The World Financial Report – July 3rd, 2012
July 3, 2012
-“Given the mess that we’re in, and given this threat that we could possibly be facing a 1931-type movement, you have to be in this market. Got to be long gold, no question about it.” Nigel Farage
-”If the Fed and other central banks continue with these artificially low interest rate policies, investors should brace themselves for unimaginable turmoil both in the markets, and in the financial system itself. In the meantime, investors need to protect themselves by owning a basket of hard assets and key sectors. For what it is worth, this is wildly bullish for gold and silver.” Robert Fitzwilson
-“Gold’s problem, why it has maxed-out at and pulled back to $1,500, is people say, ‘Well, it had a big move, going from $250 to that ($1,900) level, but it’s still just a theoretical asset, it isn’t doing anything.’ So the moment gold comes into the system and starts doing things, I suspect that’s when we are going to get a significant up-move in gold.” Donald Coxe
-“We are on the edge of collapse, it’s imminent. We’ve run out of time. If they don’t take action, continue to play this brinksmanship, and this thing gets away on the downside, when you get a hard deflation going, it’s really difficult to reverse. I don‘t think you can say anything with total assurance, for the simple reason that we have never, ever been remotely in a condition like this in all of world history. So the only things that I am comfortable in at this moment are physical gold and silver and gold and silver shares.” John Embry
-In the 1930’s, if people were lucky enough to get their money out of any of the hundreds of banks that failed, they didn’t want to take any more chances. They soon realized that the paper currency in their hand wasn’t much safer than when they had their money on deposit in a bank. The panic to obtain gold or silver marked the bottom of the Great Depression. The solution was a higher gold price, and that is the same solution needed today.
President Roosevelt knew the solution in the 1930s, and lowered the gold content of the dollar, thereby raising the gold price. Central planners don’t like that solution because it takes away the power they now have with fiat currencies, backed by nothing but their promises, but a higher gold price is coming nonetheless. It is the only solution. James Turk
-“I think gold had a real big run, and I have been bullish on gold since November of 2001. I told people at this firm that I was putting in the intermediate-term peak on the gold market. My son was graduating from the University of Michigan and wanted to go to Europe for a couple of months.
My friend’s father had been giving my son a 1-ounce gold coin at Christmas ever since he was 13. So he wanted to sell seven or eight of the gold coins to pay for his trip to Europe. He was going to sell them to a dealer and I said, ‘No, sell them to me and I will put them in the lockbox and you’ll eventually get them back.’
At that time, I told people on the verbal strategy comments, on CNBC and in my written stuff that I was putting in the near-to-intermediate-term peak on gold coins. I paid $1,925 for those gold coins, amid my son asking me, ‘Dad, are you going to pay me the bid or the ask?’ That’s a true story.
Now I think we are in a consolidation in gold and it has more time to run. Any time you have a huge, secular bull market like we’ve had since 2001, you go sideways in these corrective wide-swinging trading ranges just like we’ve been doing. We will go sideways here for a while, but eventually gold goes higher.” Jeffrey Saut
-“We are only a little bit more than 15% off the all-time high. I think what has been working against the price of gold is you have countries such as India, where the currency has weakened considerably, and Indians are traditional buyers of gold. All of the sudden, the price of gold, in rupees, has increased quite a bit.
You may have small countries like Portugal or Spain, because they are in trouble, may be liquidating some of their gold. My point is, I look at gold as a substitute currency, and I continue to see that central banks throughout the world are printing money. As long as that goes on, I don’t want to lose my position in gold.” Jean-Marie Eveillard
-Richard Russell: This Terrifying Financial Collapse & Gold. Sadly, the whole world is searching for income and safety, and the fact is that there is no income and there is no ultimate safety. Then how does one build wealth? The Asians know the answer to that, YOU BUY and HOLD GOLD, and exercise a lot of patience. Read more here-http://bit.ly/OAiMtN
-Ben Davies: Eurozone, Deleveraging & Gold to Break $6,000. “I think the mini-boom that we had in the nominal gold price, up to $1,900, we’ve been working off that mini-excess sideways. The disinflationary pressures from this concept of credit dying is worrying, and I think it weighs on all assets prices. But gold is doing what it should be doing.”
“If you look at it on a relative basis, gold has maintained its purchasing power. It’s done exactly what it should be doing. Short-term I am concerned that we could be going down to $1,400. Yes, that’s a real risk in this environment. The Greek situation that’s sort of bubbling away, there’s no change in the status quo. In some ways, as awful as it sounds, it would have been lovely to have had an extreme event happen so that we get to the end of this process.”
“Look, if you were to run M4, M3 numbers, etc, and assert a value to gold on an appropriate metric relative to that, obviously gold would be at stupendous prices. I believe that gold has considerable room to go to the upside, four or five times (Gold price above $6,000). I think that’s not an inappropriate suggestion.” Read more here-http://bit.ly/MDYsDi
-Warren Gilman, Chairman & CEO at CEF Holdings: Gold a ‘Must Have’ for Current Environment. Gilman is a long-term believer in gold, and is confident that the precious metal’s price will rise eventually. Watch more here-http://bit.ly/N7EcZ7
-Frank Holmes: An Ending Made For Gold. Over the past several months, the markets have tested investors’ conviction to gold. Since February, the price of the yellow metal has steadily stepped lower, rallying somewhat in May before falling again when Ben Bernanke disappointed by not providing the U.S. with more stimulus. Meanwhile, the dollar gained ground as global investors fled the euro. Read more here-http://bit.ly/L4thpg
-Egon von Greyerz: Greatest Financial Collapse The World Has Ever Seen. Right now investors have the illusion that things are actually okay because the stock market is near the recent highs. The reality is the stock market is not near the highs because its down 80% vs. gold in the last 10 years. The other problem is the bond market is the biggest bubble right now. Who wants to buy government bonds and earn zero to 2% from bankrupt governments. There will be a guaranteed collapse of the bond market.
So, in reality, investors are under the illusion that the system will continue, but it won’t. This is why investors have to focus on protecting their wealth. I’m still of the firm opinion that the only investment that will protect investors purchasing power is physical gold, stored outside of the banking system.
Gold cannot be printed, it cannot be destroyed, and it will continue to act as money as this crisis deteriorates even further. We now have the BIS proposing that gold should be part of Tier-1 capital. This means that gold, as Tier-1 capital, will involve zero percent risk. Up to now it’s been counted as having a 50% risk.
Therefore, it is likely that a lot of the central banks and international banks are going to increase their investment in gold. This could have a major effect on the demand for gold in the next couple of years. So in the short-term gold is like a bouncing ball. The swings are getting smaller and smaller.
The price of gold has simply gone sideways for ten months, but now the range is narrowing. While gold may experience short-term pressure, the next big move is going to be on the upside, and investors need to be positioned for that. Read more here-http://bit.ly/N1mqe8
-Rick Rule: The Big Money I’m Speaking With Is Frightened. “It was very interesting, I was at a small conference that was put on for some European and North American offices. You know family office money is a different kind of money than most money, it’s multi-generational money. They represent the very wealthy and they are stable, patient investors. But I have to say, even that kind of money is frightened.”
In the midst of all of this chaos, I continue to believe that given the choice between gold as a store of wealth and a medium of exchange vs. the euro or the dollar, I am still attracted to gold. I’ve always been more given to fundamental analysis, rather than technical analysis. Because of that, I actually feel better now than I did three months ago about the gold I have my portfolio, relative to the other ways I could hold my liquid wealth. This is particularly true in the dangerous environment we face going forward.” Read more here-http://bit.ly/MYU3Lw
-Stephen Leeb: The Fate of the Global Financial System Hangs in the Balance. Read more here-http://bit.ly/MBGxib
-Lawrence Williams: A ‘Lehman moment’ will ensure gold and silver will soar again. Be sure that a huge volume of money printing will soon be on the way in Europe, and in the U.S. too, and the gold speculators’ long awaited stimulus to drive prices up will at last become a reality. Read more here-http://bit.ly/MafTzu
-Paul’s full Fed audit bill approved unanimously by House committee. Read more here-http://www.gata.org/node/11513
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
-Silver is one of my favorite assets. I am highlighting a monthly chart of the white metal this week. Some technical indicators are now more oversold than at the lows of the 2008 crisis. Note the position of the Williams oscillator. Tremendous value is presenting itself to silver investors. Continued strong buying by commercial traders suggests substantially higher prices are likely. I’m not concerned that silver is lagging gold here. That’s normal at the beginning of a bull move in precious metals. June is seasonally a tough month for silver, but July can be excellent. Position yourself in June, so you profit in July! Morris Hubbartt
-Dr. Jeffrey Lewis: Rare Earth Silver. The last years of mining silver could well be compared to studies that indicate the world is approaching the last years of pumping oil. While the earth’s stores of silver may not actually run out anytime soon, increasing demand and increasingly difficult mining opportunities for silver tends to put upward pressure on the cost of extracting what silver is left from the planet. Those mining costs are also getting more and more complex as new processes and resource scouting techniques are required. Energy prices ultimately will go up. If not because of dwindling supply, then they will very likely rise due to inflation. The same is true of precious metal prices. Read more here-http://bit.ly/MDSana
-High gold prices, monsoon worries spark silver sales. Many Indian investors are making a beeline for silver, and are refraining from buying gold due to its high price, though gold is expected to give a 20% return in 2012. Read more here-http://bit.ly/M9CQCQ
-Platinum demand to substantially outstrip supply in 2012 CPM. Contrary to investor perceptions, fabrication demand for platinum, palladium, and rhodium is expected to grow at a stronger pace in 2012, says commodities consultant CPM Group. “The platinum market is expected to be in a substantial deficit this year and palladium could fall into a deficit, due to lower South African and Russian output,” CPM forecast Tuesday in its CPM Group Platinum Group Metals Yearbook 2012. Read more here-http://bit.ly/N7rERw
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-CHART OF THE WEEK: Actually It Is Generation X That Suffered Most From The Recession. Though everyone seems to be feeling sorry for millennials, who are experiencing one of the highest unemployment rates and boomers, who are delaying their retirement due to the economy, the generation in between, Gen X, deserves their own time in the recession limelight. A Census report released found that people between 35 and 44 saw a 59 percent decline in median household net worth between 2005 to 2010, the largest drop of all age groups. Those 55 to 64, only saw a 25 percent drop, though they had a larger decline in actual dollar amount. Read more here-http://read.bi/LsWhk9
-CHART OF THE WEEK: The Growth Of The 60+ Age Group As A Percentage Of Total US Population (1990-2030). Read more here-http://read.bi/MAxXkM
-CHART OF THE WEEK: How The Age Of The World Will Change By 2025. The countries in red are the ones with younger populations; blue, older. Especially notable is East Asia (of course) but also Mexico. Soon, we’ll all have the blues. Read more here-http://read.bi/MWgYcd
-”If left unchecked, the fiscal squeeze next year in terms of spending cuts and the expiry of all the tax goodies introduced over the past decade will conspire to take roughly four percentage points out of real GDP growth. There have only been two instances in the past when we experienced such fiscal restraint and recessions ensued both times.
It pays to note that with the baseline trend in real GDP little better than 1%, even if half of the expected restraint manages to get kicked down the road, the economy will at best stagnate in 2013. That may not be a recession in a technical sense, but it would sure feel like one for a whole bunch of people.” David Rosenberg
-”This is 1937 and Bernanke is fearing the ghost of Andrew Mellon and the French bankers remember he promised Milton Friedman at his 90th birthday that deflation would not take place on his watch and the same mistakes repeated.” Yra Harris
-Pamela Heaven: Repeat of 1931 on horizon. Is the world about to repeat the economic catastrophe of 1931? A growing chorus of economists of all stripes thinks so. “Suddenly, normally calm economists are talking about 1931, the year everything fell apart,” writes Nobel Prize winning economist Paul Krugman in the New York Times.
“The parallels between Europe in the 1930s and Europe today are stark, striking, and increasingly frightening,” write Bradford DeLong and Barry Eichengreen in the new preface to Charles Kindleberger, The World in Depression 1929-1939. “We see unemployment, youth unemployment especially, soaring to unprecedented heights. Financial instability and distress are widespread. There is growing political support for extremist parties of the far left and right.”
In May 1931, Austrian bank Creditanstalt suffered a run. Its collapse after a merger with an insolvent rival sparked a crisis that left Germany and Central Europe strewn with failed banks, caused defaults in Europe and Latin America, knocked the pound off the gold standard, and forced the New York Federal Reserve by October to raise its discount rate by two percentage points.
“Austria’s troubles shouldn’t have been big enough to have large effects on the world economy, but in practice they created a panic that spread around the world. Sound familiar?” wrote Krugman. The ominous clouds on the horizon are uniting economic pundits. Read more here-http://bit.ly/NPrjYr
-Central Banks Commit to Ease as Threat of Lost Decades Rises. Central bankers are finding it easier to support their economies than to spur expansion as the prospect of Japanese-like lost decades looms across the developed world. The rub is that even as they renew their rescue efforts, policy makers are postponing forecasts for fuller recoveries and run the risk that their latest actions pack a smaller punch. This raises the prospect of longer-term anemic expansion akin to the doldrums Japan has suffered since the early 1990s. Read more here-http://bloom.bg/MXipna
-Central Banks Face Limits of Power as Crisis Persists. Central banks in developed nations are confronting the limits of their ability to aid economic recovery as government efforts to strengthen their finances fall short, the Bank for International Settlements said. “Central banks are being cornered into prolonging monetary stimulus as governments drag their feet and adjustment is delayed,” the Basel, Switzerland-based BIS said in its annual report. “Both conventionally and unconventionally accommodative monetary policies are palliatives and have their limits.” Read more here-http://bloom.bg/LuksP0
-Draghi May Enter Twilight Zone Where Fed Fears to Tread. European Central Bank President Mario Draghi is contemplating taking interest rates into a twilight zone shunned by the Federal Reserve. While cutting ECB rates may boost confidence, stimulate lending and foster growth, it could also involve reducing the bank’s deposit rate to zero or even lower.
Once an obstacle for policy makers because it risks hurting the money markets they’re trying to revive, cutting the deposit rate from 0.25 percent is no longer a taboo, two euro-area central bank officials said on June 15. “The European recession is worsening, the ECB has to do more,” said Julian Callow, chief European economist at Barclays Capital in London, who forecasts rates will be cut at the ECB’s next policy meeting on July 5. “A negative deposit rate is something they need to consider but taking it to zero as a first step is more likely.” Read more here-http://bloom.bg/MqTZHI
-Evans Says Fed Needs to Do More Than Operation Twist. Federal Reserve Bank of Chicago President Charles Evans said the U.S. central bank didn’t provide enough stimulus last week and called for new easing including more asset purchases to spur economic growth. Read more here-http://bloom.bg/LDhgXE
-Bernanke’s Twist Sharpens Year-End Anxiety Over Stimulus. Federal Reserve Chairman Ben S. Bernanke has repeatedly warned lawmakers that a fiscal cliff threatens the economy. Now he’s created a precipice of his own. The Fed on June 20 extended its Operation Twist program to swap $267 billion in short-term securities with longer-term debt through December. That end date coincides with reductions in federal spending, a halt to payroll-tax cuts and expiration of income-tax cuts enacted under President George W. Bush.
The timing of Bernanke’s easing raises the stakes for the Fed’s four remaining policy meetings this year as investors focus on whether the central bank will provide stimulus for 2013 to help the economy overcome the impact of the fiscal tightening due to take hold in January, said Vincent Reinhart, chief U.S. economist at Morgan Stanley. Read more here-http://bloom.bg/MXiIhK
-Princeton’s Blinder Says Fed Has Weak Weapons for Growth. Princeton University economist Alan Blinder said remaining options for Federal Reserve policy probably won’t provide a powerful boost to the U.S. economy. “The basic problem for the Fed is it’s used all the heavy artillery a long time ago and it’s down to relatively weak weapons,” Blinder, a former Fed vice chairman, said in an interview. Read more here-http://bloom.bg/Lum0bO
-Jobless Claims in U.S. Hovered Last Week Near 2012 High. The number of applications for unemployment benefits hovered last week near the highest level of the year, showing little improvement in the U.S. labor market. Read more here-http://bloom.bg/NG597j
-Older Workers in U.S. Drive Competition in Labor Market. A record 7.3 million workers 65 or older trying to shore up finances battered by the recession that ended three years ago and stay productive. An aging population, longer and healthier lifespans and changes to retirement-benefit plans will mean rising competition for jobs and limited wage gains even after the economy strengthens.
About 74 percent of Americans say they plan to work past age 65, according to a May study by economists Jay Bryson and Sarah Watt of Wells Fargo Securities LLC in Charlotte, North Carolina. Thirty-nine percent said they need to earn to make ends meet or maintain their lifestyle, and 35 percent wanted to stay employed.
“Many seniors simply aren’t in a position to retire,” said Watt, whose research was based on a Wells Fargo retirement survey done in 2011. “More people are hanging on to the job longer,” she said, as a result of the recession and some longer-term trends. Read more here-http://bloom.bg/OvE1Ne
-Consumer Confidence in U.S. Declines to a Five-Month Low. Confidence among U.S. consumers dropped in June for a fourth consecutive month as mounting concern over jobs and incomes dimmed the outlook for spending. Read more here-http://bloom.bg/Qnf9pa
-Morgan Stanley’s Amazing Presentation On The State Of Everything That’s Important In The World. Read more here-http://read.bi/MCq1Nn
-Eric Sprott and David Baker: Ministry of [Un]Truth. Read more here-http://www.gata.org/node/11496
-The 15 Maps That Explain The Entire World. Read more here-http://read.bi/LPl4jt
-Oil Over $100 Seen on Iran After Worst Quarter Since ’08. Brent crude is set to recover from its worst quarter since 2008 as a European Union ban on Iranian oil takes effect, central banks act to protect growth and on speculation OPEC will curb some of its excess supply. Read more here-http://bloom.bg/LiMhM3
-MAP: How Oil Flows In And Out Of Every Country In The World. See more here-http://read.bi/MXfMS9
-The Price Of One Major Energy Commodity Is Doing Worse Than Oil Or Natural Gas. Read more here-http://read.bi/LPlC98
-The Next World War Will Be Over Resources And Commodities. Read more here-http://read.bi/M68wJs
-Iran threatens to close Strait of Hormuz over EU oil sanctions. A senior member of Iran’s parliament said on Monday the Islamic Republic would close the entry point to the Gulf if new sanctions block its oil exports, reiterating a threat made by officials a month ago that caused a temporary oil price spike. Read more here-http://bit.ly/LEfLXl
-Islamist Mohamed Mursi Elected Egyptian President. The Muslim Brotherhood’s Mohamed Mursi was elected Egypt’s first Islamist civilian president, capping an acrimonious race that divided a nation whose economy is reeling and where the military has curbed his authority. Read more here-http://bloom.bg/Lue7TU
-The New Egyptian President Reportedly Said ‘Jihad Is Our Path And Death In The Name Of Allah Is Our Goal.’ “The Koran is our constitution, the Prophet is our leader, jihad is our path and death in the name of Allah is our goal.” Read more here-http://read.bi/QmY1QC
-How US And Israel Are Preparing For A Possible Attack On Iran. Israel continues to “prepare all other options” for a strike against Iran’s nuclear facilities, as diplomatic talks go nowhere, according to Reuters. Talk of a joint U.S.-Israeli military strike on Iran has waned recently, but talk of U.S.-Israel cyberattacks has taken its place. Read more here-http://read.bi/MUFbiT
-Barclays admits manipulating LIBOR rate; other banks still being investigated. Barclays Pays $450 Million to End Libor Probe. Read more here-http://www.gata.org/node/11509
-”If the allegations of LIBOR manipulation turn out to be true, it would present governments with the mother of all regulatory dilemmas: when virtually all the top banks in all places have been fixing something as elemental as interest rates, what do you do? Issue more fines?” Matt Taibbi, Rolling Stone June 22 2012
-Simon Johnson: U.S. Banks Aren’t Nearly Ready for Coming European Crisis. The euro area faces a major economic crisis, most likely a series of rolling, country-specific problems involving some combination of failing banks and sovereigns that can’t pay their debts in full. This will culminate in system wide stress, emergency liquidity loans from the European Central Bank and politicians from all the countries involved increasingly at one another’s throats.
Even the optimists now say openly that Europe will only solve its problems when the alternatives look sufficiently bleak and time has run out. Less optimistic people increasingly think that the euro area will break up because all the proposed solutions are pie-in-the-sky. If the latter view is right or even if concern about dissolution grows in coming months markets, investors, regulators and governments need to worry not just about interest-rate risk and credit risk, but also dissolution risk. Read more here-http://bloom.bg/LEfN3r
-U.S. Home Loan Banks Overexposed in Europe, Audit Finds. The U.S. Federal Home Loan Banks’ unsecured lending to foreign institutions skyrocketed last year as the European sovereign debt crisis intensified, raising concerns about their risk management, an auditor’s report said. Read more here-http://bloom.bg/OD6Zfj
-JPMorgan Trading Loss May Reach $9 Billion. Losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation. Read more here-http://nyti.ms/OCZncK
-HSBC Canada launches commercial yuan savings account. Read more here-http://natpo.st/Qo537N
-Fraud Ring In Hacking Attack On 60 Banks. Sixty million euro has been stolen from bank accounts in a massive cyber bank raid after fraudsters raided dozens of financial institutions around the world. Read more here-http://bit.ly/N4fp89
-28% of Americans have no emergency savings. Most Americans don’t have nearly enough money stashed away for emergencies and more than one-in-four don’t even have a single penny saved. While the general rule of thumb is to have an emergency fund that will cover at least six months of expenses, only 25% of Americans have that amount saved. Read more here-http://cnnmon.ie/MUTC6U
-43% of Americans go without cash for a week. Are cash payments becoming a thing of the past? Money never goes out of style, but the paper version seems to have lost some appeal: Able to buy stuff with debit cards, credit cards, and even mobile phones, two in five adults have gone cashless for an entire week, according to a recent survey by Rasmussen Reports. Read more here-http://cnnmon.ie/M4SzTJ
-Top secret: $80B a year for food stamps, but feds won’t reveal what’s purchased. Americans spend $80 billion each year financing food stamps for the poor, but the country has no idea where or how the money is spent. Read more here-http://bit.ly/KN6PzA
-Drought May Rival 1980s U.S. Scorcher That Cost $78 Billion. The drought in the U.S. Midwest that has pushed up corn prices 28 percent since June 15 may eventually rival a dry period in 1988 that cost agriculture $78 billion, a government meteorologist said. Read more here-http://bloom.bg/LQMs28
-America Sets a New Record for Old Cars. Feel like you’re driving an old car? You’re not alone. In fact, the average age of vehicles in the U.S. has hit a new all-time high. Experian Automotive says the average age of the 245 million vehicles registered in the U.S. in the first quarter of this year was 11 years. That’s an increase of just over 2 months compared the first quarter of last year.
What’s behind the increase? Part of it is because the recession and sluggish recovery forced many people to put off buying or trading-in for a new or used car. Another factor is the fact cars and trucks are built to run longer. That quality improvement picked up momentum in the early ’90s. Now, many of those cars and trucks are 13 to 22 years old, and yes there are millions of them still on the road. Read more here-http://bit.ly/MXvVLj
-A Cool Graph To Tell You When Fruits And Vegetables Are In Season. See more here-http://read.bi/MWSHyY
-What Kills Us: The Leading Causes Of Death From 1900-2010. See more here-http://read.bi/OtLoVn
-Pair of metal detector friends discover three quarters of a ton of Iron Age coins worth £10m. Read more here-http://bit.ly/M65Uez
-De Beers, the largest diamond producer by sales, estimates that rough diamond prices rose in 2010 by 27 per cent and another 29 per cent in 2011. FT.com
-Diamonds are expected to be supported by the lack of supply. No new significant diamond mines have been found in at least a decade, and with lead times for mines from discovery to production averaging about eight years, and large miners such as BHP Billiton and Rio Tinto looking to leave the sector, supply growth is expected to be sluggish for years to come, says Des Kilalea, analyst at RBC Capital Markets.
On the demand side, China and India are expected to be the drivers of growth. Mr. Kilalea believes the two countries, which each hold about 10 per cent of global demand, will together account for a third of the market. The industry is also hanging its hopes on the policy move by the Chinese government to encourage consumption, to benefit luxury goods, including spending on jewellery. Martin Rapaport, founder of Rapaport, the diamond services company, says: “It’s going to be normal for people to own diamonds in China.” FT.com
-Asian demand for diamonds set to boom. “The demand for diamonds is set to boom. There is no doubt about this. It will be driven primarily by the growth of the markets in China and India,” said Maneesh Dhukaje from Hare Krishna Exports, a diamond trading firm. In India alone, he noted, the market for diamonds is expected to grow faster than that for gold over the next five years, with some estimates pegging it at 1 trillion rupees. During the same time, India and China are expected to represent half the global growth in demand for diamonds. Read more here-http://bit.ly/MDMR7d
-Costly gold losing its sheen to diamond in India, China. With gold prices on a high, the Indian middle class is apparently finding the shine of the diamond more attractive. Read more here-http://bit.ly/MDRzls
-Rare diamonds add glitter. Two rare Argyle diamonds, including one of only a handful of purplish-red diamonds ever certified and a 0.74-carat pink diamond valued at $480,000, went on show in Broome at the weekend. Just one out of every 10,000 diamonds dug out of the Kimberley mine are coloured and red diamonds are the rarest of them all.
Lost River Diamonds merchant Clyde Jones said the tiny 0.35-carat purplish-red diamond, valued about $340,000 and produced exclusively at Argyle, was a miracle of nature. “Very few jewellers in the world would have seen a red diamond and very few people in Australia would have seen an Argyle tender pink,” Mr. Jones said. The diamonds’ deep hue is believed to be caused by years of extreme pressure underground.
Only about 60 red diamonds have been produced since they were discovered at Argyle in 1987 and most go out to tender overseas. Mr. Jones said just 50 people worldwide were invited each year to view tender diamonds and make sealed bids at top-secret auctions.
“It’s a very exclusive tender you can only auction for these if you’re given an invitation and the only people who get to view a tender stone are those who have been invited,” he said. The latest purplish-red gem is one of only six in the world to be certified by the Gemmological Institute of America. Read more here-http://yhoo.it/N7qJ3p
-King Edward VII’s diamond encrusted sword goes on display at Buckingham Palace for Jubilee. Some of the most spectacular treasures from the Royal Collection will go on display at Buckingham Palace this week to mark the Queen’s Diamond Jubilee. Read more here-http://bit.ly/KOZ5Nq
-Diamonds, a washer woman’s best friend: Microscopic sparklers in washing powder help detergents work much more effectively. Read more here-http://bit.ly/OzzYzr
-CHART OF THE WEEK: European sovereign debt crisis perspective. Today’s chart illustrates the forecasted 2012 debt to GDP ratio for each of the PIIGS (red bars) plus a handful of today’s major economies (blue bars). While the PIIGS are currently enduring relatively high debt loads, it is noteworthy how some of the relatively safe nations/bond markets (e.g. United State and Germany) are not far behind.
These relatively high debt loads are of concern as they could lead to higher taxes sometime in the future and can risk fiscal crises if bond holders sense an increasing risk of default. The current crisis in Europe provides a clear example of the bond market’s reaction (i.e. higher bond yields) to increased default fears. This leads to a very interesting case study that is Japan. With a debt to GDP ratio of over 200%, the Japanese 10-year bond yield is a relatively low 0.83%.
Why? At the moment, the bond market feels that the Japanese have the ability to repay their debts in part due to Japan’s perceived ability to raise taxes. To that end, Japanese Prime Minister Yoshiko Noda just won opposition support for the doubling of the nation’s sales tax to 10% by 2015. So it’s not just the amount of debt but also convincing your banker that you are good for it. Read more here-http://bit.ly/MVY1EJ
-And then there were five: Cyprus seeks EU aid. A fifth euro-zone country turned to Brussels for emergency funding on Monday when Cyprus announced it was seeking a lifeline for its banks and its budget, hours after Spain submitted a formal request to bail out its banks. Read more here-http://reut.rs/Mr42wm
-Recovery still five years away, Mervyn King warns. Britain is facing at least five more years of financial pain, the Governor of the Bank of England has warned, in his bleakest outlook for the economy yet. Read more here-http://bit.ly/MDqSQs
-Wealthy Swiss Hoard Cash, See Doom for Euro. If you want proof that the world’s wealthy are worried, consider this: Swiss banking clients have nearly a third of their portfolio in cash. And one in five believe the Euro will collapse. The findings are included in a new report from LGT Group, the Austrian banking company, conducted with Austria’s Johannes Kepler University. The study found that wealthy Swiss and Austrian private-banking clients remain highly risk-averse and fearful of inflation, sovereign debt defaults and the unstable financial system. In Switzerland, 58 percent of private banking clients have lost confidence in the financial system. Forty-four percent worry about inflation. Read more here-http://bit.ly/ME85ll
-Steve Schwarzman: Something Terrible Will Happen To The US If We Don’t Deal With Our Deficit. Private equity tycoon Steve Schwarzman said this morning on CNBC’s “Squawk Box” that if we keep racking up our deficit “something terrible” will happen. Read more here-http://read.bi/KNPdDD
-Stockton, California, to File for Bankruptcy Protection. Stockton, California, said it will file for bankruptcy after talks with bondholders and labor unions failed, making the agricultural center the biggest U.S. city to seek court protection from creditors. “The city is fiscally insolvent and must seek Chapter 9 bankruptcy protection,” Stockton said in a statement released Tuesday after its council voted 6-1 to adopt a spending plan for operating under bankruptcy protection. “In addition to the bankruptcy petition, the city will file a motion with the courts to share information from the confidential mediation.” Read more here-http://bloom.bg/MVK21G and http://reut.rs/KEwWnE
-Financially-strapped Nevada city declared disaster. North Las Vegas is officially a disaster area. After five years of declining property taxes, massive layoffs and questionable spending, leaders of the blue-collar, family-oriented city outside Las Vegas declared a state of emergency, invoking a rarely used state law crafted for unforeseen disasters. No matter that the statute, which allows municipalities to suspend union contracts and avoid paying scheduled salary increases, doesn’t actually include fiscal emergencies among the list of potential disasters. Read more here-http://fxn.ws/QnAkYv
-Public Pensions Face Wider Deficits Under New Rules. State and local governments coping with years of underfunding and weak investment returns will be forced to clarify the extent of pension deficits under rules set that will widen the gaps for some plans. The measures adopted by the Governmental Accounting Standards Board alter methods of calculating liabilities and assets by the retirement systems.
The changes will mean pensions for public workers in Illinois, New Jersey, Indiana and Kentucky have less than 30 percent of assets needed to meet liabilities, according to the Boston College Center for Retirement Research. “We’re expecting some troubled credits to look worse,” Richard Ciccarone, managing director of McDonnell Investment Management LLC in Oak Brook, Illinois, which oversees $8 billion in municipal securities, said by telephone. “That will cause some shock and awe.” Read more here-http://bloom.bg/LhwDAs
-Tax Growth Slows for States And Cities, U.S. Census Says. Tax revenue growth slowed for U.S. state and local governments during the first three months of 2012, showing lingering financial pressure three years after the end of the recession. The Census Bureau said today that the collections rose 1.5 percent during the quarter from a year earlier and revenue from corporate income taxes dropped. The pace was down from 2.3 percent at the end of 2011 and 5 percent in the three months through September, according to the Census data. Read more here-http://bloom.bg/LCn3em
-CHART OF THE WEEK: Home Prices in U.S. Cities Fall at Slowest Pace Since 2010. Residential real estate prices fell in April at the slowest pace in more than a year, adding to signs the U.S. housing market was firming. The S&P/Case-Shiller index of property values in 20 cities dropped 1.9 percent in April from the same month in 2011, the smallest decline since November 2010, after decreasing 2.6 percent in the year ended March. Read more here-http://bloom.bg/Lh8R7K and http://read.bi/Ov5rmn
-Housing Exuberance Led by Shiller’s U.S. Glamorous Cities. Home prices are beginning to rise after a six-year slump in cities from San Francisco and Seattle to Miami with jobs and lifestyles that appeal to younger and affluent buyers. Read more here-http://bloom.bg/L2HmUa
-CHART OF THE WEEK: New Home Sales Hit A 2-Year High. Read more here-http://read.bi/Ov6Fhu
-Home Sales Reach Two-Year High as U.S. Rates Fall. Demand for new U.S. homes rose more than forecast in May as mortgage rates dropped, bolstering the residential real-estate market while other parts of the world’s largest economy cool. Purchases climbed to a 369,000 annual rate, the most since April 2010 and up 7.6 percent from the prior month, the Commerce Department reported. Read more here-http://bloom.bg/NOp1Zr
-Pending Sales of U.S. Homes Climbed More Than Forecast. More Americans than forecast signed contracts to purchase previously owned homes in May, indicating the real estate industry is firming three years after the start of the economic recovery. The index of pending home resales climbed 5.9 percent to 101.1, matching a two-year high reached in March, after a 5.5 percent decline in April, figures from the National Association of Realtors showed. Read more here-http://bloom.bg/Ov4muE
-Evidence Suggests Anti-Foreclosure Laws May Backfire. U.S. state and federal laws enacted to protect homeowners from eviction in the wake of the 2008 housing crash may be extending the slump, according to a growing number of economists and industry experts. Foreclosures have all but ground to a halt in Nevada, which passed one of the stiffest borrower-protection laws in the country last year.
Yet the housing market is further than ever from recovery, local real estate agents say, with a lack of inventory feeding a “mini-bubble” in prices that few believe is sustainable.
A recent U.S. Federal Reserve study found that in states requiring a judicial review for foreclosure, delays associated with the process had no measurable long-term benefits and often prolonged the problems with the housing market. Read more here-http://bit.ly/MBxW0c
-David Rosenberg: The Housing Bust Isn’t Over, We’ve Got 2 Or 3 More Years Of Pain. Rosenberg said that although home prices do appear to be carving out a bottom, there are major issues that will put downward pressure on prices for a while yet. On shadow inventories and foreclosures, Rosenberg told Bloomberg.
I estimate that there is between two and three million excess housing units on the market for sale when you count in all the shadow inventory, so you’re talking about at least another two or three years to clear the inventory and put a definitive floor under home prices. There is no question that the decline in home prices is decelerating. Some people are claiming victory, that we’ve actually put a floor under home prices permanently. I’m not so sure about that.
I think we are going to get more foreclosed homes now and it’s going to add to the inventory situation. My sense is that when you take a look at where the value of these homes are being priced in the marketplace, it’s going to put overall downward pressure on housing prices over the course of the next several quarters. Read more here-http://read.bi/MBkOIj
-Singapore Homes Most Affordable as Rents Climb. Shivram Anantharaman paid a monthly rent of S$2,650 ($2,069) until March. Now, he’s paying S$40 less every month after buying a three-bedroom condominium in Singapore’s East Coast region. Read more here-http://bloom.bg/MquJkZ
-Madison Square Garden Co. Buying Ex-Home of L.A. Lakers. Madison Square Garden Co., the sports and entertainment company that owns the New York Knicks, will acquire the former home of the Los Angeles Lakers and Kings for $23.5 million. Read more here-http://bloom.bg/Oz9U90
© 2013, Worldwide Precious Metals Canada Ltd.
The World Financial Report – July 3rd, 2012
Posted by Worldwide Precious Metals on Tuesday, July 3, 2012
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