The World Financial Report – July 17th, 2012
July 17, 2012
-”At some point gold will have a trigger, and when it does you are going to see gold move to the upside. When gold finally breaks out to the upside from this strong, steady base, it will experience a massive move to the upside.” Dan Norcini
-”I get a huge kick out of the sentiment in the gold market, which as you know, is extremely negative. We are to a point where we are dealing with very little on the downside in gold, but thousands of dollars on the upside. This is one of the best buying opportunities in history. The Chinese get it, and I think a number of the Eastern powers get it. They are just delighted that gold continues to be suppressed. From all of the information I get, more and more gold is headed in that direction (to the East).” John Embry
-“I absolutely stick to the view that we’ve had that market shakeout. Given the risk that we see, not just in the eurozone but more seriously the risk to the banking system, gold is the right place to be. Anybody with an investment portfolio should have a good gearing in gold, and should even consider adding to it over the course of the summer.” Nigel Farage
-“From my viewpoint, what I’m doing about this is holding cash, most of it in the form of US dollars, and in particular, I continue to increase, on down days, my holdings of gold. Gold and silver are the only historical medium of exchange that are simultaneously a store of value. Gold and silver are also the only medium of exchange that can’t be counterfeited by the collective. So I continue to be a goldbug. If this crisis of confidence, that I think is likely to occur, does occur, I would suspect that although the gold price would be extremely volatile, it will vastly outpace the alternatives.” Rick Rule
-”Commercial banks currently hold $1.42 trillion worth of excess reserves with the central bank. If that money were to be suddenly released, it could, through the fractional reserve system, have the potential to increase the money supply north of $15 trillion! As silly as that sounds, I still hear prominent economists like Jeremy Siegel calling for just such action. If they get their wish, watch for the gold market to explode higher in price as the dollar sinks into the abyss.” Michael Pento
-CHART OF THE DAY: How Gold Could Surge To $8,300 By 2015. You may have heard of the “Pareto principle” it’s often referred to as the “80-20 rule.” The idea is that 80 percent of the effects of something come from just 20 percent of the causes so maybe 80 percent of people control 20 percent of the wealth, or 80 percent of sales come from 20 percent of your customers.
Zero Hedge posted a new report by Erste Group, the Austrian investment bank, which says this principle can be applied to bull markets as well, including the current bull market in gold:
80% of the price performance tends to occur in the last 20% of the trend. The third and last phase is the phase of euphoria and ends in a “blow-off”, i.e. a parabolic increase. It is dominated by excessive optimism and a “this time it’s different” attitude. Gold would probably be increasingly traded in backwardation during this phase, which would be a clear sign of a buying frenzy. At the end of this cycle the smart money will have distributed.
Erste analyst Ronald-Peter Stoeferle says that following this line of thinking, you get an $8,300 price target for gold by the spring of 2015:
Applying the Pareto principle to the current gold price, we find a theoretical price target of USD 8,300. If we were to assume that the last trend phase were to start in August 2012 at USD 1,600 and the bull market had begun in August 2001, the parabolic phase would last 29 more months and thus end in spring 2015. The price target according to the 80/20 principle is therefore USD 8,300. Read more here-http://read.bi/NizfyC
-CHART OF THE WEEK: Huge Price Declines Are Not New In This Long-Term Gold Bull Market. According to Erste Group, precipitous drop-offs in gold prices are actually a normal element of the larger bull run. “It seems that the months of correction are now coming to an end.
When gold set a new all-time-high at USD 1,920 last year, it was traded three standard deviations above the 40-day line. Only twice before in the current bull market, i.e. in May 2006 and in March 2008, had gold been similarly overbought. Both times, significant corrections ensued. The following chart illustrates the fact that the drawdown of the current correction is of average size. The duration (blue bar), however, has been above-average.”
Erste thinks that the bullish catalysts remain for gold. “The crucial factors indicating the continuation of the long-term upward trend have not changed. We regard the real interest rates as central argument in favour of the trend both in the USA and the Eurozone they will remain negative for a while. And indeed they are negative in many big importer nations such as India, China, Turkey, and Vietnam.
On top of this we expect the still fragile shape the financial markets are in, the increasing scepticism with regard to uncovered paper currencies, and the persistent government debt problem to continue supporting the gold price in the foreseeable future. “We therefore stick to our positive outlook and in the long run expect the gold price to exceed its inflation-adjusted all-time-high of USD 2,300/ounce.” Read more here-http://read.bi/NiKPtA
-Lars Schall interviews Erste Group’s Ronald Stoeferle. Read more here-http://www.gata.org/node/11567
-Eric Sprott: Gold to Rally 22% to Record. Gold will climb to a record by yearend as the global economy slows from the weight of too much debt, says Eric Sprott, the founder and chairman of Canadian fund manager Sprott Inc. Read more here-http://bloom.bg/MkpMFf
-John Embry: Hang On Because The Chaos is Going to Accelerate. “I talk to a lot of people and the general mindset is that what is happening right now, this is just business as usual There are problems but we can deal with them. I saw an amazing interview where Byron Wien spoke to the man he called the ‘smartest man in Europe.’
The man laid out the picture that we are headed for a train wreck. And Bryon Wien, who’s always been a typical Wall Street shill, at the end of the interview he sort of said, ‘Well I respect your views, but I’m an optimist and I think we can work through this because the powers that be can deal with it.’ Byron Wien is wrong. He’s dead wrong, but that’s the typical mindset that’s out there. I will tell you today that before this ends, it will be cataclysmic.” Read more here-http://bit.ly/PSYjSP
-Don Vialoux: Get ready for gold bullion’s season of strength. Thackray’s 2012 Investor’s Guide notes that the optimal time to invest in gold bullion for a seasonal trade is from July 12 to Oct. 9. The trade has been profitable during 11 of the past 14 periods. During the past 25 periods, gold bullion has outperformed the S&P 500 Index by 4.7 per cent per period. Read more here-http://bit.ly/NkBCDR
-Gold market poised for rally. Seasonal trends that often see gold and gold stocks rally from mid-summer to early autumn bode well for investors. Bullion has risen an average of 14.5% in the late summer for the past 11 years, according to Bank of America Merrill Lynch analyst Michael Jalonen. He noted that a key driver of these rallies is the rebound in jewellery demand coming from India’s festival and wedding season.
Mr. Jalonen also told clients that a possible third round of quantitative easing and the approaching U.S. fiscal cliff could be a trigger for bringing new buyers into the gold market. BofAML continues to favour gold as an investment, maintaining a 12-month price target of US$2,000 per ounce. Gold has averaged $1,650 so far in 2012, with the price ranging from US$1,540 and US$1,784. Read more here-http://natpo.st/OxQlbm
-Gold could be the best asset class to own in 2013 if inflation starts to pick up following major stimulus programmes from central banks, Fidelity’s global strategist Andrew Wells said. Wells, global CIO of fixed income at the asset manager, said the precious metal could be “the asset class of choice” in 2013 if inflation returns as expected. “Following QE, inflation protection will become more and more popular,” he said. Read more here-http://bit.ly/O7hssJ
-Investors expect long-term gold price to average US$2,000: JPMorgan. Gold may be a long way off from its peak price last year, but the majority of investors expect the precious metal to gain over the next 12 months. That was the outlook from JPMorgan’s second global gold sector survey, in which investors were polled on where they see gold prices heading and how they expect gold stocks to perform.
Seventy one percent of respondents said they see gold prices rising over the next 12 months. But investors are split on where prices will be over the next few years. About 23% expect long-term gold prices to average US$2,000 an ounce. The next largest group, which comprises 16% of respondents, sees gold prices above US$2,500 an ounce.
Despite some conflicting outlooks in Tuesday’s survey, JPMorgan itself is still relatively bullish on gold. Analysts with the firm wrote in a note on Tuesday that they remain “very positive” on gold, given global financial uncertainty and stretched central bank balance sheets. They note, however, that questions remain over whether gold will be able to hold its value better than other assets if the world deleverages, or if quantitative easing delivers inflation as hoped. Read more here-http://natpo.st/L97mqR
-Tocqueville: Gold’s Correction Is Over, $1900 By Year-End. John Hathaway, manager of the Tocqueville Gold Fund, predicts in his latest investor letter that gold’s correction is complete. He’s now saying he “will not be surprised” to see the metal scale $1,900 or better by the end of 2012. Read more here-http://on.barrons.com/S5Sv5L
-GFMS sees gold price above $1‚800/oz. The gold market is expected to remain choppy in the very short term‚ although the price should be well supported in the mid-$1‚500s per ounce‚ says Philip Klapwijk‚ global head of metals analytics at Thomson Reuters GFMS.
However‚ the consultancy forecasts that the gold price will comfortably exceed the $1‚800 mark in the second half of 2012 as investment demand grows. “We would not be surprised if heightened volatility were to continue‚ in part as investors’ interpretation of the impact of macroeconomic news on gold seems to be increasingly variable. Despite this noise‚ and the stagnation in the price that we have seen over much of the year to date‚ we believe the gold bull market remains intact.” Read more here-http://bit.ly/LP7PQQ
-Axel Merk: Gold to Outshine Dollar? As the price of gold has gone up fivefold over the past 10 years, why would one buy it at today’s prices? For the same reason an investor would buy any other asset: if one believed it would be a good investment now, that is if one believed it may appreciate in value and add portfolio diversification benefits. A key reason to hold gold today might be to prepare for the crisis tomorrow. Read more here-http://bit.ly/OavgTi
-Stephen Leeb: All Hell is Going to Break Loose on the Upside in Gold. I see massive turmoil. It’s one thing if people want a lot of dollars out of the banks, you just print the dollars. But how are they going to print the gold? I just see massive turmoil when people finally realize the banks don’t have their gold.
You will see governments frantically trying to substitute fiat money for gold because this is going to feed on itself. And you have to keep in mind this is something that has happened all over the world. The banks take in customers gold and charge them fees for storing the gold as allocated, but then they turn right around and lease it out to the market to aid in price suppression.
This is the kind of thing that will end in catastrophe. At some point the government may try to impose some type of controls, but before you get that you could end up with $8,000 or $10,000 gold. I just think this whole situation will end in total chaos. They will be trying to satisfy customers wanting their physical gold by the printing presses and that’s not going to work. It’s not a pretty situation.
So short-term on gold I’m a lot less concerned today. I don’t think gold is going to go much lower than the recent lows because I really see a lot of natural buying in the market. There are a lot of bids not too far below the current price. I think gold looks like a buy right here and now. I would be buying gold and the juniors and preparing for a massive move to the upside.” Read more here-http://bit.ly/NskDik
-Caesar Bryan: Central Planners Are Making Desperate Maneuvers Right Now. The gold story is not really a story about quantitative easing, and the maneuvers of the central banks over the last five years. The gold story really had its beginning in 1971 when the world came off what were the last vestiges of the gold standard.
What has happened since then is this huge and unprecedented growth of debt. This is what is now coming to the market’s attention. But all of this started way back in the 1970s. Investors have to realize that there has been this extraordinary growth of debt, and it has become apparent that it is unsustainable. The issue is who is going to take the losses?
What we contend is that central banks are going to be asked to take the losses, so in the end these losses will be socialized. But the beneficiary will be those holding real assets, and gold is the ultimate real asset.” Read more here-http://bit.ly/Mn9z4z
-John Hathaway: The Lengthy 10 Month Correction In Gold Is Over. We believe that gold remains under owned and misunderstood notwithstanding a thirteen year bull market. It is considered a fringe strategy to most, a little bit exotic and slightly risqué to the mainstream investor.
While policy makers attempt to buy time by inventing solutions that are incomprehensible to most, the dream of mainstream investors for robust growth amidst stable economic conditions remains alive. Faith in half-baked policy improvisations that are nothing more than repackaging bad debt in the envelope of sovereign credit, along with hope that ever increasing quantities of sovereign debt will generate growth is, in our opinion, delusional.
It is a smoke screen that obscures reality and will most likely result in further misdirection of capital. When adverse outcomes become obvious, gold will seem pricey. In the current confusion of misplaced faith, it seems to us downright reasonable. Read more here-http://bit.ly/NrhX0H
-Jean Marie Eveillard: Expect More Chaos As The Elites Are Now Totally Discredited. “It’s been almost a year since gold hit $1,900. Gold suffers from the idea that there is no inflation. In fact there is inflation. The Austrians (economists), and I think they are right, they say inflation is the creation of too much money and too much credit.
And that has happened, the creation of too much money and too much credit has happened over the past three years, and it’s continuing. So the policies are inflationary. I think gold, in spite of the fact that it has been in a bull market for 10 years or more, continues to be under-owned. Gold is still seen as an outlier, as a somewhat bizarre instrument. It’s not seen at all for what it is, which is a substitute currency.
Pure paper money systems, historically, they are not inspiring. They always end badly. But (right now) there is no acceptance that things will end badly with a pure paper money system. So it has been a somewhat disappointing behavior of the price of gold over the past nine months or so, but I think eventually the bull market will come back. By eventually, I mean within a few months or so.” Read more here-http://bit.ly/PSXKrW
-Bill Fleckenstein: Central Banks & The Fed Are Close To Panic. “What I am salivating over is the chance to really press my gold position. I think the next leg is going to be really, really powerful. When I sense that the Fed is going to pull the trigger, I’m going to make my gold investments a lot more aggressive than they are right now. The American people are going to realize at some point they need to own gold.
The Fed’s track record is absolutely spectacular at one thing and that is destroying the value of the dollar. And when the Americans start stampeding in, on top of the other people, and everybody finally gets the joke, which they are all going to get before this era of central bank money printing is ended, there is going to be the big, unridable phase of the bull market in gold that’s going to take place. That’s in front of us. It’s probably closer than most people think.” Read more here-http://bit.ly/MkJZku
-Iran Turns $3 Billion into Gold, Bypassing Sanctions. Iran has exchanged a total of $3 billion of its reserves for gold in financial operations via Turkey. The operation was revealed by Turkey’s official foreign trade statistics. Read more here-http://bit.ly/NLuIFv
-Adrian Douglas: Deflation nowhere to be seen. Read more here-http://www.gata.org/node/11553
-Argentina bans buying dollars as a way to save. Argentina’s central bank on Thursday formally banned people from buying dollars for the purpose of saving them, confirming the government’s de facto policy aimed at safeguarding foreign reserves. Argentines tend to convert their pesos into greenbacks as a hedge against high inflation and to protect against potential currency devaluations, which they have endured through decades of boom and bust economic cycles. Read more here-http://reut.rs/NpkVmi
-Jim Sinclair: The war between manipulation and buying. Read more here-http://www.gata.org/node/11549
-Hearing Naylor-Leyland, CNBC remembers GATA. Read more here-http://www.gata.org/node/11558
Gold to silver ratio at 60 to 1 with gold at $2,000 the silver price would be $33.33
Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00
Gold to silver ratio at 40 to 1 with gold at $2,000 the silver price would be $50.00
Gold to silver ratio at 30 to 1 with gold at $2,000 the silver price would be $66.67
Gold to silver ratio at 20 to 1 with gold at $2,000 the silver price would be $100.00
Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33
Gold to silver ratio at 60 to 1 with gold at $2,500 the silver price would be $41.67
Gold to silver ratio at 50 to 1 with gold at $2,500 the silver price would be $50.00
Gold to silver ratio at 40 to 1 with gold at $2,500 the silver price would be $62.50
Gold to silver ratio at 30 to 1 with gold at $2,500 the silver price would be $83.33
Gold to silver ratio at 20 to 1 with gold at $2,500 the silver price would be $125.00
Gold to silver ratio at 15 to 1 with gold at $2,500 the silver price would be $166.67
-Sprott Physical Silver Trust Prices Follow-on Offering of Trust Units In an Aggregate Amount of US$200,005,000. Read more here-http://on.mktw.net/N36la1
-Bob Kirtley: The Next Time Silver Crosses $30.00 Will Be The Last Time. Read more here-http://bit.ly/LioAXy
-Dr. Jeffrey Lewis: The Precious Metal Achilles’ Heel. Read more here-http://bit.ly/NagYqL
-Silver Institute: June Newsletter. Read more here-http://bit.ly/LiVMyn
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-CHART OF THE WEEK: Fed Policy Meetings Best Time for Stock Gains. The most rewarding time for investors to own U.S. stocks is when the Federal Reserve’s policy makers get together, according to a study published by the central bank’s New York branch. Most of the Standard & Poor 500 Index’s gains between September 1994 and March 2011 were recorded around the time of regular meetings, the results showed. The index climbed about 180 percent during those 17 years. Read more here-http://bloom.bg/N3O5gC
-Market Savior? Stocks Might Be 50% Lower Without Fed. A report from the Federal Reserve Bank of New York suggests that the bulk of equity returns for more than a decade are due to actions by the US central bank. Theoretically, the S&P 500 would be more than 50 percent lower at the 600 level if the bullish price action preceding Fed announcements was excluded, the study showed. Read more here-http://bit.ly/NkJViR
-CHART OF THE WEEK: World to Dodge El Nino’s Spur to Cost of Food. The El Nino weather pattern that led to rising food prices in five of its last six occurrences won’t likely have the same effect this year as nations have stockpiled staples such as rice and sugar, according to the United Nations. Read more here-http://bloom.bg/Mje7X5
-The Chances Of El Niño Conditions Occurring Just Skyrocketed By 55 Percent. There’s a greater than 50 percent chance that El Niño conditions will develop during the second half of 2012, the National Weather Service announced. Read more here-http://read.bi/NoAdb6
-CHART OF THE WEEK: Horrible Heat And Drought Conditions Are Creating The Worst Crop Conditions Since 1988. Read more here-http://read.bi/N4EKVc
-Disaster Declared in 26 U.S. States as Drought Sears Midwest. More than 1,000 counties in 26 states are being named natural-disaster areas, the biggest such declaration ever by the U.S. Department of Agriculture, as drought grips the Midwest. Read more here-http://bloom.bg/N0e2xB
-U.S. Corn-Crop Forecast Cut as Drought Dims Supply Outlook. The U.S. cut its corn-harvest estimate 12 percent and said inventories next year will be smaller than forecast in June as the worst Midwest drought since 1988 erodes prospects for a record crop. Read more here-http://bloom.bg/NowZ7k
-CHART OF THE WEEK: Low-Paid Grads On Tight Budgets Switching to Discounters. Michael Baum took every substitute teaching job he found and has sent out hundreds of resumes since graduating from college two years ago. He never got a full-time offer and works as a waiter at a pizza parlor in Chicago, earning $650 during a busy week. “It’s discouraging,” said Baum, 25, who is certified to teach in Texas and North Carolina as well as his native Michigan. His pay is just enough to cover basic living expenses. Read more here-http://bloom.bg/Lg3pWb
-CHART OF THE WEEK: Americans’ Confidence in Television News Drops to New Low. Americans’ confidence in television news is at a new low by one percentage point, with 21% of adults expressing a great deal or quite a lot of confidence in it. This marks a decline from 27% last year and from 46% when Gallup started tracking confidence in television news in 1993. Read more here-http://bit.ly/PNyDH1
-”The problem is real, The solutions are all painful. and there’s no easy way out.” Erskine Bowles, co-chairmen of the U.S. national debt reduction commission
-Roubini: My ‘Perfect Storm’ Scenario Is Unfolding Now. “Dr. Doom” Nouriel Roubini says the “perfect storm” scenario he forecast for the global economy earlier this year is unfolding right now as growth slows in the U.S., Europe as well as China. In May, Roubini predicted four elements stalling growth in the U.S., debt troubles in Europe, a slowdown in emerging markets, particularly China, and military conflict in Iran would come together to create a storm for the global economy in 2013.
“(The) 2013 perfect storm scenario I wrote on months ago is unfolding,” Roubini said on Twitter on Monday. Chinese inflation data released on Monday, suggested that the economy is cooling faster than expected, while employment data out of the U.S. on Friday indicated that jobs growth was tepid for a fourth straight month in June.
Roubini said that unlike in 2008 when central banks had “policy bullets” to stimulate the global economy, this time around policymakers are “running out of rabbits to pull out of the hat.” Policy easing moves by the European Central Bank, Bank of England and the People’s Bank of China last week did little to inspire confidence in global stock markets. “Levitational force of policy easing can only temporarily lift asset prices as gravitational forces of weaker fundamentals dominate over time,” he said. Read more here-http://bit.ly/O8Kloe
-ECRI’S (Economic Cycle Research Institute) Lakshman Achuthan: The US Is In Recession Already. Read more here-http://read.bi/LJX6f6
-Joseph Stiglitz: America Has Now Seen ‘Almost Half A Century Of Stagnation.’ “If you look at the income of the typical male worker in the United States today, it’s the same as it was in 1968. Almost half a century of stagnation,” Stiglitz argues. Read more here-http://read.bi/S8E8gR
-Bank of England’s King sees little sign of UK recovery. Britain’s stagnant economy is showing little sign that it is about to recover, due largely to the damaging effect of the euro zone debt crisis on businesses’ investment and exports, Bank of England governor Mervyn King said in an interview. “The economy has basically been flat for two years and doesn’t show a great deal of signs of impending recovery,” King said in a BBC radio interview. Read more here-http://yhoo.it/Np7CCm
-Man Who Knew Too Much on Ratings Says They Aren’t Meaningful. Ratings companies, whose scores have helped determine the cost of money for governments and businesses for more than a century, are no longer trusted by the world’s biggest investors, according to the former head of structured finance at Standard & Poor’s. “They’re there because people have to have them, not because people believe in them,” David Jacob, who was fired from S&P in December, said in an interview with Bloomberg. Read more here-http://bloom.bg/NnZLIY
-Regulators seize bank in Georgia, bringing the number of US bank failures this year to 32. The Federal Deposit Insurance Corp. said Friday that it seized Montgomery Bank & Trust, based in Ailey. The bank, which had two branches, had about $173.6 million in assets and $164.4 million in deposits as of March 31. Read more here-http://bit.ly/M5Ax2n
-Fukushima Disaster Was Man-Made, Investigation Finds. The Fukushima nuclear disaster was the result of “man-made” failures before and after last year’s earthquake, according to a report from an independent parliamentary investigation. Read more here-http://bloom.bg/NMp5XD
-Peak Oil Guru Robert Hirsch Gives A Dire Outlook For The Future. Read more here-http://read.bi/P1NNpG
-U.S. Adds Sanctions on Iran for Proliferation, Oil Trade. The U.S. announced additional economic sanctions on Iran targeting its weapons proliferation networks and “front companies” helping to evade international oil restrictions. The action is intended to disrupt Iran’s “nuclear and ballistic missile programs as well as its deceptive efforts to use front companies to sell and move its oil,” the Treasury Department said in a statement. Read more here-http://bloom.bg/P3e46W
-U.S. moving submersibles to Persian Gulf to oppose Iran. The Navy is rushing dozens of unmanned underwater craft to the Persian Gulf to help detect and destroy mines in a major military buildup aimed at preventing Iran from closing the strategic Strait of Hormuz in the event of a crisis, U.S. officials said. Read more here-http://lat.ms/Oa667a
-Iran’s Ballistic Missiles Improving, Pentagon Finds. Iran’s military continues to improve the accuracy and killing power of its long- and short-range ballistic missiles, including designing a weapon to target vessels, according to a Pentagon report to Congress. “Iran has boosted the lethality and effectiveness of existing systems by improving accuracy and developing new submunition payloads” that extend the destructive power over a wider area than a solid warhead, according to the June 29 report signed by U.S. Defense Secretary Leon Panetta. Read more here-http://bloom.bg/M3W6R3
-Man Finds Rare $3 Million Baseball Card Collection In The Attic. Read more here-http://read.bi/P1E7eQ
-U.S. billionaire named as mystery buyer of “The Scream.” U.S. billionaire Leon Black is the mystery buyer who paid a record $120 million for Edvard Munch’s masterpiece “The Scream” at Sotheby’s in May, the most expensive work of art ever sold at auction, the Wall Street Journal said. Read more here-http://reut.rs/NwJ8KQ
-Wolf Richter: Pity Anyone Who Invested In Wine In The Past Year. Read more here-http://read.bi/NM6WZQ
-Rarecoloreddiamonds.com Featured Diamond of the Week. This week’s Diamond is a 0.70 Pear Cut Fancy Vivid Yellow Orange Diamond. Harold Seigel-See video of the Featured Diamond here-http://bit.ly/LIsp98
-Diamonds Trump Gold as Investor’s Best Friend. Investors should be putting their money into diamonds, as the precious stones represent the best safe haven available right now, Philip Manduca, Chief Executive Officer at Titanium Capital Partners told CNBC’s “Squawk Box Europe.”
“You should have been parking your money in diamonds for some time now. They are portable, liquid, there are no storage costs unlike other asset classes. You get to enjoy them while you have them. It’s been a wonderful place to be and will be a very good place to be in three to five years. Even better than my key recommendation which is gold,” he said.
He said investors should avoid diamond-related stock but buy the hard asset itself. “Diamonds is one of the best hard asset plays out there and all girls would love that recommendation out there,” he said. Read more here-http://bit.ly/Nbde8E
-Australia’s Largest Pink Diamond Finds Home in Melbourne. Although not nearly as large as white diamonds, pink diamonds have been sought out for centuries. What they may lack, at times, in size, they more than make up for in coloring and rarity. The 8.01-carat Argyle Pink Jubilee is the largest pink diamond ever to have been found in Australia. Discovered last year, it went on display Thursday at the Melbourne Museum thanks to a donation from mining company Rio Tinto.
“The Argyle Pink diamond is highly prized for the purity of depth and the purity of color,” said Michael Neuman, a director of jewelry company Mondial Pink Diamond Atelier, who sported a pink diamond pin on his suit lapel at the diamond’s unveiling. The Argyle Pink Jubilee was found at Rio Tinto’s Argyle mine in Western Australia last August. It has a light pink color, similar to the Williamson Pink, a diamond set into a brooch for the coronation of Queen Elizabeth II. Pink diamonds, which take 1.8 billion years to form, comprise just 0.03% of global diamond production.
Although India, Brazil and Tanzania all produced notable pink diamonds in the 17th and 18th centuries, the Argyle mine now accounts for almost all supplies of the pink gems. The Argyle Pink Jubilee could only be partially cut and polished, said David Peever, managing director of Rio Tinto’s Australian operations, due to the nature of the stone. He declined to speculate on its value beyond calling it “priceless.” “This diamond is an incredible legacy, one we want to be on display for the public,” Mr. Peever said.
According to Rio Tinto, sales of pink diamonds have outperformed white stones for the past decade, with prices continuing to rise over the past 20 years. This is in part due to their rarity, with the Argyle mine unearthing only a handful of pink diamonds larger than a carat each year. The mine itself, part of a wider diamond business that Rio Tinto is considering selling, has only an estimated 10 years life left. It has been operating since 1983.
In 2010, a Sotheby’s Geneva auction fetched US$46.2 million for the 24.78-carat diamond known as the Graff Pink, setting a world auction record for any diamond or gemstone. Prior to that, the record was held by a five-carat Vivid Pink diamond auctioned by Christie’s Hong Kong for $10.7 million in 2009. More recently, a Christie’s Hong Kong auction in May sold a 12-carat Martian Pink diamond for $17.4 million. Read more here-http://on.wsj.com/Nb9JPp
-BofA: QE3 Is Coming In September. The minutes from the June FOMC meeting revealed a larger number of Fed officials either favoring or willing to consider additional easing if conditions weaken. Members noted even greater uncertainty and risks skewed to the downside, suggesting that additional easing may occur sooner rather than later. We expect that the outlook will be weak enough to warrant addition Fed easing by the September 12-13 FOMC meeting; we look for Fed officials to both push out their forward guidance on rates until at least mid-2015 and to launch QE3. Read more here-http://read.bi/LQfmyE
-Some on FOMC Said More Stimulus Probably Will Be Needed. A few Federal Reserve policy makers said the central bank will probably need to take more action to boost the labor market and meet its inflation target, according to minutes of their June meeting.
“A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee’s goal,” according to the record of the Federal Open Market Committee’s June 19-20 gathering released in Washington. Read more here-http://bloom.bg/NvGW6C
-Top Fed officials set table for more easing. Three top Federal Reserve policymakers on laid the groundwork for a third round of bond purchases, saying the U.S. recovery was weak and unemployment far too high. “We are right at that edge, that if economic data keep coming in below our expectations and our view is we are not making progress on our mandates, or we don’t expect to make progress on our mandates then I think we would need more accommodation,” San Francisco Fed President John Williams told reporters after a speech in the resort area of Coeur D’Alene, Idaho. Read more here-http://reut.rs/MiZxp0
-Fed should ease policy further, top Fed official says. The U.S. Federal Reserve should unleash a new round of bond purchases to bring down unemployment, even at the risk of driving inflation temporarily higher, one of the Fed’s most dovish policymakers said on Monday. “Additional monetary accommodation is needed to more quickly boost output to its full potential level,” Chicago Federal Reserve Bank President Charles Evans said in remarks prepared for delivery to the Sasin Bangkok Forum.
“The economic circumstances warrant extremely strong accommodation.” The Fed has kept U.S. benchmark short-term interest rates near zero since December 2008 and signaled it will keep them there until 2014 to bolster a weak recovery. It has also undertaken two unprecedented rounds of so-called quantitative easing, buying $2.3 trillion in long-term securities to push down borrowing costs still further. Read more here-http://yhoo.it/Nn2ulg
-Dealers Declining Bernanke Twist Invitation. Wall Street banks are increasingly choosing to hoard their U.S. bonds rather than sell them to the Federal Reserve as speculation grows that a slowing economy and global financial turmoil will only make them more dear. The world’s biggest bond dealers offered an average of $7.2 billion in Treasuries a day to the central bank in June, down 40.5 percent from a high of $12.1 billion in October. Read more here-http://bloom.bg/Oyzg0U
-Slower Chinese inflation opens door to more easing. Prices are tumbling in China, giving the government more leeway to stimulate the world’s second-largest economy. China’s annual inflation rate fell to 2.2% in June, the government’s National Bureau of Statistics reported Monday. That’s the lowest inflation rate in nearly two-and-a-half years and comes as prices have been falling, especially on food. Read more here-http://cnnmon.ie/Nildje
-Goldman Sachs, Bank of America Say Fed to Hold Rate. Goldman Sachs Group Inc. and Bank of America Corp. say a weaker-than-forecast June jobs gain in the U.S. will lead the Federal Reserve to keep its benchmark interest rate at almost zero until the middle of 2015. Read more here-http://bloom.bg/N6c6mG
-Value Added Tax on goods and services in Spain is now 21 percent. CNBC
-Wolfgang Munchau: In an FT column, columnist Wolfgang Munchau presents a grim prediction for the eurozone: the crisis won’t be resolved for another 20 years. Munchau explains that the banking union proposed by EU leaders in their summit in late June was more or less lip-service to the European cause, and in reality displayed a continuing lack of progress towards affecting the crisis:
Angela Merkel’s answer was revealing. She told them that there is nothing to worry about. The banking union was about joint supervision, she said. There will be no joint deposit insurance. She has a very different understanding of a banking union than the European Central Bank. At most, I expect this new banking union to cover the 25 largest banks, and leave those cajas and Landesbanken in national control. This is like an alcoholic who promises to drink only the better cognacs from now on. This course of action, Munchau suggests, would put the timetable for true fiscal reform in the euro area at something like 20 years. Read more here-http://read.bi/LPEt4O
-JPMorgan, Goldman Shut Europe Money Funds After ECB Cut. JPMorgan Chase & Co., Goldman Sachs Group Inc. and BlackRock Inc. closed European money market funds to new investments after the European Central Bank lowered deposit rates to zero.
JPMorgan, the world’s biggest provider of money-market funds, won’t accept new cash in five euro-denominated money-market and liquidity funds because the rate cut may result in losses for investors, the company said in a notice to shareholders. Goldman Sachs won’t accept new money in its GS Euro Government Liquid Reserves Fund, and BlackRock, the world’s largest asset manager, is restricting deposits in two European funds.
“The European market environment is in unchartered territory with such historically low or even negative yields for high-quality issuance,” Goldman Sachs (GS) said in a memo to fund shareholders, citing the ECB’s rate cut. “It is not currently feasible for our portfolio managers to deploy capital without substantially diluting the yield for the existing base of shareholders.” Read more here-http://bloom.bg/S993cY
-Denmark sets a negative interest rate for first time. Denmark’s central bank cut interest rates by a quarter point last week, mirroring the European Central Bank’s action earlier in the day, putting one of its secondary rates below zero for the first time in history. Read more here-http://www.gata.org/node/11544
-France sells bonds at negative interest rate. France’s government has sold short-term bonds at negative interest rates for the first time. In a sale Monday, the treasury sold three-month bonds at negative 0.005 percent, and six-month bonds at negative 0.006 percent. The treasury agency says it’s the first time they have registered negative yields. Read more here-http://yhoo.it/S9bSL3
-EU to Speed $123 Billion Aid for Spanish Banks. European governments will jump-start as much as 100 billion euros ($123 billion) in emergency loans to shore up Spain’s banks and may move the costs off the Spanish government’s balance sheet to shield the euro region’s fourth- largest economy from the debt crisis. Read more here-http://bloom.bg/Nn17TG
-Europe Recalls Hamilton as Desperation Turns on the Debt. As Europe struggles to contain its debt crisis, the name of an American dead for more than two centuries is being invoked by those who think euro area nations will have to trade some autonomy for fiscal stability. Alexander Hamilton, the first U.S. Treasury secretary and the face on the ten-dollar bill, offered cash-strapped states in 1790 a deal they eventually couldn’t refuse: The federal government assumed their debts in return for more centralized power. The alternative risked consigning their creditworthiness to “burst and vanish,” and a breakup, Hamilton warned. Read more here-http://bloom.bg/LJVd27
-CHART OF THE WEEK: Obamacare Now Estimated to Cost $2.6 Trillion in First Decade. Read more here-http://bit.ly/OyqHmI
-U.S. June Budget Deficit Widens on 9.3% Spending Increase. The U.S. government’s budget deficit widened in June, as spending jumped 9.3 percent from the same month a year ago. The deficit expanded 38.7 percent to $59.7 billion from a $43.1 billion shortfall in June 2011, the Treasury Department said in Washington. Read more here-http://bloom.bg/Oe3Hse
-San Bernardino Third California City to Choose Bankruptcy. San Bernardino’s City Council voted to become the third California municipality this year to seek bankruptcy protection after officials learned they might not have enough cash to pay workers. A filing by San Bernardino would follow ones by Stockton, a community of 292,000 east of San Francisco, which on June 28 became the biggest U.S. city to go into bankruptcy.
Mammoth Lakes, a mountain resort of 8,200, filed for protection from creditors July 3 saying it can’t afford to pay a $43 million legal judgment, more than twice its general-fund spending for the year. San Bernardino was already struggling with declining tax revenue, growing worker costs, accounting discrepancies and an unemployment rate in the metropolitan area of almost 12 percent. Read more here-http://bloom.bg/LJ2sXS
-How Stockton went broke: A 15-year spending binge. Read more here-http://reut.rs/PPCfak
-Rising costs push California cities to fiscal brink. Throughout the state, local governments are slashing services to avoid bankruptcy. For some, it’s too late. “There are likely to be more in the future, but it’s hard to know, since a lot of struggling cities may manage to work things out,” said Michael Coleman, a fiscal policy advisor for the California League of Cities. “Some cities may not go into a bankruptcy, but they may dissolve. They may cease to exist.” Read more here-http://lat.ms/NNbEGK
-Scranton cuts workers’ pay to minimum wage. Faced with a crippling cash flow problem and divided political leadership, one of Pennsylvania’s largest cities distributed paychecks last week to city workers that cut wages to the legal minimum. Scranton’s 398 city workers including firefighters, police officers and the mayor himself were paid a reduced rate of $7.25 an hour. Read more here-http://cnnmon.ie/Npb8Nc and http://reut.rs/NmUjFB
-Bankrupt Alabama county asks for second look at lawyer fees. Alabama’s Jefferson County wants a federal judge to take a second look at a June 29 ruling favoring Wall Street creditors in order to clarify how the cash-strapped local government can pay $1 million a month in fees to its bankruptcy lawyers. Read more here-http://yhoo.it/NMINCw
-How US Can Avert Fiscal Cliff: ‘We’ve Got Some Hope.’ The U.S. can avoid “going off the fiscal cliff” by slashing government spending including drastic reductions in defense and raising the retirement age to 68, Erskine Bowles the co-chairmen of the national debt reduction commission told CNBC Thursday.
“I think if I had to tell you the probability, I’d say the chances are we’re going of the over the fiscal cliff and I hate to say it but I think that’s probably right,” Bowles said. “But we worked hard to try to get common sense to overrule politics, and that’s a tough thing in Washington, as all can tell you.” Read more here-http://bit.ly/NPvCRo
-Pension Deficits Deepen in Corporate US. Chronically weak stock markets and record low bond yields have pushed company pension deficits in the United States sharply higher, adding to the burden of retirees living longer than ever before, reports said on Tuesday. In the United States the aggregate deficit of S&P 500 companies grew $59 billion in the first half of the year to $543 billion, consultancy Mercer said. Corporate America is sitting on total liabilities of $2.09 trillion against total assets of $1.55 trillion, Mercer added. Read more here-http://bit.ly/N0MoQZ
-CBO: The wealthly pay 70 percent of taxes. Wealthy Americans earn about 50 percent of all income but pay nearly 70 percent of the federal tax burden, according to the latest analysis Tuesday by the Congressional Budget Office though the agency said the very richest have seen their share of taxes fall the last few years.
CBO looked at 2007 through 2009 and found the bottom 20 percent of American earners paid just three-tenths of a percent of the total tax burden, while the richest 20 percent paid 67.9 percent of taxes. The top 1 percent, who President Obama has made a target during the presidential campaign, earns 13.4 percent of all pre-tax income, but paid 22.3 percent of taxes in 2009, CBO said. But that share was down 4.4 percentage points from 2007. Read more here-http://bit.ly/NvDyIV and http://bloom.bg/S8fdKm
-Congress Keeps Free Mail While Pushing U.S. Postal Cuts. Lawmakers intent on dictating how the U.S. Postal Service cuts billions from its spending are among those helping themselves to a favorite congressional perk: free mail. Read more here-http://bloom.bg/Ni4xW9
-CHART OF THE WEEK: Disability Ranks Outpace New Jobs In Obama Recovery. More workers joined the federal government’s disability program in June than got new jobs, according to two new government reports, a clear indicator of how bleak the nation’s jobs picture is after three full years of economic recovery. Read more here-http://bit.ly/M3THG0
-Payrolls in U.S. Rose 80,000 in June; Jobless Rate 8.2%. American employers added fewer workers to payrolls than forecast in June and the jobless rate stayed at 8.2 percent as the economic outlook dimmed. The 80,000 gain in employment followed a 77,000 increase in May, Labor Department figures showed last Friday in Washington. Economists projected a 100,000 rise, growth in private payrolls was the weakest in 10 months. Read more here-http://bloom.bg/NmGN4X and http://bit.ly/LJmBx5
-Broader Jobless Rate Ticks Up to 14.9%. The U.S. unemployment rate was unchanged at 8.2% in June but a broader measure rose to 14.9% as the ranks of the underemployed grew. Read more here-http://on.wsj.com/NiClpb
-Companies Are Laying People Off At The Highest Rate In Two Years. Read more here-http://read.bi/NMIacf
-Bill Gross: Unemployment Will Be Higher in a Year. Federal Reserve policies are progressively having less impact, and by this time next year we’ll see unemployment higher than today’s 8.2 percent, Pimco co-founder Bill Gross told CNBC’s “Street Signs” on Wednesday. Read more here-http://bit.ly/La9jDF
-New York Fed Says It Knew of Barclays Libor ‘Problems.’ The Federal Reserve Bank of New York was aware of potential issues involving Barclays Plc and the London interbank offered rate after the financial crisis began in 2007, according to a statement from the district bank. Read more here-http://bloom.bg/NmUD7m and http://www.gata.org/node/11559
-Alasdair Macleod: LIBOR fixing implicates government as well. Read more here-http://www.gata.org/node/11551
-New York Sun: What’s so magical about interest-rate rigging? Read more here-http://bit.ly/NiZOGH
PEREGRINE FINANCIAL FRAUD
-Peregrine Files to Liquidate After CFTC Sues. Peregrine Financial Group Inc. filed to liquidate in bankruptcy after the U.S. Commodity Futures Trading Commission sued the brokerage alleging a $200 million “shortfall” in client funds. Peregrine listed assets of more than $500 million and debt exceeding $100 million in a Chapter 7 petition filed in U.S. Bankruptcy Court in Chicago.
Separately, U.S. District Judge Rebecca Pallmeyer issued an order freezing Peregrine’s assets at the CFTC’s request, saying it appeared there was “good cause” to believe the firm and its founder, Russell Wasendorf Sr., violated the federal Commodity Exchange Act.
The National Futures Association, an industry self- regulator, said July 9 that Peregrine reported it had about $400 million in customer-segregated funds on or about June 29, of which $225 million was on deposit at U.S. Bank. The regulator said it learned that Peregrine’s chairman “may have falsified bank records” after finding only $5 million on deposit. The brokerage offered futures, cash, foreign exchange and options on futures trading. Read more here-http://bloom.bg/PRzKWd
-Peregrine Customers’ Claims Priced at 25 Cents on Dollar. Customers’ claims on Peregrine Financial Group Inc., whose founder is accused by regulators of misappropriating more than $200 million, may fetch less than a quarter of their value in the wake of the firm’s bankruptcy, a trader said. Read more here-http://bloom.bg/MkmdQr
-CHART OF THE WEEK: Doug Short, The Return Of The Four Totally Bad Bears. Read more here-http://read.bi/PR0K8o
-John Mauldin: A Dozen Years After The Bear Market Began, The Outlook For Stocks Is Still Crappy. The next few years or perhaps the entire next decade will be frustrating for investors, as the market continues its rollercoaster ride to nowhere. And given the correlation between US markets and world markets, the coming period is likely to be frustrating in more places than just the US. But savvy investors with diversified and well-developed portfolios will not only ride out the storm, they are likely to achieve investment success. There will be winning stocks and strategies in even the worst bear markets. An emphasis on absolute returns and alternative investment portfolios will be rewarded. Hang on and prepare for interesting times. Read more here-http://read.bi/NhKhad
-Wall Streeters Lose $2 Billion in 401(k) Bet on Own Firms. Wall Street employees, who dispense financial advice to individuals and companies, aren’t following a basic investing tenet with their own money. Workers at the five largest Wall Street banks saw the value of company stock in their 401(k) accounts, sometimes the biggest holding of those plans, decline more than $2 billion last year, according to annual filings. Read more here-http://bloom.bg/O7UdyD
-Japan Insider-Trade Crackdown Targets ‘Animals Run Wild.’ Japan’s crackdown on insider trading barely scratches the surface of a practice that allows traders to profit and brokerages to boost their underwriting business at the expense of shareholders and issuers. The disclosures have undermined confidence in the world’s second-largest stock market, where the Nikkei 225 Stock Average remains 77 percent below its 1989 peak and scandals such as the accounting fraud at Olympus Corp. and covered-up losses at AIJ Investment Advisors Co. deter investors from a waning economy. Read more here-http://bloom.bg/NixXUf
-Housing Rebound Signaled as Banks Resume Foreclosures. U.S. lenders are notifying more delinquent homeowners they face foreclosure, a step toward clearing a backlog of properties and helping to accelerate a housing recovery. Read more here-http://bloom.bg/LLIETN
-Manhattan Apartment Rents Increase the Most Since 2007. Manhattan apartment rents rose the most in five years in the second quarter as would-be homeowners struggling to get mortgages lingered in the leasing market, competing for space with transplants and new college graduates. Read more here-http://bloom.bg/Scp4yY
-Gary Anderson: Well, Now We Know What The Next Wall Street Real Estate Scam Will Be. It didn’t take long. We now know by an interview with Maria Bartiromo today that these Wall Street innovators want to package up rental income and sell it as securities to unsuspecting investors. I didn’t have a clear view regarding the purpose of the 1 percent buying real estate to rent when I wrote that the 1 percent were buying up all the low end real estate.
But leave it to the 1 percent to figure out a way to pawn off risk to everyone else so that they can try to manufacture a housing bubble on the backs of renters! The same risks that occurred when we had securitization of mortgage backed securities will likely accompany these securities, including lack of transparency, ratings companies rating these securities, and the SEC and more inept government agencies policing these securities.
But the danger goes beyond the actual risk of the securities themselves. That was not covered by the best looking CNBC shill for the banks, Bartiromo. The danger is that the money generated by these securities will be plugged into even more purchasing of homes. And the fervent heat by which these buyers in the 1 percent will buy could cause another housing bubble if the scale is big enough.
Think about it, you have hedge funds with 1 percent money, buying rentals. They take the rental income and bundle them up into securities. The profits they get from the selling of the securities goes to buying more houses. Rinse and repeat. Read more here-http://read.bi/NoytOZ
© 2013, Worldwide Precious Metals Canada Ltd.
The World Financial Report – July 17th, 2012
Posted by Worldwide Precious Metals on Tuesday, July 17, 2012
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