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The GoldBugg Report - Protection from Stagflation, own Precious Metals

February 26, 2008

TOP HEADLINES AND QUOTES

• That '70s Look: Stagflation.
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• Stagflation. A condition of slow economic growth and relatively high unemployment a time of stagnation accompanied by a rise in prices, or inflation. Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fuelling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects. Investopedia.com
• Interest rates: The new conundrum
  
  When Alan Greenspan hiked short-term rates, long-term rates barely moved. Ben Bernanke is cutting interest rates but bond yields are rising. Here's what it means.
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• "The next president will inherit a monstrous mess created by one of the most fiscally irresponsible presidents in US history." Richard Russell Dow Theory Letters Feb 2008
• Gold futures rose to a record $958.40 an ounce Thursday as a slumping dollar and soaring commodity costs boosted the appeal of the precious metal as an inflation hedge. Silver rose to the highest since 1980.
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• "At some point, in 15 to 20 years, silver prices will be 5 times higher than gold prices. If my calculation is correct, a dollar invested in silver will do many times better than gold. In real estate value, I think 1,000 ounces of silver will buy a 3-bedroom apartment in Manhattan in Trump Towers. I am a different thinker, and some gold investors don't like my opinion, but that is their problem." Israel Friedman
• Market adjustments worldwide triggered by the real estate and CDO (Collateralized Debt Obligations) and SIV (Structured Investment Vehicle) collapse and the credit crisis has triggered the loss of $5.2 trillion 50 of 52 share indexes worldwide ended January lower.
  
  Wait until the investors and Wall Street see the write-offs over the next two years and the drop in earnings as a result. In January the Turkish market fell 22.7%; China 21.4%; Russia 16.1%; India 16%; Paris 12.3%; London 8.9% and New York was off 6%. Just under half of the major markets lost more than 10% of their value. The FTSE in London lost 9% and 16.5% over the past three months. Paris lost 15.3% over the past three months. Bob Chapman
• The Fed's interest-rate cuts last month have failed to lower borrowing costs for many companies and households. That means soon there will be one or probably two more ½% cuts. Taxpayers should ask Congress why they are bailing out borrowers, lenders, investment banks, bank and brokerage houses who all committed fraud? There are urgent proposals before Congress and the neocons for a bailout of the banking, investment banking and insurance industries. This would allow them to keep profits and lay off the losses on the public. There is more than $1 trillion in loses still to be accounted for. Bob Chapman
• "Mark O'Byrne, executive director at Gold and Silver Investments Ltd., wrote that, "In the medium to long term, the combination of strong international safe-haven demand and decreasing production of and supply of gold in most major producers and particularly in South Africa will likely result in gold going significantly higher in the coming months." Kitco Daily Resource
• Finite Natural Resources and Peak Gold, Silver and Platinum. Scientists have acknowledged the reality and the respected New Scientist has reported on it, especially in its 'Earth Natural Wealth: An Audit' report. The Wall Street Journal has also reported ( 'A Metal Scare to Rival the Oil Scare' ) how man's voracious demand for the earth's natural resources may lead to us 'running out' of some of them: "Scientists who have tried to estimate how long the world's mineral supply can meet global demand have made some gloomy predictions."
  
  This is especially the case with the unprecedented movement of billions of people in BRIC and other emerging economies moving from 'peasant class' to middle class in one of the greatest social and economic transformations the world has ever seen. In the same way that peak oil has been recognised in recent years so too will the reality of peak precious metals be realised in the coming years when the price of the earth's precious finite resources soar to levels previously thought impossible. Gold.ie
• Nigerian states support discontinuing payment in U.S. dollars.
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• US wholesale price inflation hit highest increase rate in 34 years, & consumer inflation rose at highest rate in 2yrs. Inflation rising everywhere, but UK is keeping interest rates steady & EU may raise them to fight inflation, whereas Bernanke will cut int-rates to fight recession. This difference is caused by history. EU has lived thru hyper-inflation in 20's. US has lived thru hyper-deflation in 30's. To each his own fear. Cutting rates will increase inflation. Harry Schultz
• "We should be looking at oil in the $120-to-$150 area by the end of the year without any major changes." Peter Schiff, chief executive officer of Darien, Connecticut-based brokerage Euro Pacific Capital, which has $1 billion in customer accounts
• Bush Administration Hides More Data, Shuts Down Website Tracking U.S. Economic Indicators. The U.S. economy is faltering. Family debt is on the rise, benefits are disappearing, the deficit is skyrocketing, and the mortgage crisis has worsened. Conservatives have attempted to deflect attention from the crisis, by blaming the media's negative coverage and insisting the United States is not headed toward a recession, despite what economists are predicting.
  
  The Bush administration's latest move is to simply hide the data. Forbes has awarded EconomicIndicators.gov one of its "Best of the Web" awards. As Forbes explains, the government site provides an invaluable service to the public for accessing U.S. economic data. Yet the Bush administration has decided to shut down this site because of "budgetary constraints," effective March 1.
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• U.S. Congressman Dennis Kucinich to Investigate 9/11 Insider Trading. "I'm not afraid to ask questions about 9/11"
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GOLD

• Five fundamentals will drive gold price higher in 2008. Precious metals and coin dealers Blanchard and Company expect five fundamental factors will keep the gold price high and rising throughout the year. Since hitting record highs above $900 since the first of the year, gold had shown continued strength at those price levels amid expected volatility, and analysts at Blanchard and Company Inc. say five specific fundamentals will continue to drive the price up through the end of 2008.
  
  "Gold has experienced a shift in fundamentals when compared to 1980's speculative highs, and today there are five factors that will drive prices higher - supply and demand, dollar weakness, institutional buying, the price relationship between gold and oil, and global economic uncertainty," says Donald W. Doyle, Jr. Chairman and CEO of Blanchard. "Expect some price consolidations, which are healthy for the market, and view them as buying opportunities because we see the price ultimately going significantly higher than current levels in the long-term."
  
  Doyle says investor demand is at record levels, and the markets should expect to see that demand continue as global supply shrinks, emerging markets begin to play a more significant role in the world's economy, and as former sellers of gold notably central banks and hedge books reverse their selling trends and become buyers again themselves.
  
  "The U.S. economy is slowing to a crawl, and the Fed is continuing to infuse liquidity through rate cuts that further weaken the dollar," Doyle says. "Look for large institutions and central banks to continue to move out of dollar-based assets and into quality alternative tangible assets such as gold."
  
  Doyle also pointed to differences between today's economic collapse and that of 1987, noting that the previous near global implosion featured a U.S. economy that was in solid shape. Now the underlying cause of the crisis is the domestic economy and housing deflation. Real consumer spending is declining, payroll employment numbers are falling, and industrial production in the U.S. is losing traction, triggering a flight to quality alternative investments.
  
  "Gold is not just a luxury item it was the foundation of the global currency system for eons and, as the current global economic crisis continues to unwind, the precious metal has reasserted itself as the fourth currency," Doyle says. "We believe widespread increased investment demand will offset any decline in luxury goods manufactured with gold as investors seek to secure assets that will retain their value." Mineweb.com
• The Only Charts You Need to Understand the Gold Price. ResouceInvester.com
  
  
• Today we find the tiny group of so-called gold-bugs waiting for gold to correct after its run-up of recent months. So far, the upward inflationary pressures have prevented much of a correction in gold. Below I show a monthly chart of gold which takes the metal back to 1998. It's truly amazing, but people tend to see what they want to see.
  
  Here on this chart we study the early part of what could be one of the greatest bull markets in history, and all we hear about is "gold was up two dollars today," or "gold was hit by a big five dollar drop in late trading." Somehow, under a blanket of orchestrated denials and ignorant comments, the great bull market in gold has placed blinders over the public's eyes. Show this chart to anyone, but leave off the identifying heading, and ask them what the chart might represent. They'll come up with all variety of answers. But see if anyone comes up with gold as an answer.
  
  "What's that? You say it's gold? I can't believe it. Nobody told me that gold was rising like that and blah blah, blah." [Editor's note: There is a chart with the heading removed for you to print or send to your friends click here.] The higher gold rises without attracting mass attention, the greater the potential for the gold bull market. After all, gold has risen this far literally without public participation. What happens when the public finally becomes interested?
  
  
  
  On a much smaller scale, on a daily scale, we see that gold has advanced while forming a number of continuation patterns. Here, take a look at this daily chart below. As each little pattern is formed, amateur gold "experts" warn that "gold is ready for the big correction." Fine, let the warnings continue. They serve to allow gold to advance without any important public participation. The bull market in gold heads north with only a small number of Americans zealots aboard. That too will change. Richard Russell
  
  
• In China and India, consumers unfazed by high gold prices.
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• Gold output falling at Africa's No. 3 producer. Mali, Africa's third largest gold producer, expects production to fall sharply again in 2008 according to government forecasts.
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• 2007 gold sales jump 30 percent in Middle East, but slip in 4Q WGC. Gold sales in the Middle East rose sharply in 2007, but the high prices in the fourth quarter led to slippage towards the end of the year.
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• China's demand for gold jumped 23 percent in 2007 as rising personal incomes helped it to race ahead of the U.S. to become the world's second-biggest market, the World Gold Council said. Gold use in jewelry in China mainland rose to 302.2 metric tons last year, from 244.7 tons in 2006, Roland Wang, general manager of Greater China at the council, told reporters Tuesday in Shanghai. That compares with 558.2 tons in India, the biggest consumer, and 262.9 tons in the U.S. Bloomberg
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SILVER

• 10 Gold / Silver ratios. The ratio gold and silver it is the number of Kilogram's of silver which one can buy with one kilogram of gold. This ratio has varied greatly through history :
• 90 Was the ratio of silver to gold when the price of an ounce of silver was at a low in 1991. With one kilogram of gold one could buy 90 kilograms of silver.
• 51 Was the average ratio of the price of gold to silver in 2007.
• 17 Was the gold / silver ratio at the time of the record gold and silver prices in 1980.
• 15 Was the official ratio of gold to silver during the great period of Bi metallism, 15 ½ for France (1803), 15.68 for the USA (1800), 14.29 for England (1806).
• 12 Was the gold/silver ratio in Antiquity in Rome.
• 12.5 Was the ratio in Greece at the time of the death of Alexander the Great in 323 BC.

The ratio of production and reserves of gold and silver :

• 13 Is the ratio of world production from 1493 to 1931. For this 400 year period 13 times more silver than gold was produced.
• 8 Was the ratio of silver to gold production in the world in 2006. What is being said is that eight times more silver than gold was produced in 2006.
• 7.64 It the ratio of all production of gold and silver during one century (1900-2003).
  In the 103 year period, there was 7.64 times more silver than gold produced in the world.
• 6.4 Was the ratio of the ground reserves of silver to gold in 2000.
  
  
• It is astonishing to see that we produce 8 times more silver than gold, that the reserves are 6 times larger, but that the price of the silver is 50 times lower.
• Over the period of the history one kilo of gold was exchanged between 10 and 90 kilograms of silver, today it is exchanged at 51.
• During the raw materials bear market, silver suffered much more than gold. Silver has already caught up with part of the lag in its price, but there still is a way to go.
  
  
  
  The price of an ounce of silver will continue to increase more quickly than that of gold. For example, if the gold price rises 100%, the price of silver can increase between 100 and 600% depending on the evolution of the ratio. With gold at 2000 dollars, the price of an ounce of silver may be between 40 and 100 dollars. As more time passes it is more probable that the ratio will go lower, be patient. Dr. Thomas Chaize
• Is Dishoarding Massive Quantities of Silver from India Likely? NO!
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PLATINUM-PALLADIUM

• Platinum Futures Rise to Record on Increasing Investment Demand. Platinum futures surged to a record on soaring demand for commodities as a hedge against inflation. Palladium rose to the highest in more than six years. "All the commodities are just exploding," Edward Meir, a commodity analyst at MF Global Ltd. in Darien, Connecticut, said in an interview. "It's really investment money, funds coming into this market.
  
  Some of the precious metals, such as gold and platinum, are fairly undervalued." Record prices for gold, crude oil, corn and soybeans led the UBS Bloomberg Constant Maturity Commodity Index to the highest ever. The gauge of 26 raw materials has gained 38 percent in the past year, compared with a 7.9 percent drop in the Standard & Poor's 500 Index. Platinum has jumped 77 percent in the past 12 months amid South African supply disruptions.
  
  Platinum futures for April delivery soared $49.50, or 2.3 percent, to $2,188.20 an ounce on the New York Mercantile Exchange Thursday. Earlier, the price reached a record $2,194.80. Palladium futures for March delivery jumped $21.30, or 4.3 percent, to $515.50 an ounce Thursday. Earlier, the price reached $526, the highest for a most-active contract since July 2001. The metal is up 48 percent in the past 12 months. Platinum and palladium are used in jewelry and pollution control devices in vehicles.
  
  World platinum supplies may fall 400,000 ounces short of demand this year because of South African output disruptions, compared with a deficit of 265,000 ounces last year, Standard Bank Group Ltd. said last week in a report. "We are looking at a deficit again this year," Meir said. "There are lots of problems in South Africa with energy. So the crunch is sort of hitting these markets from both the supply side and the demand side."
  
  Most South African mines shut for five days last month after state-owned utility Eskom Holdings Ltd. couldn't guarantee power supplies. Eskom later agreed to provide industrial users with 90 percent of their usual requirements and said that will continue until 2012. The nation supplied about 78 percent of the world's platinum in 2006. "Increased investor interest keeps driving" the market amid speculation that "South Africa will continue to have power problems," said Miguel Perez-Santalla, vice president for sales at Heraeus Precious Metals in New York. "Overall, the regular players in the market are expecting a correction in the near future." Bloomberg

COMMODITIES-OIL-GAS-GASOLINE

• Commodities to Again Outperform Stocks. Investors who ignore commodities and precious metals do so at their peril. Numerous academic studies have shown that investing in commodities can be less risky than investing in stocks, contrary to the most persistent fantasy of all about commodities. Commodities are not just a good way to diversify a portfolio of stocks, property and bonds; they often offer better returns and importantly they are not correlated to stocks and bonds.
  
  The highly respected 2004 study from the Yale School of Management's Center for International Finance, "Facts and Fantasies about Commodity Futures," is very important in this regard. Professors Gary Gorton, of the University of Pennsylvania's Wharton School and the National Bureau of Economic Research, and Professor K. Geert Rouwenhorst, of the Yale School of Management, did research that confirms that:
  • Since 1959, commodities futures have produced better annual returns than stocks and outperformed bonds even more. Commodities have also had less risk than stocks and bonds, as well as better returns.
  • During the 1970s, commodities futures outperformed stocks; during the 1980s the exact opposite was true evidence of the "negative correlation" between stocks and commodities. Bull markets in commodities are accompanied by bear markets in stocks, and vice versa.
  • The returns on commodities futures in the study were "positively correlated" with inflation. Higher commodity prices were the leading wave of high prices in general (i.e., inflation), and that's why commodity returns do better in inflationary times, while stocks and bonds perform poorly.
  • The volatility of the returns of commodities futures they examined for a 43-year period was "slightly below" the volatility of the S&P 500 for the same period.
  • While investing in commodities companies is one rational way to play a commodity bull market, it is not necessarily the best way. The returns of commodities futures examined in the study were "triple" the returns for stocks in companies that produced those same commodities. Also companies have significantly more risk than owning the actual commodity or tangible asset itself.
  Mining shares have accounting and company risk in the form of depending on the performance of employees, management and auditors and considerable risk in the form of political interference and nationalisation, environmental risk, natural disasters, mining accidents and depleting resources. Gold.ie
• Commodity prices still expected to rise on demand growth Investec. Development and urbanization in Asia and under-investment in the West will drive further growth in commodity demand.
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• Commodity bull run has a long way to go. With oil again nudging $100 a barrel, platinum above $2,000 an ounce, and even coffee, cocoa and tea at multi-year highs, the commodities market may appear overly exuberant. There are, however, still many opportunities in the sector if one is selective.
  
  The main factors driving my conviction are the various balances of supply and demand. Few claim to see an end in sight to precipitous growth in emerging markets and notwithstanding some short-term pauses for thought (and profit taking), I believe this to be a secular trend, helping to fuel a long-term bull market in commodities.
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• Chavez Says Venezuela Can Sell Oil Anywhere, Not Just to U.S. Venezuelan President Hugo Chavez, who has threatened to cut off oil sales to the U.S., said reports that making such a decision would hurt his country's economy are false, and that Venezuelan oil can be sold anywhere. Chavez denounced an editorial published this week in the Washington Post, which said the president's government would be the "first victim" if he decided to cut off oil sales to the U.S.
  
  "If the U.S. didn't need the oil, they would have boycotted us a long time ago," Chavez said last night in an interview on state television, according to an e-mailed statement from the information ministry. "Try it then. We've got more buyers than we can handle in the first place." Chavez's threat to cut off the U.S. stemmed from a conflict between Petroleos de Venezuela SA and Exxon Mobil Corp.
  
  The U.S. company last month got court orders freezing $12.3 billion of the Venezuelan state oil company's assets to ensure it will be compensated for its stake in a heavy crude joint venture that was nationalized last year. Venezuelan Oil and Energy Minister Rafael Ramirez said on Feb. 13 that the U.S. State Department, which is trying to carry out an "economic war" with the South American country, was behind the Exxon move.
  
  The State Department has said it had no part in Exxon's actions. PDVSA, as the state oil company is known, and Exxon are in arbitration to resolve the dispute. Venezuela, the fourth-biggest supplier of foreign crude oil to the U.S., is already increasing oil exports to other countries, including China, Portugal and Japan, Chavez said, according to the statement. Bloomberg
• Iran opens oil products exchange, plans one for oil itself. Iran established its first oil products bourse Sunday in a free-trade zone on the Persian Gulf Island of Kish, the country's oil ministry said. A statement posted on the ministry's Web site said 100 tons of polyethylene consignment were traded at the market's opening on the island, which houses the offices of about 100 Iranian and foreign oil companies.
  
  Oil and petrochemical products will be traded in Iranian rials, as well as all other hard currencies, the statement quoted Iranian Oil Minister Gholam Hossein Nozari as saying. About 20 brokers are already active in the market, it said. "The bourse provides an economic opportunity for Iranians, other countries and foreign customers," Nozari was quoted as saying.
  
  Iran produces more than 20 million tons of petrochemical products per year. Iran has already registered for another oil bourse, in which it has said it hopes to trade oil in Euros instead of dollars, to reduce any American influence over the Islamic Republic's economy.
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• Iran Starts Oil, Petrochemicals Exchange in Tehran.
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• Iran's ambassador to Russia said here Friday that Iran and Russia, as major energy suppliers, can rid the world of the U.S. dollar's slavery by promoting oil and gas deals using other currencies. In an interview with Echo Moscow Radio, the ambassador, Gholam-Reza Ansari, further emphasized, "We have been trying to launch an oil market in Iran and trying to find substitute currencies for Iran's oil sales.
  
  That can be Russia's ruble." He said he appreciated Friday's remarks by the Russian prime minister's first deputy, Dimitri Medoviv, on Russia's intention to sell its oil in rubles, saying, "That was a brave move."
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WHEAT SHORTAGE SENDS BREAD AND PASTA PRICES SOARING

• Soaring wheat prices have Canadian bakeries struggling, farmers rejoicing and customers digging deeper at the till to pay for their bread and pasta purchases.
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• The biggest rally in the history of wheat trading defied even some of the best conventional wisdom, humbling forecasters Goldman Sachs Group Inc. and the U.S. government.
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• Bread will cost more.
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NEXT CRISIS OVER FOOD

• The next crisis will be over food.
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INFLATION

• U.S. Economy: Housing Slump Fails to Quell Inflation.
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• That '70s Look: Stagflation.
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• Watch inflation now! Worries about 1970s-style stagflation have moved to the forefront to rival recession fears.
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• China's Inflation Quickens to Fastest in 11 Years.
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• Inflation in Zimbabwe soars past 100,000 per cent.
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GLOBAL FINANCIAL CRISIS-NO END IN SIGHT

• US subprime crisis costs global 7.7 trillion dollars: bank. The meltdown in the US subprime real-estate market has led to a global loss of 7.7 trillion dollars in stock-market value since October, a report by Bank of America showed Thursday.
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• America's economy risks the mother of all meltdowns.
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• BMO facing $12bn costs. Canada's BMO Financial will provide up to US$12.2bn, or about 3 per cent of its assets, in liquidity support for two structured investment vehicles that it is seeking to wind down. The group, centered on the Bank of Montreal, will take C$490m in pre-tax charges on its exposure to ACA, the monoline insurer, and other investments hit by credit market turbulence.
  
  The latest charges follow a C$680m loss last year on natural-gas trading. The bank also announced the appointment of a new chief risk officer and shifted the chief executive of its investment banking division, Yvan Bourdeau, to vice-chairman. The charges are expected to lower earnings by 70 cents a share, or C$325m, for the first quarter ended January 31. FT.com
• Societe Generale swings to $4.9 billion loss. French bank hit by trading scandal also warns of further writedowns.
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• Societe Generale SA, France's second-largest bank, failed to follow up 75 warnings on bets by Jerome Kerviel that led to a trading loss of 4.9 billion euros ($7.2 billion), independent board members concluded in a report.
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• Credit Suisse Group discovered pricing errors on bonds that will cut first-quarter profit by about $1 billion, prompting the biggest share decline in more than five years. Switzerland's second-largest bank took $2.85 billion of writedowns on asset-backed securities after an internal review found "mismarkings" by a group of traders and credit markets worsened. The Zurich-based bank said in a statement today that it's assessing whether 2007 earnings were also affected.
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• Credit Suisse has suspended a "small number" of traders suspected of inflating the value of mortgage-backed bond investments by $2.85bn (£1.5bn). The Swiss firm blamed pricing errors for its actions, which would cut $1bn from expected first-quarter profit. It also blamed "adverse market conditions" for the write-down.
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• Credit Suisse Group was forced to increase the interest rate on $2 billion of subordinated bonds after the bank said writedowns will cut first-quarter profit by about $1 billion.
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• Dresdner Rescues $19 Billion SIV, Follows Citigroup.
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• US banks borrow $50bn via new Fed facility.
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• Wall Street Abandons Neediest Clients, Cuts Credit.
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• Lax banks blamed for defaults.
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• State regulators are scrutinizing sales of auction-rate securities by closed-end mutual funds as investors complain they can't get out of the investments, which were billed as the equivalent of cash.
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• Legislation to nationalize Northern Rock Plc cleared all its stages in the lower chamber of the U.K. Parliament. The House of Commons passed the bill on a vote of 293-167, paving the way for the government to have the power to nationalize the bank.
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• Finger pointing over bond insurer crisis. Congress drills into crisis that has shaken Wall Street. New York governor: 'The problems in this market will affect many average Americans.'
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• The cost of protecting corporate bonds from default soared to a record as investors purchased credit-default swaps to hedge against mounting losses in the $2 trillion market for collateralized debt obligations.
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• The extra yield that investors demand to own agency mortgage-backed securities over 10-year U.S. Treasuries rose to an eight-year high as record spreads on other debt hurt demand.
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U.S. RECESSION

• Philadelphia Fed Index Falls to Lowest Since 2001.
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• Greenspan: Recession chances '50% or better'. Former Fed chairman, speaking at Houston conference, also promotes nuclear power and electric cars.
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INTEREST RATES

• Fed Saw Need for 'Relatively Low' Interest Rates 'For a Time'.
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• Australian Central Bank Says It Mulled 50-Point Boost.
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DAVID WALKER GOVERNMENT ACCOUNTABILITY CHIEF RESIGNS

• One of government's chief internal watchdogs resigned yesterday as Comptroller General David M. Walker, an outspoken gadfly and frequent witness on Capitol Hill, announced his plans to lead a new foundation focused on U.S. fiscal responsibility. Walker has led the Government Accountability Office, Congress's investigative agency, for a decade.
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BILL GROSS SAYS U.S. BUDGET DEFICIT MAY REACH $800 BILLION

• Bill Gross, manager of the world's biggest bond fund, said the U.S. federal budget deficit will widen to as much as $800 billion during the next presidential administration.
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REAL ESTATE

• Real estate prices are still rising across Canada the record high reached only two years ago.
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• Home price plunge accelerates: 2007 year-end results are in and the news is bad: Major housing markets were down even more than anticipated.
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• Banks unloading abandoned houses at cut-rate prices.
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• In A Down Market, Cash Is King.
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• Incredible Pent-Up Demand Is Still Sitting On The Fence.
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• Out Of All Destruction Can Come Construction.
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• Part Of The Real Estate Gamble.
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• The $100,000 Profit Is Gone.
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• The Only Way To Recover From This Crazy Market.
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• There Is A Major Lack Of Common Sense Everywhere.
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FORECLOSURES-MORTGAGES

• Foreclosure prevention plan under attack. Lenders trying to derail legislation that would allow bankruptcy judges to reduce mortgage balances for home owners.
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• Countrywide foreclosures at record, refinancing up.
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• Alliance & Leicester profit falls 41%. UK mortgage lender hit by turmoil in credit markets.
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• Subprime loans defaulting even before resets.
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GEOPOLITICAL TENSION

• In yet another verbal attack against Israel, Iranian President Mahmoud Ahmadinejad called the Jewish state a "filthy bacteria" whose sole purpose was to oppress the other nations of the region. "The world powers established this filthy bacteria, the Zionist regime, which is lashing out at the nations in the region like a wild beast," the Iranian president told supporters at a rally in southern Iran. "[Israel] won support [from the other nations] which created it as a scarecrow, so as to keep the people of this area under control," Ahmadinejad said.
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• The Iranian president said on Wednesday Iran's determination to continue its disputed nuclear program had brought major powers "to their knees". In another defiant speech ahead of an International Atomic Energy Agency report on Iran due on Friday, Mahmoud Ahmadinejad said Iran would ignore calls by major powers to halt sensitive nuclear work that has led to two rounds of U.N. sanctions.
  
  "The Iranian nation will not allow any power to trample even on its smallest (national) right," he said in a televised address to a rally in the southern port city of Bandar Abbas. As well as worrying the West, Ahmadinejad's uncompromising speeches have stoked concerns among moderate politicians in Iran ahead of a March parliamentary election. Critics say he is pushing Iran into international isolation.
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• Iran's supreme leader Ayatollah Ali Khamenei said Sunday that God would punish Iranians if they do not support the country's disputed nuclear program, state radio reported. "The Iranian people openly announce that they will defend their rights. God will reprimand them if they do not do so," state radio quoted Khamenei as saying.
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• "The cancerous growth Israel will soon disappear," Iran's Revolutionary Guards Corps commander Muhammad Ali Jafari wrote to Hizbullah leader Sheikh Hassan Nasrallah, the FARS news agency reported Monday. In a letter of condolences following last week's assassination of Hizbullah terror chief Imad Mughniyeh, Jafari said: "I am convinced that with every passing day Hizbullah's might is increasing and in the near future, we will witness the disappearance of this cancerous growth Israel by means of the Hizbullah fighters' radiation therapy."
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• Fidel Castro resigned as president and commander-in-chief of Cuba, after almost 50 years as the country's leader, the official daily Granma said. "I neither will aspire to nor will I accept, the position of president of the council of state and commander-in-chief," Castro wrote, according to Granma in its online edition. "My only desire is to fight as a soldier for my ideas."
  
  Castro, 81, the world's longest serving president, seized power in Cuba almost a half-century ago promising liberty and economic justice only to turn the Caribbean island into a communist bastion and a flashpoint of the Cold War.
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© 2008, Worldwide Precious Metals.
www.wwpmc.com

The GoldBugg Report - Protection from Stagflation, own Precious Metals
Posted by Worldwide Precious Metals on Tuesday, February 26, 2008

The GoldBugg Report - Buy Silver For The Long Run

February 19, 2008

TOP HEADLINES AND QUOTES

• "Buy silver for the long run. Nothing available anywhere has the potential to change your economic circumstances like silver."Ted Butler
• Bullion or Mining Stocks Do You Have the Right Mix? In 2005, a study by Ibbotson Associates concluded that holding gold, silver and platinum bullion (7.1% for conservative portfolios, 12.5% for moderate portfolios and 15.7% for aggressive portfolios) could reduce risk and improve returns. During periods of economic uncertainty or high inflation, allocations should be higher. Gold and silver have been used as money for over 3,000 years, and platinum for centuries.
  
  Today, the world's wealthiest families still hold bullion to protect their wealth. Precious metals have proven to be the best protection an investor can have against both inflation and monetary crises. As the financial storm clouds become evident to everyone, any portfolio without bullion is needlessly at risk.
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• There is also the risk of competitive currency devaluation as central banks embark on a massive cycle of global money and credit creation. Inflate or die seems to be the new mantra. This is obviously extremely bullish for the finite currency that is gold and will likely see gold reach its inflation adjusted high of $2,400 per ounce faster than market participants expect. The macroeconomic climate for gold is possibly the most conducive it has ever been.
  
  It is even more conducive than in 1971 when Nixon went of the gold standard. Gold rallied nearly 3,000% in the next 9 years from a fixed price of $35 per ounce to over $850 per ounce. Were gold to again rise 3,000% from its lows in 1999 at some $250 per ounce it would reach $7,500. This is possible especially if politicians and central bankers continue to print and therefore cheapen money in a way akin to a banana republic.
  
  Gold reaching the inflation adjusted 1980 high of 28 years ago of $2,400 per ounce in the next 5 years seems more than likely in the present macroeconomic, systemic and monetary climate. There is little in the way of important data today and thus market sentiment may be again gained from equity markets. Continued volatility in international equity markets will increase safe haven demand for gold.Gold.ie
• Bernanke Warns of Worsening Economy. Fed Chairman Tells Congress That Business Prospects Are Deteriorating.
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• World equity markets lose $5.2 trillion in January. Emerging markets fell 12.44%, while developed markets lost 7.83%, one of the worst ever starts to a new year, S&P reports.
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• January retail worst in almost 40 years in U.S. Here's a sign of how shaky the economy has become: Wal-Mart says its shoppers are redeeming holiday gift cards for basics pasta sauce, diapers, laundry detergent instead of iPods or DVDs.
  
  On Thursday, the nation's retailers turned in their worst January in almost four decades as high gasoline and food prices, a slumping housing market, tighter credit and a tougher job market squeezed consumers. Sales at 43 retailers surveyed by the UBS-International Council of Shopping Centers rose just 0.5 percent in January, well below the original 1.5 percent forecast.
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GOLD

• Is the gold standard still the gold standard among monetary systems. Yes!
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• Cash or Gold is King? Gold will continue to be supported by investment demand internationally due to the international credit crisis but particularly from increasing demand in Asia, the Middle East and internationally. While Indian demand has slowed down recently it is important not to look at this one fact by itself as demand in other regions is outweighing the recent slowdown in demand from India.
  
  The Star Business reports that 'More investors turn to gold amid struggling stock market'. "Cash might be king, but gold could again rule. Amid a struggling stock market, rising prices and uncertain prospects in the property sector, many Chinese people think that gold is the safest and most reliable asset." A range of developments over the past year seems to show the increasing allure of gold. "At the 2007 China Gold and Precious Metal Forum held last December in Shanghai, the China Gold Association estimated that more than a million Chinese then had gold investments.
  
  In Beijing Caishikou Department Store, the capital's largest gold jewellery, accessories and decorations retail store, two tonnes of gold bars commemorating the Lunar Year of Rat, retailing at 238 yuan a gram, sold out in under two hours in November. China's first gold investment instrument, CGS Standard Gold Bars, sold 2.7 times more bullion last year than in 2006." Gold.ie
• Stagflation and Gold. In the same way that the 'R' word (r is for recession in case you didn't know) was verboten some 6 months ago so now the 'S' word for stagflation is verboten despite increasing evidence of slowing growth and increasing inflation and all the classic symptoms of stagflation.
  
  The FT reports that risk aversion among fund managers has reached the highest level in more than seven years, and almost a third of managers have taken out protection against another sharp fall in equities over the next three months. More than two-thirds of the asset allocators in Merrill Lynch's latest monthly fund managers' survey said markets were facing "stagflation", with above-trend inflation combined with below-trend growth.
  
  Stagflation is gold's best friend and saw gold rise some 3,000% or 30 fold from 1971 to 1980 or from $35 to over $850 per ounce. A similar performance by gold would see it reach some $7,500 $250 X 30) in the coming years. While this is certainly possible, it is safe to say that the inflation adjusted high of $2,400 per ounce is a near certainty barring a massive and complete reversal of all the existing supply and demand and macroeconomic and geopolitical fundamentals. This is more than unlikely. Gold.ie
• IMF Gold Sales. Over the last two days gold has greeted the weekend comments regarding the possibility of IMF gold sales with disdain. Unsurprisingly this latest gold sale proposal failed to deter gold buyers. The Italian Economy Minister Tommaso Padoa-Schioppa, announced at the G7 meeting in Tokyo that the Group of Seven (G-7) approved the sale of gold by the International Monetary Fund (IMF) from April.
  
  The IMF has 3,217 tonnes of gold in reserves the third largest holding in the world after the Federal Reserve's 8,133.5 tonnes of gold and the Bundebank's 3,427.8 tonnes of gold. It is unlikely and implausible and is not the first of similar proposals that have gone nowhere. Even Gordon Brown mooted the possibility of IMF gold sales. Despite presiding over the sale of much of the UK's gold bullion reserves at record low prices. Which incidentally has left the UK in a more precarious position should there be a global systemic and monetary crisis.
  
  As ever the proposal was very sketchy in detail. Particularly with regard to how the major obstacle of the majority voting rights of the U.S. in the IMF and the small matter of the U.S. congress having to vote on such a proposal would be overcome. In the past many U.S. lawmakers have been very vocal in opposing IMF gold sales.
  
  It reeks of desperation on the part of the G7 and is a further case of panicked irrational short term thinking designed to treat the symptoms of the present global financial and economic crisis rather than treat the root causes which are cheap money in the form of irresponsible monetary policies which has caused the creation of significant asset bubbles and humongous levels of debt at all levels of western society (particularly in the Anglo Saxon world).
  
  It is especially ironic that in this era of unprecedented systemic and monetary risk that politicians of the G7 are so ignorant that they would sell the one asset which may protect the institutions and the citizens faced with this growing crisis. Whereas any new IMF gold sales today would instead meet with a strong bid from anxious investors and private householders looking to defend their wealth. If it sells gold now, the IMF looks very unlikely to dent gold prices. Indeed, "every time the IMF has sold gold it has actually triggered more buying interest," says Mario Innecco, a broker at MF Global in London, to Bloomberg.
  
  "It will just make it easier for the big sovereign buyers" the big central banks outside the G7 who want to build up their gold reserves "to snap up cheap gold from the IMF." Selling gold is another short sighted illusory panacea which will create more problems for western financial institutions in the long term. Indeed it may ultimately lead to a further increase in the wealth and power of Asian and other emerging economies and diminution in that of western economies and particularly the U.S. Gold.ie
• IMF Gold Sales Face Impasse in U.S. Congress.
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• IMF Gold Sales: Does It Matter?
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• Jim Sinclair: Any IMF sales will be great for gold.
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• Gold a Better Inflation Hedge Than Real Estate. The U.S. will likely spin into a long era of high inflation. The coming years will look like the 1970s. There is also a good risk of hyperinflation, which is a particularly severe bout of high inflation. Thus, the vital question for every investor is: How to hedge, or protect your wealth, against inflation? Some, especially realtors, urge to hedge this risk with real estate. So, should we really hedge with real estate?
  
  The right answer calls for knowledge of two closely-related topics. First, what is an inflation hedge? Second, what makes a good inflation hedge? The first answer is simple. An inflation hedge is an asset that loses little value in periods of rising prices. Thus, it holds its value and its purchasing power during inflation. This also applies to hyperinflation. An investor expecting inflation will buy this asset to hedge against inflation.
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• Merrill Lynch substantially raises gold prices forecast, ups silver too.
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• Newmont predicts all major gold miners will see production decline. As gold prices continually break records, Newmont Mining President and CEO Richard O'Brien warned analysts that the number of major gold prospects are declining globally.
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• More Chinese investors turn to gold amid struggling stock market.
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• Gold-USD Decoupling as Gold Approaches $1,000.
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• India 07 gold demand 773.6 tonnes, up 7 pct on yr WGC.
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• India Saw Highest Gold Demand in 2007.
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• GATA's ad reaches national audience in South Africa.
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SILVER

• Silver Is Leading-James Turk.
  
  The price of gold and silver rarely move at the same rate. The reason for this outcome is that their respective demand is fundamentally different. To put it into economic terms, the demand for gold is inelastic, while that for silver is elastic. In other words, the demand for silver is very sensitive to changes in its price, while in contrast, the demand for gold is relatively insensitive to changes in its price.
  
  The result is that in precious metal bull markets, the price of silver typically rises faster than the price of gold, and vice versa in precious metal bear markets. This relationship is made clear by the following chart of the gold/silver ratio, which shows how many ounces of silver it takes to purchase one ounce of gold.
  
  
  
  As precious metal prices peaked in January 1980, it took only 16.7 ounces of silver to buy one ounce of gold. Thereafter as precious metal prices fell, the ratio began climbing. In February 1991 it took 101.8 ounces of silver to buy one ounce of gold, at which point the ratio reversed course. Since then the ratio has been falling, indicating that the precious metals are in a bull market. The ratio is now 53.8, and I expect will in the years ahead eventually fall to the January 1980 level. In other words, silver is leading.
  
  Since 1991 its price has been rising faster than that of gold. Silver has risen 4.9 times compared to gold's 2.6 times. However, for nearly a year, gold has been rising faster than silver. This short-term uptrend in the ratio can be seen on the above chart, with the ratio climbing and then staying above its 40-week moving average. But this trend is about to change in favour of silver. The ratio looks ready to fall below its 40-week moving average and resume its major downtrend. This event would bode well for silver, which is an outcome consistent with the following chart.
  
  
  
  Silver continues to follow the same pattern from the first pennant. If history continues to repeat, silver will soon exceed $20. Importantly, silver is also looking very good in terms of other currencies. The following charts present silver in terms of the euro and British pound.
  
  
  
  
  In summary, it looks like the short-term trend in the gold/silver ratio will soon be in harmony with its long-term trend, with both trends falling. This event combined with the strength silver is displaying against various currencies could mean that a powerful rally in silver is just around the corner.
• The Gold & Silver Ratio.
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• Silver more compelling than ever. Frankly, I think the case for silver is more compelling today than it was five years ago. When we compare today's circumstances with the current price, silver looks better today. Of course, a 50-cent sell-off then is the equivalent of a $1.50 sell-off now. But a tripling in price then brought us to $13 to $15, now triple brings us to $40 or $45.
  
  Still under priced. The doubling and tripling in the price of silver over the past few years hasn't caused it to become over-valued, based on current fundamentals and circumstances. Although silver has appreciated as much as any precious metal, it has greatly lagged the price performance of the base metals. The GFMS base metals index is up almost 5-fold over the past five years, almost doubling silver's price performance. This suggests silver is still undervalued.
  
  A special trait. One special trait that distinguishes silver from all the other industrial metals is investment demand. It sets silver apart from any other industrial metal. Silver will always be considered as a true investment asset by people around the world. Investors large and small, hold silver in their own possession or in storage. They hold it in a wide variety of forms, including coins and bars. The only other metal that can be compared to silver in terms of investment holdings is gold. But gold is not considered an industrial material. The only true investment metals are gold and silver.
• Panic. Industrial commodities can enter temporary periods where physical availability is a problem. This is reflected in time delays for physical delivery and premium prices being offered for prompt delivery. This almost always occurs when industrial users attempt to build up inventory to avoid disruptions to production. No industrial concern will willingly shut down and send employees home for lack of a key ingredient or component. It is precisely the need to avoid shutdowns that cause industrial users to build inventory when availability gets tight, causing more overall tightness and shortage. It leads to panic buying.
  
  Buy silver for the long run. Nothing available anywhere has the potential to change your economic circumstances like silver.
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PLATINUM-PALLADIUM

• Platinum rose to a record in New York as Impala Platinum Holdings Ltd., the second-biggest producer of the metal, forecast a drop in output because of a power shortage in South Africa. Palladium was little changed. The Johannesburg-based company said it may lose 40,000 ounces of production, equal to more than two days of global supply. Platinum rose to a record $2,030.60 an ounce today after breaching $2,000 yesterday.>
  
  The metal also gained to a record in London, topping $2,000 an ounce for a second day. "The market remains very strong," said James Steel, an analyst with HSBC Securities in New York. "There is a wide spread concern about the power shortage in South Africa and what it will mean for platinum production."
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• Johnson Matthey releases "Platinum and Palladium 2007 Interim Review."
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• Platinum 'Will Stay in Demand'.
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• Power Cuts Deprive South Africa of Platinum Windfall.
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• Frank McGhee, head metals trader at Integrated Brokerage Services in Chicago, who said in an interview, "There are very significant power-generation constraints in South Africa and because of that there is a lot of talk of platinum at $2,100 to $2,200" an ounce.
  
  "There is just so little of it," McGhee continued, "and it is used in so much of the modern world, that it certainly has always had an opportunity to have a better bullish component to it than in some other markets." McGhee concluded by saying, "Overall size of the platinum market is very small, so some minor change in demand can significantly impact it. If you are in the market, ride it, if you are not, be very careful." Kitco Daily Resource
• How far can palladium substitute for platinum. With the big and rapid increase in platinum prices over the past month, an analyst's thoughts turn to substitution, and here some of the likelihoods of increased palladium for platinum substitution in the catalyst and jewellery sectors are examined.
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COMMODITIES-OIL-GAS

• OPEC May Cut Output to Defend $80 Oil, Officials Say.
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• Nigeria's shut-in oil production seen hitting 1 million barrels per day.
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• Investors: Don't blame us for high oil prices. Despite increased public scrutiny over investors' role in $100 oil, they say it's about diversifying investments, and that trading activity is here to stay. Despite widespread public perception that speculative investing is to blame for high oil prices, big investors distanced themselves from it Tuesday, saying the recent run up has more to do with strong demand, tight supply, and a desire to diversify instead of trading momentum.
  
  "It's buying into an asset class that has very little correlation to [company stock prices]," said Andrew Safran, Citigroup's vice chairman for global investment banking, speaking at the Cambridge Energy Research Associates' (CERA) annual energy conference in Houston Tuesday. "They aren't really speculators, they are making alternative investments."
  
  With oil prices near $100 a barrel and gasoline hovering around $3 a gallon, speculative investment from banks and hedge funds has taken heat for adding as much as $30 or $40 to the cost of a barrel of oil. The finger-pointing became especially acute in 2007, when crude prices went from around $50 to nearly $100 in 12 months. "It's pure speculation," longtime Oppenheimer oil analyst Fadel Gheit said in a recent CNNMoney.com story. Nothing has changed from a year ago, he said, he said "Not a single thing."
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• Panning for black gold, a global challenge. Exxon, Conoco, Hess and Saudi Aramco address the difficulties they face in satisfying the worlds growing thirst for oil.
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• More cost overruns for Horizon oilsands project.
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• Impact of China's Power Crisis on Oil Demand Is Uncertain.
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CHAVEZ THEATENS TO CUT-OFF U.S. OIL

• Chavez Threatens US Oil Cut-off. President Hugo Chavez on Sunday threatened to cut off oil sales to the United States in an "economic war" if Exxon Mobil Corp. wins court judgments to seize billions of dollars in Venezuelan assets. Exxon Mobil has gone after the assets of state oil company Petroleos de Venezuela SA in U.S., British and Dutch courts as it challenges the nationalization of a multibillion dollar oil project by Chavez's government. A British court has issued an injunction "freezing" as much as $12 billion in assets.
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• Venezuela's Chavez Threatens 'Economic War' Over Exxon Freeze.
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• Venezuela cuts ties with Exxon. State-run Petroleos de Venezuela says it 'has paralyzed sales of crude' to the No. 1 U.S. oil company.
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• Oilsands Producers Can't Fill Gap if Venezuela Cuts Off Oil to U.S.
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OPEC MAY SWITCH TO EURO-SAUDI'S TO KEEP DOLLAR PEG

• OPEC may abandon the dollar for pricing oil and adopt the euro but any such switch will "take time", OPEC Secretary-General Abdullah al-Badri was quoted as saying by a weekly magazine. A decline in the dollar has eroded oil exporters' purchasing power, prompting some members of the Organization of the Petroleum Exporting Countries to call for a switch away from the U.S. currency.
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• OPEC secretary general Abdalla El-Badri tells the Middle East Economic Digest in an exclusive interview that the producers' cartel may switch to the euro within a decade to combat the dollar's decline. OPEC has rekindled talk of switching the pricing of oil to the euro from the dollar because of the continued weakness of the US currency. The cartel is under pressure from its members, who have seen the potential value of their earnings fall sharply since 2000,as a result of the continued reliance on the dollar.
  
  The dollar has fallen in value by 44 percent against the euro over the past seven years. OPEC secretary general Abdalla El-Badri tells MEED in an exclusive interview that the producers' cartel may switch to the euro within a decade to combat the dollar's decline. "Maybe we can price the oil in the euro," El-Badri says. "It can be done, but it will take time."
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• Saudi official says riyal's peg to dollar will continue.
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INFLATION

• Global inflation climbs to historic levels. In China, government data there show that consumer inflation remains near an 11-year high. Inflation is at 16-year highs in Saudi Arabia, a 14-year high in Switzerland, a 25-year high in Singapore. And the list goes on and on. Australia's central bank bluntly warned Monday that it would need to raise interest rates further to contain inflation, even though it had lowered its outlook for economic growth.
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• No hiding huge inflation in Britain anymore. Families are having to pay an extra £1,300 a year in household bills as food and fuel prices rise at their fastest rate for 17 years.
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U.S. RECESSION-WILL EUROPE CATCH U.S. COLD

• The U.S. economy has entered a recession that will be more painful and drawn out than the usual downturn, the director of the Reuters/University of Michigan consumer sentiment survey said on Friday. Inflation pressures will linger despite the retrenchment in consumer spending, complicating the task of policy-makers, the University's Richard Curtin said in a report, citing data from the Reuters/University of Michigan Surveys of Consumers.
  
  "This is no ordinary recession," he said. "The aftereffects will last much longer than the typical downturn." He said the Reuters/University of Michigan's expectations index is a strong predictor of economic contractions, and that it is currently flashing red.
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• U.S. Recession Is Now an Even Bet as Spending Slows. A U.S. recession is now an even bet as job losses and the housing contraction jeopardize the longest- ever expansion in consumer spending, according to a Bloomberg News survey. The world's largest economy will grow at a 0.5 percent annual rate from January through March, capping the weakest six months since the last economic slump in 2001, according to the median estimate of 62 economists polled from Jan. 30 to Feb. 7. Federal Reserve Chairman Ben S. Bernanke will lower the benchmark interest rate a further half point by June, adding to the fastest easing since at least 1990, the survey showed. The odds of a recession over the next 12 months, pegged at 40 percent in the January survey, jumped to 50 percent as payrolls, auto sales and stocks slumped. "Consumers are squeezed on many fronts," Kurt Karl, chief U.S. economist at Swiss Re in New York, the world's largest reinsurer, said in a Bloomberg Television interview.
  
  A recession "could have started already or is likely to start very soon. We're slipping." The anticipated rate of expansion for all of 2008 was reduced to 1.7 percent, the lowest in six years. Economists also slashed the projected growth rate for the second quarter to 1 percent from the 1.8 percent forecast last month.
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• U.S. Executives Forecast Economy Will Slow, Avoid a Recession.
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• Europe Economy May Stay Sick After Catching U.S. Cold. Europe's economy has caught the U.S.'s cold, and may be sick longer. Persistent inflation and budget deficits may prevent policy makers in the 15 nations that share the euro from moving as aggressively as their U.S. counterparts to cut interest rates and taxes. Meanwhile, Europe's labor laws will make it harder for companies to speed a recovery in profits by reducing payrolls.
  
  "A European downturn will take noticeably longer to run its course than the U.S. one," Nobel laureate Edmund Phelps, an economics professor at Columbia University in New York, said in an interview. Next year "might be a period of 'reverse decoupling,' with the U.S. economy enjoying a sharp recovery and the euro-area economy stagnating," says Dario Perkins, senior European economist for ABN Amro Holding NV in London. "A relatively inflexible economy and 'sticky' inflation" will hold Europe back, he says.
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WORLDWIDE FINANCIAL CRISIS

• Senior global policymakers have raised projections for the size of subprime-related credit losses in a move that implies financial institutions will have to increase write-offs. Speaking after the meeting of Group of Seven finance leaders, Peer Steinbrück, German finance minister, said the G7 now feared that write-offs of losses on securities linked to US subprime mortgages could reach $400bn.
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• Credit writedowns may total $175B analyst. Bear Stearns analyst sees financial firms logging billions more in writedowns, but believes the worst is over.
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• Citigroup Inc. and seven other top investment banks may need to write down at least $15.1 billion on unsold loans and bonds for leveraged buyouts in their first quarter earnings, according to Bank of America Corp. analysts. As prices of high-yield debt continue to fall this year, banks including Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Merrill Lynch & Co. may have more writedowns for $157 billion of loans and bonds than they did in the third- quarter, analysts led by New York-based Jeffrey Rosenberg wrote in a research note yesterday.
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• $1.2 Billion Write-Down at Credit Suisse.  Switzerland's two largest banks may have their Zurich headquarters within walking distance of each other but when it comes to weathering the credit crisis they are miles apart. One bank, Credit Suisse, said Tuesday that it had write-downs of 1.3 billion Swiss francs, or $1.18 billion, in the fourth quarter on debt related to the tight credit market and the subprime crisis in the United States.
  
  A larger rival, UBS, wrote down $14 billion in the same period. The difference is mainly the result of Credit Suisse's management scaling back riskier investments before the subprime crisis started.
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• American International Group Inc., the world's largest insurer by assets, said auditors found a "material weakness" in how the company values its credit- default swap portfolio. The stock fell the most in 20 years.
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• Japan is the next sub-prime flashpoint. There is still $300bn of bad debt out there, and Japan could be hiding most of it. Just as battered investors had begun to glimpse signs of recovery in America, the next shoe has dropped with an almighty thud in Japan. Echoes are rumbling across the Far East.
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• A widening array of financial-market problems threatens to trigger a new phase in the global credit crunch, extending it beyond the risky mortgages that have cost banks and investors more than $100 billion in losses and helped push the U.S. economy toward recession. In the past few days, low-rated corporate loans the kind that fueled the buyout boom of recent years have plummeted in value. As a result, banks are expected to try to unload some of those loans this week at fire-sale prices.
  
  Nervous buyers also have retreated in recent days from the market for securities backed by student loans and municipal bonds, roiling some corners of the short-term money markets. Similarly, investors have recoiled from debt backed by commercial real estate, such as office buildings.
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• Mortgage Crisis Spreads Past Subprime Loans. The credit crisis is no longer just a subprime mortgage problem. As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists. The rise in prime delinquencies, while less severe than the one in the subprime market, nonetheless poses a threat to the battered housing market and weakening economy, which some specialists say is in a recession or headed for one.
  
  Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with blemished, or subprime, credit. "This collapse in housing value is sucking in all borrowers," said Mark Zandi, chief economist at Moody's Economy.com.
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• Bear Stearns Is 'Short' Subprime Mortgages $1 Billion.
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• IKB Deutsche Industriebank AG will receive a 1.5 billion-euro bailout ($2.2 billion) led by the German government, the third rescue package for the bank as it reels from U.S. subprime investments.
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• WestLB AG, the government-owned German bank reeling from subprime-related losses, will cut about 25 percent of its workforce after the company's owners agreed to provide a 5 billion-euro ($7.2 billion) bailout.
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• IndyMac Posts $509.1 Million Loss as Slump Deepens.
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• Canada's big banks solid, IMF says.
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• $30B Fed auction aims to ease credit crisis. Following aggressive rate cuts, the Federal Reserve provided $30 billion to commercial banks in the fifth such auction since December. The Federal Reserve, seeking to combat the effects of a serious credit crisis, said Tuesday it had auctioned $30 billion in funds to commercial banks at an interest rate of 3.010 percent.
  
  It marked the fifth in a series of auctions that so far have pumped $130 billion in money into the nation's banking system in effort to provide cash-strapped banks with extra reserves. The Fed's hope is that the increased resources will keep banks lending and prevent a severe credit squeeze from making the current economic slowdown worse.
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• Bond Insurance Turns Toxic for Munis as Rates Soar. Bond insurance sold by MBIA Inc., Ambac Financial Group Inc. and Security Capital Assurance Ltd. is backfiring on counties, universities and hospitals across the U.S., more than doubling some borrowing costs. Park Nicollet Health Services in Minneapolis may pay an extra $5 million to $6 million this year, about a quarter of its operating profit, because interest on $375 million in floating rate debt doubled in the last six weeks, said Chief Financial Officer David Cooke.
  
  The rate on $98 million insured by Ambac climbed to 6 percent on Jan. 30 from 3.06 percent on Jan. 2. "We'll have to reduce our capital expenditure program, which means less equipment, less modernization of facilities," Cooke said in an interview. The hospital paid Ambac to "count on that AAA insurance for 30 years. Now it's going away on us."
  
  Investors are shunning insured bonds after three of the biggest guarantors, owned by Ambac, Security Capital and FGIC Corp., were stripped of at least one AAA credit rating amid losses on debt tied to subprime mortgages. Interest costs on floating-rate bonds sold by more than 100 governments, hospitals and colleges rose as much as 7 percentage points since the beginning of January even as the Federal Reserve lowered its benchmark rate for U.S. borrowing by 1.25 percentage points.
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• CDO Losses Driving Credit-Default Swaps to Record, Analysts Say.  Banks are driving the cost of protecting corporate bonds from default to the highest on record as they seek to hedge against losses on collateralized debt obligations, according to traders of credit-default swaps.
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• Late payments among bonds backed by car loans surged last month to their highest level in a decade, Fitch Ratings said Thursday, renewing concerns that the credit problems plaguing the housing market could be spreading. The delinquent loans are piling up not just among subprime borrowers those with shaky credit histories but also with consumers who bought their vehicles with solid credit, Fitch said. The ratings agency said delinquencies of more than 60 days on prime loans rose to 0.77 percent in January their highest level in 10 years and a 44 percent increase over the same month last year.
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U.S. BUDGET DEFICIT DOUBLES-U.S. TRADE DEFICIT

• The federal budget deficit is running at a pace that is more than double last year's imbalance through the first four months of the budget year.
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• Bush Signs $168 Billion Measure Designed to Stimulate Economy.
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• Senior benefit costs up 24%. 'Health care crisis' leads to 8-year rise.
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INTEREST RATES

• Federal Reserve Chairman Ben S. Bernanke indicated that policy makers are prepared to lower interest rates further as the economy continues to deteriorate. The Fed "will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke told the Senate Banking Committee in Washington today. "A significant worsening in financial conditions or in credit availability would certainly be a warning bell that we need to take further action."
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• Fed official: Too early for rate cut reversal. "The threat hasn't passed," says San Francisco Fed President Janet Yellen, who adds that other problems are currently more dire than inflation.
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• Fed Interest-Rate Cuts Fail to Lower Borrowing Costs.
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REAL ESTATE FORCLOSURES

• US credit crisis escalates as defaults spread.
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• Paulson, U.S. Banks Forge Foreclosure-Freeze Deal.
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GEOPOLITCIAL

• 'A new phase in the arms race is unfolding' says Putin.
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• Homeland Security Chief Michael Chertoff's eyes narrow and his voice develops a stern, urgent tone as he reveals America's biggest vulnerability to terrorism. "The great weapon they have is persistence and patience, and the one weakness that we have is the tendency to lose patience and become complacent," Chertoff tells WTOP.
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• Iran's President to Visit Iraq in March.
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• Israel: Iran seeking nuclear weapons.
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• US Intel Links Iran With Nuke Bomb Bid.
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• Al-Qaida in Iraq threatens Israel. The purported leader of al-Qaida's affiliate in Iraq called in a new posting on a militant Web site on Thursday for attacks on Israel and proposed that Iraq's territory be a "launching pad" to seize Jerusalem.
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• Hezbollah chief threatens Israel. The chief of Hezbollah told throngs of supporters at a funeral for slain commander Imad Mughniyeh his group would retaliate against Israeli targets anywhere in the world after accusing the Jewish state of killing the militant.
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• Following the assassination of Hizbullah arch-terrorist Imad Mughniyeh, the Prime Minister's Office (PMO) on Thursday issued a global terror warning to all Israeli citizens abroad.
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• Olmert vows to protect Israel from Palestinian rockets.
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© 2008, Worldwide Precious Metals.
www.wwpmc.com

The GoldBugg Report - Buy Silver For The Long Run
Posted by Worldwide Precious Metals on Tuesday, February 19, 2008

The GoldBugg Report - Investing in Gold

February 12, 2008

• "We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene." Jim Rogers
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GOLD

• The gold price is there still upside? Gold reached its previous highs in 1980, at a time when Soviet tanks were rolling into Afghanistan, oil prices were being driven up by instability in the Middle East and the dollar was falling rapidly amid fears of a recession. Panicked investors sought refuge in the ultimate safe haven and the bullion price reached a record US$850 per ounce. Fast-forward 28 years and it seems to be deja vu all over again: trouble in the Middle East and South Asia, spiraling oil prices, and fears about the US economy and the dollar are all boosting the gold price.
  
  Yet despite these similarities, fundamental changes in the gold market mean that the two situations cannot be compared. In 1980, after surging from US$450 to US$850 in just five weeks, bullion prices collapsed to trade as low as US$300 a year later. This time round, the high price levels could be sustained a lot longer and could go even higher. One major difference between now and 1980 is that the current price rise has been slow and constant since 1999, with demand coming not only from traditional safe-haven seekers but also from other sources.
  
  Long-term investors now again see gold as a store of value and a hedge against persistent dollar weakness and rising inflation. Their interest is reflected, among other things, in the rapid rise of gold exchange traded funds (ETFs) which after an increase of 34% in 2007 now hold 865 tonnes of gold. The gold price is also supported by strong jewellery buying by the rising middle classes in China, India and Turkey.
  
  Another key difference is the decreasing supply of gold output fell by 7% between 2001 and 2006 and the shortage of substantial new projects as a result of reduced exploration in 1990s. Rising costs are likely to further constrain the development of new projects as well as existing production levels. Furthermore, gold is still relatively cheap by historic measures. In real terms, the current record price is less than half 1980 high and would have to be well above the US$2,000 level to match it. With no end in sight to the pressures that have pushed the gold price upward, the underlying fundamentals for the price therefore remain very positive. Mineweb.com
• Must see gold charts.
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• Citi ups gold forecast; to test $1,000/oz in '08.
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• David Davis Calls for $1,300 Gold by 2015. There was a "positive upward trend in the gold price with high volatility from time to time," Credit Suisse Standard Securities mining investment analyst David Davis told the Mining Indaba, predicting a gold price of more than $1,000 per ounce by the end of next year. "All the ducks are lining up in a row, and this time in the right row," Davis said. Davis estimated the gold price at $950 per ounce at the end of this year and $1,035 per ounce at the 2009. The price would continue up to about $1,300 per ounce by 2015, he said.
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• Precious metals consultant GFMS CEO Dr Paul Walker reiterated on Monday that the gold price could reach as high as $1 000/oz by the end of 2008.
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• Gold spent 27 years building a base, in the meantime bottoming at $250 an ounce. After it broke out from the previous record $850 high, most pundits are bravely forecasting $1,000 an ounce. It is our view that $1,000 is simply an intermediate target and that with a 27-year base, a "perfect storm" of drivers will push gold to be the ultimate 10 bagger investment, outperforming currencies, commodities and the stock market.
  
  Those drivers include a collapsing U.S. dollar, Wall Street's financial woes, inflation concerns, soaring demand from China and India, record investment demand and chronic geopolitical tensions. On the supply side, fewer gold supplies are expected due to the South African power outages. China has displaced South Africa as the world largest producer, but China's mines are limited in reserves.
  
  The lack of significant gold discoveries (Southwestern was yet another fraud), a "NIMBY" approach by North American regulators, higher taxes and escalating costs will also limit new production. The bottom-line? Gold will peak at $2,500 an ounce.
  - Read full story at »
• The monthly close above $900 last week, the first ever, is very bullish from a technical point of view and should see $1,000 reached in the coming weeks. With gold up by more than 10% in January, some profit taking and consolidation could be seen prior to then. However, if gold begins to move in a parabolic fashion, as it did in the 1970s, then those waiting for the correction will be left waiting on the sidelines.
  
  Our direct experience is that clients in the current bull market who try to 'time the market' end up buying at higher prices. Only some 1 in 100 clients has managed to successfully time the market. Anything can happen in the short term and buyers are advised to make the trend their friend and focus on the strong fundamentals and the very good medium to long term outlook. Gold.ie
• Amidst the growing hurricane, centered upon the housing crisis and mortgage debacle, gold will rise far past $1000. By summertime, the new base will be at one thousand bucks. The silver price will surpass the $20 mark before the leaves fall from trees in autumn. The price of gold at the last 1980 peak corresponds to around $3000 after adjusting for price inflation in a realistic manner, apart from corrupt USGovt statistics. Get ready for a very long ride, but not without some surprises for the USDollar in a possible upward bounce.
  
  However, if and when the Europeans cut their official rate, leading to a brief selloff in the euro currency, gold will rally in Europe even as gold softens in its US$ price. Volatility this way comes. The powerful factor pushing gold up will be much more global monetary inflation, broad easy money from fighting against both economic recession and broken banking systems, on a global basis. The days when the gold price is tethered to the USDollar are soon to disappear. The gold price rise is all about monetary inflation, a factor slowly being properly recognized. Jim Willie CB
• There has been a continual refrain from the bears that the decline in demand from India was negative for gold. This was claimed when gold reached $500, $600, $700, $800 and now $900. We have pointed out that this is extremely simplistic. India is a price sensitive gold buyer and thus will support the market on any sell off in gold's price. Just this week there were indications that Indian buyers were buying physical below $900.
  
  More importantly, there is now extremely strong physical demand globally and in particular from China, wider Asia and the Middle East. Turkey's gold imports in January, according to the Istanbul Gold Exchange, jumped 69.4% above December's to 18.55 metric tonnes. This was also 16.1% above January '07. January's weighted average $US price, according to the Exchange, was 10.4% above December's and a startling 41.2% above January '07. Presumably much of the buying was done in the brief break below $890 January 17-23rd.
  
  China gold futures were recently launched on the Shanghai Futures Exchange (SFE). "The launch of gold futures is very welcome as investors are eagerly looking for new investment tools given the stock market's high valuation and volatility, and the property market is under severe control," Hu Yanyan, a gold futures analyst with Shanghai Jiuheng Futures Brokerage, said.
  
  Bloomberg reported that the start of trading in Shanghai was "the biggest event in the gold market since the launch of the gold exchange-traded funds over the past few years," John Reade, analyst at UBS Ltd. in London wrote in a report. "Futures will allow leveraged investment in gold from Chinese investors and speculators."
  
  "Chinese investors obviously have enthusiasm for gold and the futures provide them with a leveraged, low-cost exposure to bullion," Zhu Bin, head of research at Nanhua Futures Co., said by phone from Hangzhou. "Given the wobbly equities market and gold's continuous climb in the past seven years, everyone seems to think that gold is a good investment." Gold.ie
• India's Glittering Jewellery Market. According to the World Gold Council (WGC), India's gold consumption this year could in fact cross the 1,000-tonne mark for the first time.
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• Gold Bull to Charge Through Short-Term Corrections.
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• Gold to De-Couple from the Euro.
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• U.S. Dollar Isn't the Only Driver in the Gold Market.
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• What's Next for Gold, Post U.S. Fed Rate Cut?
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• Dubai Gold Receipt Enables Brisk Trading in Bullion.
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• Has Gold Been a Horrible Hedge Against Inflation?
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• Connecticut editor helps sponsor gold-rigging ad in Wall Street Journal.
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Aden Sister's Commentary

• The point is, gold has been a super, consistently profitable investment for years. It's in a long-term bull market rise. The major trend is clearly up and it's strong. The fundamentals are solid, the technicals look great and as long as that's the case, gold is headed much higher.

Gold Is The Ultimate Safe Haven

• Gold has also risen due to its safe haven status in reaction to growing international uncertainty and tensions, especially in the Middle East. But there's more, and we believe these new factors could also be important in fueling gold's bull market rise this year and beyond.
  
  First, are the new developments in China, which has just become the world's second largest gold consumer. That is, Chinese demand is growing and in recent years we've seen what's happened to many markets when Chinese demand intensifies they soar. Plus, China just opened up gold futures trading and the exchange is prepared for big demand. With the Chinese stock market softening, one top fund manager expects China's wealthiest investors will pour into the gold market, driving the price much higher.

Mega Shift to Head Assets Underway

• The rise in gold is part of a larger phenomenon that's been sweeping the globe. It involves a mega shift that happened in 2000 from financial assets like stocks, to hard assets like gold, other metals and commodities. These mega shifts are rare. They don't happen often and they tend to last about 20 years. As you know, the rise in commodities has primarily been driven by the booming growth in China and other emerging nations in recent years. This has fueled massive demand for all commodities.
  
  As these countries continue growing and expanding their infrastructure, it's going to keep pushing these markets higher in the years ahead and we believe that'll be the main factor behind this mega, multi-decade upmove in commodities, which in turn will keep upward pressure on gold. Aden Sisters
  - Read full story at »

SILVER

• Gold Investments believes silver will reach $20 in the first half of this year and may trade as high as $25 per ounce. Gold.ie
• All markets go through four phases of emotion. First there is pessimism, then scepticism, then optimism, and finally euphoria. Right now we are still in the skeptics phase also known as the wall of worry. David Morgan-The Silver Investor
• How about silver, often called "the poor man's gold"? Silver used to be a monetary metal, and maybe some day it will be again. I've recommended silver before, and now I'm going to recommend silver again. Back in 1980, gold sold for 850 and silver sold for 50. Then, one ounce of gold would buy 17 ounces of silver.
  
  Today with gold near 900, one ounce of gold will buy a whopping 55 ounces of silver. It seems to me that silver, in terms of gold, is "too cheap." I think silver is cheap and a good buy here in this area. My position on the metal can be expressed in three words, "I like silver." Richard Russell
• Analysts forecast silver prices in the $15-30oz range. Silver, which is revered by some investors as the "poor man's gold," is in for a Nantucket sleigh-ride of price action in 2008, according to market-watchers polled by Platts; these analysts are forecasting annual average silver prices as high as $30/oz this year.
  
  "I'm looking for a clean double [of the price of silver] this year," said John Embry, a partner in the Toronto-based Sprott Assett Management. "We're in the early throes of a serious monetary debasement. It will attract investment in precious metals, and silver [will] be the major beneficiary, trading up as much as a buck in a single day."
  
  Embry continued: "Demand for silver is solid, but you can't get more production. Labor shortages in the mining sector are a critical issue. Silver is a coiled spring [that is ready to unwind], and the everyday market doesn't have a clue. I'm predicting $30/oz [silver price] this year."
  
  Jeffrey Christian, managing director of the New York-based metals consultancy CPM Group, who is not as bullish as Embry, noted that the silver price should average in the mid-teens for 2008. "It's easy to be bullish [on silver] today," said Christian. "Our published projection for 2008 [which was made around mid-2007] is $15.63/oz for the average.
  
  We are looking for higher prices, based primarily on strong investment demand. You have a number of investors who are buying silver for the same reason they're buying gold: They don't believe financial assets are safe." Christian continued: "The price of silver has risen to a very high level, but it's nowhere near the record highs you're seeing in gold and platinum. Silver will play catchup." A big boost for silver demand will come from the newly created, silver-backed exchange traded funds in Europe, he noted.
  
  James Turk, publisher of GoldMoney newsletter, foresees a silver price of $27.52/oz for 2008, based on a tightening of the silver/-gold ratio in the coming months. "Both silver and gold reached multi-decade highs in May 2006 of $14.85/oz and $720/oz, respectively, with a ratio of 43.6:1 in April of that year," said Turk.
  
  "Since then, gold has moved higher but silver is still lagging, and the ratio is now 55:1. This divergence is unusual because silver normally leads during precious metals bull markets, and the ratio falls." Turk noted that unusual occurrences in markets typically are not long-lasting, so this divergence will end, probably soon given the recent strength in precious metals. "When it does, silver will again out-perform gold," Turk predicted. "I expect gold to end 2008 at around $1,200/oz. If the gold-silver ratio returns to its April 2006 level, then you will see silver at $27.52."
  
  If the blow-off price of $48/oz reached in 1980 were calculated in current dollars, the white metal would command a price of nearly $100/oz, said newsletter writer David Morgan of the Morgan Report. "It's going to go higher. I'm looking for at least $18/oz, in a range of $18/oz to $20/oz," said Morgan. "It's an historic store of value, and people are looking for solid, tangible investments. I think we will see one more dip, perhaps as low as $12.50/oz, before it takes off."
  
  Analysts see silver as relatively recession proof. The pace in industrial demand for silver is not going to slow down, given eastern Asia's economic growth, and a weakening of Western currencies will only fuel investment demand for the metal as a "safe haven" from inflation and currency depreciation, according to Morgan. "All this money we've created is blowing up, and people are going to turn to precious metals," said Embry. "The $800/oz gold price of 1980 is probably equivalent to $2,000/oz now." Platts.com
• Silver may outshine gold, experts say. Metal has gained 40% in past five months. While gold has made all the headlines this year after passing through landmark highs, silver has very quietly kept pace. And many experts believe the metal could outperform gold in the months ahead. Silver prices closed Monday at $16.75 an ounce, marking a 12% gain for the metal this month, and a 40% gain in the past five months. Silver prices generally track gold closely, with gold trading at about 50 to 60 times silver.
  
  Like gold, investor demand for silver has been on the rise, especially since the silver exchange-traded fund started trading in April of 2006. That is the single-most important driver behind the high price. "Even though we see new supply coming on, investor demand continues to grow," said Haytham Hodaly, an analyst at Salman Partners. But while gold tends to move based on economic and geopolitical trends, silver has a broad range of other uses, and experts said its fundamentals are much stronger than gold.
  
  "Silver is used in industrial applications, and so above-ground stocks diminish, whereas gold supplies continue to grow," said Steve Altmann, president of ECU Silver Mining Inc., an emerging silver company with operations in Central Mexico. The most important industrial use of silver is non-digital photography, and that market has shrunk rapidly in recent years. But the metal is being used increasingly as a superconductor in a broad range of industries, and also in the medical world as an anti-bacterial agent.
  
  It is also now used in a number of new applications, such as plasma televisions and water purification. The continued strong demand from those sources will likely be "more than enough to offset the ongoing decline in photography demand and the expected increase in mine supply over the next two years," Richard Gray, a Blackmont Capital analyst, wrote in a recent note to clients. He is one of a number of experts that predict silver will outperform gold in 2008.
  
  Mr. Altmann agrees, as he believes silver will look like a more attractive investment as gold passes through US$1,000 an ounce. Experts noted that silver outperformed gold in past precious-metal rallies that took place in the midst of a turbulent economy. Financial Post
• The bottom line is despite silver's early-2008 surge, this metal still remains quite low in inflation-adjusted terms relative to its modern history. And this is not just in comparison to silver's fabled super spike in late 1979. In today's CPI-inflated 2007 dollars, silver spent about a decade straddling the 1970s and early 1980s well above its current $16ish levels. Silver could easily double from here yet still be very reasonably priced historically.
  
  And silver is particularly exciting today because gold has just broken out to new highs of its own. $900 gold is starting to get global investors really excited about the precious metals again. And when their capital starts to chase silver in earnest, its tiny market assures its gains will be fast and furious like usual. What an exciting time to be long silver. Adam Hamilton
  - Read full story at »
• James Cook interviews Ted Butler on the silver markets. Cook to Butler, will you summarize the bullish case for silver and why you think it should be purchased now? Butler: It's greatly undervalued compared to its supply and demand fundamentals. It's undervalued on a relative basis compared to everything else, including gold. There's a smaller amount available for investment than at any time in hundreds of years.
  
  It's under-owned, under-appreciated, misunderstood and overlooked by the investment world. It's about as far away from being in a bubble as it can be, yet is a prime candidate for becoming a future bubble. It has been pre-sold (shorted) to an extent never witnessed in any other item, which guarantees it must be purchased or delivered against at some point. Institutions can easily own it for the first time.
  
  It is vital for modern life. It can't go bankrupt or become worthless and can soar in price by many times its current price. It is easy to buy. All these statements can be verified easily and I can't think of one valid reason why it shouldn't be bought.
  - Read full story at »
• "Silver prices only rose 14% year-on-year (2006 -2007), having put gains of 25%, 38% and 42% over the previous three years," said David Davis analyst at Credit Suisse "We believe silver prices will likely play 'catch up' when compared to the year-on-year increases of the previous years, but also and more importantly, silver prices will likely receive impetus from the upward trend in platinum and gold prices and the investment (ETF) market. In the long term, gold and silver prices have been closely correlated. The fundamentals of the silver supply and demand dynamics are unlikely to have a major effect on driving the price. Silver has the potential to break through $20 by the end of the year." David Davis
• The Coming Investment Boom in Silver. I believe we are in the very early stages of a long-term price boom in silver that will be caused by investment demand. The combination of an extremely small and tightly-held existing investment inventory, combined with a large potential investor base, funded with the largest buying power in history, hungry for the next hot investment, and still unaware of the true silver story is the stuff that makes investment dreams.
  
  I have not forgotten, for one second, the industrial supply/demand situation, the coming industrial user inventory buying panic and the resolution of the largest concentrated short position ever witnessed, but an analyst should look at everything that promises to greatly impact prices. The purpose of this article is to get you to add the coming investment demand into the mix when you think about silver. But not before adding more silver to your holdings. Ted Butler
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PLATINUM-PALLADIUM

• Those outage issues are hitting the platinum market, and hard, as mine disruptions in South Africa, the world's source of 75 percent of the metal, may trigger a wider shortfall than analysts forecast. South African producers may lose as much as 500,000 ounces of output this year, Barclays Capital says, and the state-owned utility, Eskom Holdings, predicts that electricity capacity will be insufficient until at least 2013.
  
  "The main problem with the platinum market is the very small stocks of physical liquidity," says John Reade, head of metals strategy at UBS AG in London. "We estimate that total bullion stocks are less than 2 million ounces, and possibly as low as a million ounces." Kitco Daily Resource
• Platinum Climbs to Record on South Africa Supply Concerns. Platinum jumped to a record in New York on mounting concerns that supplies will drop from South Africa, the world's largest producer. Power shortages tied to Eskom Holdings Ltd., South Africa's state-owned utility, shut most mines in the country, source of about three-quarters of world platinum supplies, for five days last month.
  
  Eskom told major customers last week that it won't have sufficient capacity to guarantee adequate power until 2013. "Supplies were tight before the electricity problems in South Africa," said Walter Otstott, a senior broker at Dallas Commodity Co. in Dallas. "End users of platinum who used to buy on an as-needed basis are stocking up."
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• South Africa crisis may push platinum over $2,000-analyst.
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• Platinum forecast $1,350/ounce long-term but could reach a $2,000 high.
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COMMODITIES-OIL

• Resources Undervalued, Biofuels Overrated.
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• World Peace Will Help Sustain Commodities Boom.
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• Commodity Investment Set to Grow in 2008, Societe Generale Says. "Metals will extend their movement to the upside."
  - Read full story at »
• OPEC Keeps Market Tight.
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• Sakhalin-1 Oil Production May Decline 27.6% In 2008 Report.
  - Read full story at »
• Global oil production will struggle to cope with rising demand over the next decade, according to experts gathered today at international think tank Chatham House, for a conference focusing on Middle East energy supplies.
  - Read full story at »
• Exxon shatters profit records. Oil giant makes corporate history by booking $11.7 billion in quarterly profit; earns $1,300 a second in 2007.
  - Read full story at »
• Exxon Mobil Corp. won court orders in the U.S., U.K., the Netherlands and the Caribbean freezing more than $12 billion in Venezuelan assets amid a battle over the government's seizure of oil projects.
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• Royal Dutch Shell warned yesterday that oil and gas production was likely to fall for a sixth consecutive year in 2008 as it struggles to make up shortfalls at key projects, writes Dino Mahtani in London. High oil and gas prices helped the multinational oil company to report record full-year profits, with its current cost of supply earnings rising 8 per cent to $27.6bn in 2007. However, shares in Shell fell in early trade as investors focused instead on the company's declining production trend.
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• The United States is worried that Russia, China and OPEC oil-producing countries could use their growing financial clout to advance political goals, the top U.S. spy chief told Congress on Tuesday.
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GLOBAL CURRENCIES

• "Euros Accepted" signs pop up in New York City. In the latest example that the U.S. dollar just ain't what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise. "We had decided that money is money and we'll take it and just do the exchange whenever we can with our bank," Robert Chu, owner of East Village Wines, told Reuters television.
  
  The increasingly weak U.S. dollar, once considered the king among currencies, has brought waves of European tourists to New York with money to burn and looking to take advantage of hugely favorable exchange rates. "We didn't realize we would take so much in and there were that many people traveling or having euros to bring in. But some days, you'd be surprised at how many euros you get," Chu said.
  
  "Now we have to get familiar with other currencies and the (British) pound and the Canadian dollars we take," he said. While shops in many U.S. towns on the Canadian border have long accepted Canadian currency and some stores on the Texas-Mexico border take pesos, the acceptance of foreign money in Manhattan was unheard of until recently. - Reuters
• The Flight from the Dollar. While on this 'history does repeat' theme, it appears to me that 2008 is shaping up much like 1974. There are many similarities. These include rapidly rising inflation and growing monetary problems not only in the States, but across the globe. In fact, the last serious global credit crisis before the present one occurred in 1974.
  
  That was the year when Herstatt Bank failed in what was then West Germany, bringing the international banking system to a near standstill. A couple of months later, Franklin National Bank collapsed in New York, which at that time was the largest bank failure in U.S. history. Slowing economic conditions (then as now) caused loans to go bad, causing losses an