiscal-reform.html

-ECB Keeps Key Interest Rate at 1%, May Maintain Crisis Mode. The European Central Bank kept interest rates at a record low Thursday. Read more here-http://www.bloomberg.com/news/2010-09-02/ecb-keeps-key-interest-rate-at-1-may-maintain-crisis-mode-into-next-year.html

-Trichet Says ECB to Extend Emergency Bank Lending. European Central Bank President Jean-Claude Trichet extended emergency lending measures for banks into 2011, remaining in crisis mode as the risk of a renewed U.S. recession puts the euro-area’s rebound in jeopardy. Read more here-http://www.bloomberg.com/news/2010-09-02/trichet-says-ecb-will-extend-emergency-bank-loans-on-u-s-recession-risks.html

-Martin Armstrong commentary. Read more here-http://www.martinarmstrong.org/files/Australia%20&%20The%20Current%20Account%20Deficit%208-23-2010.pdf

-Tony Robbins economic warning. Watch part 1 here-http://www.youtube.com/watch?v=Z_rShZA_IjE Part 2 here-http://www.youtube.com/watch?v=LZuJqrcwrEU&feature=related

-Obama could kill fossil fuels overnight with a nuclear dash for thorium. If Barack Obama were to marshal America’s vast scientific and strategic resources behind a new Manhattan Project, he might reasonably hope to reinvent the global energy landscape and sketch an end to our dependence on fossil fuels within three to five years. Read more here-http://www.telegraph.co.uk/finance/comment/7970619/Obama-could-kill-fossil-fuels-overnight-with-a-nuclear-dash-for-thorium.html What is Thorium? Read more here-http://en.wikipedia.org/wiki/Thorium

-Backlash over China curb on metal exports. China’s draconian export curbs on rare earth minerals needed by the rest of the world for frontier technologies is escalating into a serious diplomatic and trade clash with the United States and other leading powers. Read more here-http://www.telegraph.co.uk/finance/newsbysector/industry/mining/7970872/Backlash-over-China-curb-on-metal-exports.html

-Obama Widens Sanctions Against North Korea in Bid to Cut Off Nuclear Funds. President Barack Obama widened U.S. financial sanctions on North Korea today in an effort to cut off sources of income that fund the nuclear weapons program of the regime’s leader, Kim Jong Il.

The U.S. will freeze the assets of four North Koreans, three of the country’s companies and five government agencies suspected of “illicit and deceptive activities” that support the regime’s weapons industry, according to an executive order posted on the Treasury Department’s website.

Those blacklisted bought luxury goods on behalf of the regime and are suspected of drug trafficking, money laundering and currency counterfeiting, the U.S. said. Read more here-http://www.bloomberg.com/news/2010-08-30/obama-widens-sanctions-against-north-korea-in-bid-to-cut-off-nuclear-funds.html

-Drones Will Patrol U.S.-Mexico Border to Stop Criminals, Napolitano Says. The U.S. will begin patrolling the entire U.S.-Mexico border with unmanned aircraft this week, Homeland Security Secretary Janet Napolitano said. Read more here-http://www.bloomberg.com/news/2010-08-30/drones-will-patrol-u-s-mexico-border-to-stop-criminals-napolitano-says.html

-Record number in government anti-poverty programs. Government anti-poverty programs that have grown to meet the needs of recession victims now serve a record one in six Americans and are continuing to expand. Read more here-http://www.usatoday.com/news/washington/2010-08-30-1Asafetynet30_ST_N.htm

-Recession Babies Wane as U.S. Births Decline for Second Year. The number of women giving birth in the U.S. declined for the second year in a row as more women delayed motherhood during the worst recession since the 1930s. Read more here-http://www.bloomberg.com/news/2010-08-27/recession-babies-wane-as-u-s-births-fall-for-second-year-in-row-cdc-says.html and http://news.yahoo.com/s/ap/20100827/ap_on_he_me/us_med_birth_decline_3

-Cable Bills Rise as Economy Forces People to Stay on the Couch. Beth Brodkin pays Comcast Corp. more than $200 a month for television and Internet services. The stay-at-home mom says it’s a bargain. Read more here-http://www.bloomberg.com/news/2010-08-27/cable-bills-rise-as-economy-forces-people-to-stay-on-the-couch.html

RARECOLOREDDIAMONDS.COM

-The Rare Colored Diamonds Historical Value Tracker system is the perfect tool for investors to view the potential future value of a rare colored diamond based on the current market trend of a particular type of diamond. Track the potential future value of colored diamonds here-http://www.rarecoloreddiamonds.com/HistoricalPriceTrackingsystem.html

-Watch BTV interview’s of Harold Seigel on colored diamonds. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html and http://www.b-tv.com/features/watch-now.html?id=326

-Rio Tinto’s Pink Diamonds Tender Starts, Goes to China. Rio Tinto’s annual Argyle Pink Diamonds Tender is starting to do the rounds, and is on view to invited traders and diamond investors in Perth. This year’s tender includes 55 pink diamonds.

A highlight of the 2010 collection is a 2.02 carat round brilliant fancy vivid purplish pink diamond. Inspired by the Tender collection’s theme of “Earth Magic”, Argyle Mystra, is expected to “captivate bidders with its color saturation and purplish hues,” according to the company.

“The color saturation across this year’s collection has set a new benchmark with many more “vivid” pinks than previous years,” Business Manager Josephine Archer said.

Two other stones have also been named in honor of mystical metaphors Argyle Iris, a 1.43 carat fancy purplish red square shaped diamond, named after the Greek messenger goddess and, representing a touch of heaven on Earth, Argyle Ava, a 0.50 carat fancy purplish red round shaped diamond.

In recognition of the rareness of these diamonds, and to coincide with the tender, Argyle Pink Diamonds has released a new publication, Rare and Collectable that places this rarity in the context of global supply and demand and the resulting strong price appreciation.

Tender viewings will be held in Perth (August16-22), Hong Kong (September 13-20), Shanghai (September 25) and New York (October12-17). This will be the first time that the Argyle Pink Diamonds Tender will be showcased in mainland China, in recognition of the growing importance of this market for rare colored diamonds. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=34385

CLSA-CITIGROUP IS COOKING THE BOOKS

-An all-out war has broken out between Citigroup CEO Vikram Pandit and a prominent securities analyst who is saying that the big bank may be cooking the books by inflating its earnings through an accounting gimmick, FOX Business Network has learned.

The analyst, Mike Mayo, of the securities firm CLSA, has been telling investors that Citigroup should take a writedown, or a loss on some $50 billion of “deferred-tax assets,” or DTAs. That is a tax credit the firm has on its financial statement that Mayo says is inflating profits at the big bank by as much as $10 billion.

For that critique, Mayo has been denied one-on-one meetings with top players of the firm, including CEO Vikram Pandit, Chief Financial Officer John Gerspach, and any other member of management, while other analysts enjoy full access to the bank’s top executives, FBN has learned.

In fact, Mayo hasn’t had a meeting with Pandit or anyone in Citigroup management since around the time of the financial crisis, in the fall of 2008, when Citigroup was on the verge of extinction and needed an unprecedented series of government bailouts to survive.

Since then Citigroup has been profitable, albeit marginally. Though it posted a loss for the full year of 2009, after it repaid a government bailout loan during the fourth quarter and began to unwind Uncle Sam’s ownership stake. One reason Citigroup may be unwilling to write off its DTAs: to do so may sink the troubled bank back into unprofitability. Read more here-http://www.foxbusiness.com/markets/2010/08/25/analyst-citigroup-cooking-books/

STOCK MARKET

-Investors Pull $7.1 Billion From Stock Funds Worldwide. Investors withdrew a net $7.1 billion from equity funds tracked worldwide in the week to Aug. 25 and put some $5.2 billion into bonds amid concern economies in the U.S. and Europe are losing momentum, EPFR Global said. Read more here-http://www.bloomberg.com/news/2010-08-26/investors-redeem-7-1-billion-from-global-equity-funds-in-week-epfr-says.html

-The bottom line is that when we get to single-digit P/E multiples and a 5-6% dividend yield, we will be at levels that will touch off a new secular bull market and we are more than prepared for that eventuality.

At that point, sentiment will be completely washed out, as it was in 1982, all the cheerleaders who failed to see the 2007-08 collapse and the new paradigm of frugality will be out of a job, and the political change will have occurred replacing short-term Keynesian quick-fixes with supply-side reforms that bolster capital formation, energy self-sufficiency, and work-hire incentives. David Rosenberg-Gluskin/Sheff

-Titan Capital Joins Black Swan’s Taleb in Raising Bets on Crash. Titan Capital Group LLC, whose flagship volatility fund rose 21.6 percent as stocks tumbled in May, has raised bets on extreme market moves because investors’ views on the economic outlook have polarized.

The New York-based hedge fund, which manages about $400 million, has added “a lot more” cheap, out-of-the-money options, betting the market is underestimating the likelihood of a crash, founder Russell Abrams said in a phone interview.

Treasuries, German government bonds and Japan’s yen are pricing in economic outcomes that are bleaker than the stock market expects, said the former co-head of U.S. equity derivative trading and convertible arbitrage at Merrill Lynch & Co.

“They are pointing to a much more dangerous environment than what equity investors believe,” he said in an interview Aug. 27. “Either you’re going to see the bond market make the the big move or the equity market make the big move; the current situation is not in equilibrium.”

Nassim Nicholas Taleb, whose book “The Black Swan” is about how unforeseen events can roil markets, said Aug. 11 he is “betting on the collapse of government bonds” and that investors should avoid stocks.

Government bonds around the world have rallied on growing signs the global economic recovery is faltering, driving yields on two-year Treasury notes as well as German 30-year and 10-year bonds to record lows last week. Read more here-http://www.bloomberg.com/news/2010-08-30/titan-capital-joins-black-swan-s-taleb-in-raising-bets-on-extreme-moves.html

-Except for a brief counter-trend rally in July, the stock market has struggled since peaking in late April. Investors are concerned. For some perspective, today’s chart presents the Dow’s average performance for each calendar month since 1950.

As today’s chart illustrates, it is not unusual for the stock market to underperform during the May to October time frame with a brief counter-trend rally occurring in July. It is worth noting that the worst calendar month for stock market performance (i.e. September) is fast approaching. Read more here-http://www.chartoftheday.com/20100827.htm?T

-”Quote stuffing” a focus in flash crash probe. U.S. regulators probing the May flash crash are focusing on a trading practice known as “quote stuffing”, in which large numbers of rapid-fire orders to buy or sell stocks are placed and cancelled almost immediately. Read more here-http://www.reuters.com/article/idUSTRE6812ZS20100902

JOBS

-Jobless Claims in U.S. Decreased to 472,000 Last Week. The number of Americans seeking jobless benefits fell last week to a level that indicates the labor market has not improved this year even as the economy expanded. Read more here-http://www.bloomberg.com/news/2010-09-02/jobless-claims-fell-to-472-000-last-week-signaling-job-market-still-weak.html

-Chart of the week: Last week’s ‘Good’ Unemployment Data Masked A Huge Jump In Emergency Claims. Here’s why Thursdays jobless claims data wasn’t quite as good as the headline number made it out to be.

Yes, initial jobless claims for the week ending August 21st were 473,000, which was lower than consensus had forecast, and below the 500,000 level broken one week ago. Continuing unemployment claims also shrunk.

But, the latest report described a 200,000 jump in people seeking emergency unemployment extensions (Emergency Unemployment Compensation, EUC*), for the week ending August 7th, which is the latest data. As shown by a chart from Waverly Advisors below, emergency unemployment claims have shot up markedly as percentage of the workforce.

Waverly Advisors: The number of claimants under all emergency extensions for the week ending August 7th expanded by 200k to 4.9 million. In context, the total receiving benefit extensions is now back over 3% of the civilian work force and at the highest level since April. Read more here-http://www.businessinsider.com/chart-of-the-day-claims-under-state-programs-2010-8?utm_source=Triggermail&utm_medium=email&utm_campaign=Clusterstock_COTD_082610

-Reinhart’s Seven More Years of High Unemployment Hit Fed Today. As a seven-year-old in Cuba, Carmen Reinhart memorized the routes of ships carrying silver from Peru and Bolivia to Spain. By 16, she had moved to Miami and got a job at a Sears Holdings Corp. store reviewing credit applications and payment records.

That fascination with history and data has propelled a career at Bear Stearns Cos., the International Monetary Fund and the University of Maryland in College Park. Now Reinhart, 54, is using a paper studying 15 economic crises since World War II to warn Federal Reserve Chairman Ben S. Bernanke and fellow policy makers that sluggish growth and high unemployment in the U.S. might persist through 2017 or longer.

“Whether one looks at advanced economies or a whole sample that includes emerging markets, the picture is one of lower growth during the decade that follows the crisis,” she said in an interview from Washington this week. “We are already three years into this post-crisis window. The clock starts ticking in the summer of 2007.”

Reinhart’s work has made her the female economist most frequently cited by other economists. Her latest paper, “After the Fall,” co-written with husband Vincent Reinhart, was presented last week at the Fed’s annual symposium in Jackson Hole, Wyoming.

An unemployment rate of 8 or 9 percent over the next seven years is not “outside of the experience that we have documented,” she said. Her studies of crises in Finland, Japan, Norway, Spain and Sweden that started between 1977 and 1992 show median per-capita economic growth declined by 1 percentage point in the decade following the shock. Read more here-http://www.bloomberg.com/news/2010-08-27/reinhart-s-outlook-of-seven-more-years-of-high-unemployment-hits-fed-today.html

-Pimco’s El-Erian Sees `Lost Decade’ for U.S. Jobs. A “lost decade” in U.S. employment reflects a change in the structure of the nation’s labor market, according to Mohamed A. El-Erian, chief executive officer at Pacific Investment Management Co.

“This country has very weak safety nets,” he said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “It is built on the assumption that our labor markets are very flexible, that if you lose your job in California you move somewhere else, you get another job, and what we’re seeing is structural unemployment.”

Global growth will be below average during the next three to five years as developed economies struggle with mounting deficits and increased regulation in the wake of the 2008 collapse of credit markets, said El-Erian, who is also co-chief investment officer at Pimco. Read more here-http://www.bloomberg.com/news/2010-08-30/el-erian-sees-lost-decade-for-u-s-jobs-amid-weak-safety-nets-tom-keene.html

-The share of young people aged 16 to 24 who were employed this summer fell to 48.9 percent the lowest rate on record since 1948. Read more here-http://www.mcclatchydc.com/2010/08/27/99763/bad-statistics-for-summer-employment.html

AUTO SALES

-As Lex’s column in the FT appropriately put it, “optimists who conclude that every passing month with subpar sales represents pent-up demand may be ignoring the possibility that U.S. car sales will be stuck in lower gear for the foreseeable future.”

Indeed, given the government’s attempt to boost fleet sales, huge incentives, and record-low interest rates, U.S. auto sales should be well over 12mln units by now month-in, month-out. But just as the homeownership rate is mean-reverting its way back to 64%, the 20% of the American public that entered the recession as a three-car family are, in dribs and drabs, becoming two-car families once again.

This adjustment from frivolity to at least a modicum of frugality for these folks who at the margin live on credit and beyond their means for far too long, will take years. Count on it. The auto industry may well survive, but it won’t thrive. David Rosenberg-Gluskin/Sheff

-Auto sales: Worst August since 1983. The nation’s top automakers reported disappointing sales Wednesday, resulting in the worst August for industry wide auto sales in 27 years. According to sales tracker Autodata, U.S. new vehicle sales fell just short of 1 million vehicles, a drop of 21% from a year ago, which included Cash for Clunkers.

That federal program created a sugar rush of sales by dangling an incentive of up to $4,500 in cash for buyers who traded in older gas guzzlers for more efficient models. Read more here-http://money.cnn.com/2010/09/01/news/companies/august_auto_sales/ and http://www.bloomberg.com/news/2010-09-01/toyota-honda-lead-u-s-car-sales-plunge-as-clunkers-ends-economy-slows.html

REAL ESTATE

-The number of people who are “upside” down on their mortgage is still around 11 million or 23% of the mortgage population. That number has actually come down in part because of some have defaulted and others are moving to pay down debt but further home depreciation could well cause this number of people “under water” to start to rise again.

Meanwhile, 14.4% of borrowers have missed at least one mortgage payment or are in the foreclosure process, which is a tad better than the 14.7% in Q1 but amazingly still higher than the 13.5% share a year ago when the economy was still struggling to get out of recession. David Rosenberg-Gluskin/Sheff

-House Prices Are Still 10% Too High, Says Barry Ritholtz. Read more here-http://finance.yahoo.com/tech-ticker/house-prices-are-still-10-too-high-says-barry-ritholtz-535388.html?tickers=&sec=topStories&pos=2&asset=&ccode

-Pending Sales of Existing Homes Unexpectedly Increase in July. The number of contracts to purchase U.S. previously owned houses unexpectedly rose in July, a sign the market may be starting to stabilize after the expiration of the homebuyer tax credit.

The index of pending home re-sales rose 5.2 percent after a revised 2.8 percent drop the prior month, figures from the National Association of Realtors showed today in Washington. Read more here-http://www.bloomberg.com/news/2010-09-02/pending-sales-of-existing-u-s-homes-unexpectedly-climbed-by-5-3-in-july.html

-Home Prices Rose More Than Forecast in June. Home prices in 20 U.S. cities rose more than forecast in June from a year earlier, reflecting the influence of a government tax incentive and a sign the market was stabilizing before sales plunged in July.

The S&P/Case-Shiller index of property values increased 4.2 percent from June 2009, the group said today in New York. The median estimate of economists surveyed by Bloomberg News called for a 3.5 percent advance. Read more here-http://www.bloomberg.com/news/2010-08-31/home-prices-in-20-u-s-cities-rise-more-than-forecast-case-shiller-says.html

-Another house call. “Both indexes might be higher than they were a year ago, but both have been in a downtrend for the last 5 consecutive months. In fact, 15 of the 20 cities tracked have seen their index fall for between 3 and 7 consecutive months.” Read and see more charts here-http://www.caseyresearch.com/displayCdd.php?id=525

-While it may be hard to believe, the housing market hasn’t been the worst performing real estate sector in terms of price. The index for the Case-Shiller Composite 20 index for residential real estate peaked in July 2006, and as of May 2010, the index had dropped by 29.1%.

Considering how dismal the recent housing data has been, we can certainly expect for the Case-Shiller index to continue its downward trajectory. However, it still has some catching up to do with its counterpart that tracks national commercial real estate prices. The Moody’s Commercial Property Price Index peaked in October of 2007, and as of June it had already lost 41.4% of its value.

Making the situation potentially much worse, the price declines in commercial properties have occurred absent a major wave of default in the commercial sector at least one comparable to what we saw in housing. Rather than accept losses, lenders have been carrying commercial loans on their books at pre-crash values, pushing the problem down the road in a strategy dubbed “delay and pray.” Read more here-http://www.caseyresearch.com/displayCdd.php?id=520 and http://online.wsj.com/article/SB20001424052748703447004575449803607666216.html

-Housing quagmire: Is it time to remove relief? Not even record low mortgages rates have boosted home sales or enticed a debt-weary public. Of course, this doesn’t seem much of a shocker. Experts say home prices which have fallen by more than 30% since 2006 are still inflated by 15% to 20% in many areas.

So why try to prop up prices any longer with federal programs? Is it time to simply let prices freefall, clearing the way for a genuine correction of the real estate market? Read more here-http://money.cnn.com/2010/08/31/real_estate/federal_housing_programs.fortune/index.htm

-Cameron `Chopping Block’ May Worsen U.K. House-Price Slowdown. Evan Hillier knew his ambition to own a home would mean years of saving. With his job threatened by U.K. government spending cuts, it may now be impossible. “I’ve just given up,” Hillier, 24, a clerk at the local council in Caerphilly, South Wales, said in an interview. “I know my head’s going to start being on the chopping block.”

About 9 percent of government employees may lose their jobs by 2015 in Prime Minister David Cameron’s drive to tame the U.K.’s record budget deficit. With at least a quarter of working people in Wales and northeast England and almost a third in Northern Ireland on the nation’s payroll, spending cuts may further blight a housing market already losing steam. Read more here-http://www.bloomberg.com/news/2010-08-26/house-prices-face-cameron-chopping-block-as-budget-cuts-sap-buying-power.html

-Spain Homeowners Face Squeeze as Mortgage Rates Rise. Spanish homeowners will face higher mortgage repayments after the benchmark rate for loans last month posted its first annual gain since October 2008.

The benchmark rate for most of the country’s home loans, 12-month Euribor, rose to 1.42 percent in August from 1.33 percent a year earlier, the Bank of Spain said today on its website. That will further stretch the finances of Anabel Ruiz, who already spends two-thirds of her 1,000 euro ($1,271) monthly salary on making payments on a 30-year mortgage that runs until 2036.

“It’s going to make a desperate situation even more critical,” said Ruiz, 43, who works in an accounts department. “It could mean I lose my apartment and we all end up living under a bridge.” Read more here-http://www.bloomberg.com/news/2010-09-01/spanish-homeowners-face-new-squeeze-as-mortgage-borrowing-costs-increase.html

-’Zombie’ Hotels Arise in Ireland as Recession Empties Rooms. “It’s a game of last man standing,” said Paul Gallagher, president of the Irish Hotels Federation in Dublin. “When corporate traffic slowed up and the recession took hold, very quickly it became obvious we had an enormous problem.”

At least 200 hotels opened during Ireland’s decade-long economic boom, leaving a glut of rooms and mountain of debt as the number of visitors dwindles. While some establishments cut their losses and shut, others are lowering prices to stay in business and avoid repaying tax breaks if they were to close.

Irish hotel occupancy slumped to about 54 percent in 2009, the lowest level since the early 1980s, as the economy fell into its worst recession on record, the hotels federation said. In 2007, the height of Ireland’s boom, the figure was 64 percent. Read more here-http://www.bloomberg.com/news/2010-08-30/-zombie-hotels-arise-in-ireland-as-faltering-economy-leaves-rooms-vacant.html

Market Alert for All Retail Dealers
Posted by Worldwide Precious Metals on Tuesday, September 7, 2010

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