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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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© 2009, 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.
  - Read full story at »
• 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.
  - Read full story at »
• Iran's President to Visit Iraq in March.
  - Read full story at »
• Israel: Iran seeking nuclear weapons.
  - Read full story at »
• US Intel Links Iran With Nuke Bomb Bid.
  - Read full story at »
• 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.
  - Read full story at »
• 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.
  - Read full story at »
• 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.
  - Read full story at »

© 2009, 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
  - Read full story at »

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.
  - Read full story at or at »
• 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.
  - Read full story at »
• 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.
  - Read full story at or at »
• 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.
  - Read full story at »
• Gold Bull to Charge Through Short-Term Corrections.
  - Read full story at »
• Gold to De-Couple from the Euro.
  - Read full story at »
• U.S. Dollar Isn't the Only Driver in the Gold Market.
  - Read full story at »
• What's Next for Gold, Post U.S. Fed Rate Cut?
  - Read full story at »
• Dubai Gold Receipt Enables Brisk Trading in Bullion.
  - Read full story at »
• Has Gold Been a Horrible Hedge Against Inflation?
  - Read full story at »
• Connecticut editor helps sponsor gold-rigging ad in Wall Street Journal.
  - Read full story at »

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
  - Read full story at »

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."
  - Read full story at »
• South Africa crisis may push platinum over $2,000-analyst.
  - Read full story at »
• Platinum forecast $1,350/ounce long-term but could reach a $2,000 high.
  - Read full story at »

COMMODITIES-OIL

• Resources Undervalued, Biofuels Overrated.
  - Read full story at »
• World Peace Will Help Sustain Commodities Boom.
  - Read full story at »
• 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.
  - Read full story at »
• 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.
  - Read full story at »
• 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.
  - Read full story at »
• 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.
  - Read full story at »

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 and erosion of essential capital. Also, lines of credit not previously drawn upon during good times started being used in 1974, with the result that banks became over-leveraged (again, then as now).
  
  Given what happened in 1974, there is one piece of advice that I can recommend. If history is any guide - and I really do believe that it is then the current banking and credit crisis is going to get much worse before it gets better. Years of imprudent reckless lending is taking its toll on the global banking system. There is one last point worth noting. In 1974 gold rose 72.8%, while silver jumped 84.1%. James Turk
  - Read full story at »
• Qatar considers dropping dollar peg.
  - Read full story at »
• Greenback Has Lost 30% in Past 7 Years, Becomes "Bernanke Peso."
  - Read full story at »
• A Write-off Recession and a Dollar Crisis.
  - Read full story at »
• Greenback's days in Iran numbered. The Iranian Company of Commodities Bourse has been tasked by the government to establish the long-awaited Oil Bourse on Kish Island.
  
  The Cabinet of Ministers on Sunday issued an order to the Oil Ministry, Finance Ministry, Foreign Ministry and Central Bank to implement a plan to set up the Oil Bourse.
  
  The Oil Bourse will serve as a place to trade oil products and crude oil. The Ministry of Economy will be setting up the petrochemicals section by February 19. The Oil Bourse is supposed to trade oil products in non-dollar currencies and many analysts hold the opinion that it could deal a blow to the already declining greenback. Presstv.ir

INTEREST RATES

• Bill Gross-investment outlook for February.
  Read full story at »
• ECB leaves interest rates on hold as England cuts.
  - Read full story at »
• Five Gulf Arab states, including Saudi Arabia and the United Arab Emirates, lowered interest rates today, following a half point cut by the U.S. Federal Reserve.
  - Read full story at »
• Lacker Sees Recession Risk, More Cuts May Be Needed.
  - Read full story at »
• Dozens of U.S. banks will fail by 2010
  - Read full story at »

FINANCIAL CRISIS - MORE BAD NEWS

• Jim Sinclair's Commentary. The following is not exactly wrong and does outline a present situation. Let us remember all central banks have unending blank checkbooks. You can bust a currency but technically you cannot bust a central bank. They just create it now electronically. Of course this type of activity will bust the currency. Lets not forget the law I published a while ago for your reference that gives the Fed the ability to reduce member bank reserve requirements to ZERO. Did anyone read it? Maybe not.
  
  Hi Jim, Many thanks to you and everyone there for all your efforts. First time contributor here guess I was looking to make a splash. Well here I go:
  
  Important links:
  http://www.federalreserve.gov/releases/h3/current/
  http://www.federalreserve.gov/releases/h3/hist/h3hist1.pdf
  
  Basically the credit system is insolvent. Check out that non-borrowed reserves number – 8751, meaning currently the banks have borrowed more than their required by law reserves from the Fed. Even more daunting is for the first time in recorded history the number is negative. Further to that the relative difference (between borrowed and non-borrowed reserves) is almost unbelievable by historical measures!!! Regards, CIGA CG-Chris-Jsmineset.com
• Has the Bank Bailout Begun? Non-borrowed Reserves Turn Negative for the First Time!
  - Read full story at »
• The debate is no longer about a soft vs. a hard landing, but how hard will the hard landing be. The recession train left the station in December. The recession will be severe because the U.S. consumer whose spending makes up 70% of our GDP is shopped-out, saving-less, and debt-burdened. There is a rising risk of a systemic financial crisis. Avoid risky assets like equities, which could suffer a sudden market crash. You want to buy protection against this by buying options on the CBOE volatility index, known as the VIX, or on the S&P 500.
  
  Be careful with money market funds. Some could have meaningful exposure to securities backed by risky mortgages, or even auto loans or credit card loans, which are also high risk. Finally, do not buy a home. The housing recession is not near the bottom and prices could fall by another 20% over another year and a half. If you buy now, you'll have a massive capital loss. Nouriel Roubini-Economics professor at New York University and chairman of RGE Monitor.com
• The sharply weakening U.S. economy, strong inflationary pressures (wheat surged to new record highs this week) and negative real interest rates will create safe haven demand for gold. This weeks services sector data was extremely bad.
  
  It was the weakest ISM reading since October 2001 (immediately after 9/11) and this in conjunction with the raft of other negative data (including the very poor jobs number of Friday) would suggest that the U.S. is already in a recession. The question continues to be not whether there is a recession but rather how deep is the recession and what form does it take. Given the massive imbalances facing the U.S. economy and the unprecedented property, credit and soon to be solvency crisis, this recession will not be a shallow and benign one as experienced in recent history.
  
  Rather it is more likely to resemble that of the stagflationary 1970s or of the Japan's lost decade of deflation in the 1990s. Weimar Germany's hyperinflation is unlikely at the moment but if 'Helicopter Bernanke' continues to rain paper dollars on the U.S. economy in order to prevent a 1930s style deflationary depression, a virulent form of inflationary recession could take hold. Gold.ie
• India's economy expanded 9.6 percent last fiscal year, the fastest pace since 1989, as rising incomes spurred demand for cars, mobile phones and motor-bikes. The growth rate for the year that ended March 31, 2007, was revised up from 9.4 percent estimated earlier, the government said in a statement in New Delhi today. The government also raised growth in the year ended March 31, 2006, to 9.4 percent.
  Read full story at »
• The U.S. Senate approved a $151 billion economic stimulus measure that will send tax rebates to more than 100 million U.S. households.
  - Read full story at »
• Stimulus plan may not lead to many new jobs. Even if $150B tax rebate plan gives economy a shot in arm, it won't necessary prompt employers to add staff.
  - Read full story at »
• $60B Fed auction aims to ease credit crisis.
  - Read full story at »
• Banks may face additional writedowns of as much as $60 billion this year from investments in commercial real estate and non-traditional residential mortgages, Goldman Sachs Group Inc. analysts said. Commercial real estate prices may fall 21 percent to 26 percent from current levels, resulting in writedowns for banks of about $20 billion, Goldman Sachs said today in a report.
  - Read full story at »
• Subprime Markdowns Reach U.S. Central, Credit Unions. U.S. Central Federal Credit Union, the non-profit company that invests on behalf of 8,400 local lenders, lost its AAA rating from Standard & Poor's after reporting a $760 million drop in the value of subprime-infected securities.
  - Read full story at »
• Subprime Lenders Get Big Accounting Break at SEC: Jonathan Weil.
  - Read full story at »
• New $20B subprime bailout on the table. Senator Chris Dodd proposes setting up a fund that would buy defaulting subprime mortgages and restructure loans for borrowers.
  - Read full story at »
• Merrill Lynch to Reimburse Massachusetts City for CDO Purchase.
  - Read full story at »
• CDO Market Remains Almost Frozen, JPMorgan, Merrill Traders Say. Buying and selling of collateralized debt obligations based on mortgage bonds, high-yield loans or preferred shares has ground to a near-halt, traders said at the securitization industry's largest conference.
  - Read full story at »
• CDO Ratings to Fall as Losses Trigger Fitch Overhaul.
  - Read full story at »
• U.K. Adds Northern Rock Debt to Government Burden.
  - Read full story at »
• China Bank Sets Aside Subprime Reserves.
  - Read full story at »
• Global credit crisis hits Bahrain-based bank.
  - Read full story at »
• GMAC Posts $724 Million Loss as Mortgage Loans Sour.
  - Read full story at »
• Doomsday for financial world.
  - Read full story at »
• Marc Faber Predicts the End of the Financial World Again.
  - Read full story at »
• G-7 Frets Central Banks Can't Avoid Peril Without Helping Hand.
  - Read full story at »
• Fed Says U.S. Banks Are Tightening Lending Standards.
  - Read full story at »

U.S. BUDGET 3.1 TRILLION-DEFICIT 410 BILLION-STATES HAVE BUDGET GAP PROBLEMS

• The Bush administration's final annual budget request of $3.1 trillion is another example of serious fiscal irresponsibility. Taxpayer's money is being spent in classic 'guns and butter' fashion in a way that would give even the most fun loving drunken sailor a bad name.
  
  President Bush inherited a national debt of $5.7 trillion. Under Bill Clinton, it had grown by 35 percent. Since Bush came to power it has grown 63 percent in just seven years. The national debt stands now at $9.2 trillion and may surpass $10 trillion when President Bush leaves office. This will lead to further pressure on the U.S. dollar in the coming years and may lead to its recent historical status as the global reserve currency of the world being questioned. Gold.ie
• Bush Boosts Defence Spending in $3.1 Trillion Budget.
  - Read full story at »
• Bush to project $400B deficit in budget plan.
  - Read full story at »
• The trillion dollar deficit.
  - Read full story at »
• Half of U.S. States Facing Budget Gaps, Report Finds.
  - Read full story at or at »

BOND INSURERS THREATEN DEBT TSUNAMI

• Read full story at »

STOCK MARKETS - DON'T BE A HERO-EXPECT FED TO LOWER DOW TO 8,000-HEDGE FUNDS HIT

• "Perma-bear's" advice: Hold cash, not stocks. Jeremy Grantham, the money manager who oversees $157 billion as chairman of Grantham, Mayo, Van Otterloo & Co., says investors should shun stocks and hold cash during the worst financial crisis in more than 60 years. "Don't be a hero," Grantham said in an interview from his office in Boston. "Move to cash and let the other guys fish around for the bargains in the wreckage."
  
  Dubbed a "perma-bear" for his dour view on U.S. equities for more than a decade, Grantham correctly predicted a crash in technology stocks two months before the bubble burst in March 2000. Now, he tells his firm's investors that if they want to risk investing in stocks, they should stick with the "highest-quality" large U.S. and emerging-market shares. "This is the most important U.S. financial crisis since World War II," he said.
  - Read full story at »
• The popular Wall Street adage is "As January goes, so goes the year" and that seems very likely this year. Yale Hirsch, the founder of The Stock Trader's Almanac, first introduced this concept in the 1960s. Gold was up 10% in January and most stock markets were down between 5% and 10%.
  
  The January effect is extremely likely to come to fruition this year, especially given the continuing and deteriorating credit crisis. The FT reports that "heavily indebted European and U.S. companies are facing growing financial difficulties because they cannot refinance their borrowings due to the continuing closure of the credit markets. Companies' inability to borrow is raising the spectre of defaults, particularly among the most highly leveraged companies in sectors such as property that have been hardest hit by economic uncertainty." Gold.ie
• Economist: Expect Fed to lower Dow to 8,000. Critic claims agreements involving billions used to shift market. Consumers should expect a deep recession, triggered by the "stealth methodology" of the Federal Reserve to "depress" the market even while lowering interest rates in an ostensible effort to stimulate economic growth, an economic analyst is charging. "The Federal Reserve is directly involved in manipulating the stock market," said economic analyst Mike Bolser in a telephone interview with WND yesterday.
  
  The New York Stock Exchange finished the day down 108.03 points, closing at 12,635.16, much as Bolser predicted, despite recent emergency Fed rate cuts of 1.25 percentage points aimed at stimulating the economy. "Fed wants the Dow Jones Industrial Average and other financial indicators to descend in a managed way," Bolser said. "The Fed wants to drive the DJIA toward the 8,000 level, or below, in order to help create a deep recession which will have the effect of slowing consumption across the board, and dampening the otherwise harmful effects of inflation.
  
  "A falling DOW is only one element of the recession effects of the excessive Fed-created housing and credit creation, whose bubbles are now bursting," he added. "Without this recession, we would be on quick trip to hyper-inflation," Bolser, the author of an internationally followed newsletter published in conjunction with his InterventionalAnalysis.com website, said, "and the Fed wants to prevent this."
  - Read full story at »
• Hedge-fund managers lost an average of 1.8 percent in January as stock markets around the globe got off to their worst start since 1990.
  - Read full story at »

WARREN BUFFETT - MADE MILLIONS ON THE LOONIE

• The woes in the U.S. financial sector are "poetic justice" for bankers who designed and sold complex investments that have since gone sour, billionaire investor Warren Buffett said on Wednesday.
  - Read full story at »
• Buffett Made Millions on Canadian Currency Bet, Post Reports. Billionaire investor Warren Buffett, chairman of Berkshire Hathaway Inc., made "several hundred million dollars" owning the Canadian currency and believes it will continue to strengthen, the National Post reported. Buffett, in an interview with the newspaper while in Toronto yesterday, said he wished he'd held on to the Canadian dollar, which has gained 17 percent against the U.S. currency the past 12 months.
  
  "I think those Canadian dollars are very likely, even from this level, to be worth more than the U.S. dollar five or 10 years from now than they are today," Buffett told the paper. While he doesn't own any direct stakes in Canadian companies, Buffett said that Canadian National Railway Co. has "the best record of any railroad I know of," the Post said. Bloomberg
• Buffett Sees No Credit Crunch, Forecasts Lower Dollar.
  - Read full story at »
• Buffett sitting on his wallet. The Berkshire Hathaway chairman became the world's second-richest man by buying good companies at low prices. But even as stock markets plunge, he doesn't see any bargains.
  - Read full story at »

REAL ESTATE

• Housing starts to cool in 2008: CMHC.
  - Read full story at »
• The number of Americans signing contracts to buy previously owned homes fell in December for a second straight month, signaling the worst housing slump in 25 years will persist well into 2008.
  - Read full story at »
• Housing Meltdown. Why home prices could drop 25% more on average before the market finally hits bottom.
  - Read full story at »
• Big Homes, Big Problems. How the size of our houses inflated the housing crisis.
  - Read full story at »
• There Used To Be A Housing Boom In California.
  - Read full story at »
• Sellers Are Willing To Give Away The Farm In California.
  - Read full story at »
• The Wave Is Finally Hitting The Beach.
  - Read full story at »
• Celebrity Real Estate Losers. Even Hollywood's rich and famous can't avoid the housing downturn that's sweeping the nation.
  - Read full story at »
• Construction spending drops by record 2.6%. Biggest decline since 1994 driven by 18.3% drop in residential projects by private companies, says Commerce Department.
  - Read full story at or at »
• Consumers, economy crimp U.S. retail store plans. The consumer spending slowdown that began in 2007 is turning into a new store slowdown in 2008. As many U.S. retail chains prepare to end their fiscal year on Thursday, they are already ratcheting back expansion plans for their next fiscal year, realizing the rocky economy and a cash-strapped consumer will no longer support heady store opening plans.
  - Read full story at »

FORECLOSURE - MORTGAGES

• Troubled homeowners: Can't pay? Just walk away. More and more borrowers are watching their house values sink while the cost of their loans skyrockets. What to do? Skip out on the mortgage all together.
  - Read full story at »
• Exploding ARMs Roil Bernanke's Drive to Calm Markets.
  - Read full story at »
• The Capital Times reports from Wisconsin. "Mortgage foreclosures in Dane County leapt nearly 80 percent in 2007, matching the national increase as the local housing boom went bust and risky loans went sour. Stella Morris and her family lost a west side condominium, last fall after the interest rate on their adjustable rate mortgage reset at a level they could not afford."
  - Read full story at »
• Kroszner Urges Lenders to Enact Fast-Track Loan Modification.
  - Read full story at »

AL QAEDA SEEN PLANNING ATTACK ON U.S.

• Senior al Qaeda leaders have diverted operatives from Iraq across the globe and are increasing preparations to strike the United States, senior intelligence officials told the Senate Select Committee on Intelligence yesterday. They said the terrorists had plans to attack the White House as recently as 2006.
  - Read full story at »

IRAN-IRAQ-ISRAEL-U.S.A.-PAKISTAN

• Israel's Mossad spy agency estimates Iran will develop a nuclear weapon within three years and continue to provide rockets to regional armed groups, a newspaper reported on Tuesday.
  - Read full story at »
• Iran launched a research rocket Monday and unveiled its first major space center, which will be used to launch research satellites, state-run television reported. The report said the rocket was the first launched by Iran "into space." But analysts have expressed doubts about similar technological achievements announced by the country in the past. Iran launched its first domestically built rocket last February, which did not reach orbit level.
  - Read full story at »
• Prince Andrew rebukes US on Iraq. The Duke of York has criticized the US administration for failing to listen to advice from Britain on how to avoid problems following the war in Iraq. Prince Andrew said the war had led to a "healthy skepticism" in Britain towards what was said in Washington.
  - Read full story at »
• Israeli security forces were on high alert Tuesday, sending beefed-up patrols to public areas such as shopping malls, bus stations and train depots after the first Palestinian suicide attack in more than a year.
  - Read full story at »
• An American missile ship set to dock at Haifa Port on Monday is equipped with an anti-missile defense system that could be deployed in the region in the event of an Iranian missile attack against Israel.
  - Read full story at »
• U.S. Military unready for homeland attack, says study.
  - Read full story at »

To add Precious Metals to your portfolio, call 1-866-623-2002.

© 2009, Worldwide Precious Metals.
www.wwpmc.com

The GoldBugg Report - Investing in Gold
Posted by Worldwide Precious Metals on Tuesday, February 12, 2008

Silver Is Leading

February 11, 2008

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.

---

As published by GoldMoney
Edited by James Turk

© 2009, Worldwide Precious Metals.
www.wwpmc.com

Silver Is Leading
Posted by Worldwide Precious Metals on Monday, February 11, 2008

The GoldBugg Report - Bullion is Back

February 5, 2008

Gold

• Bullion is back as globe girds for hard times.
  $1,500 US an ounce by mid-2009, bank now predicting
  Canwest News Service
  Published: Wednesday, January 30, 2008
  - Read full story at »
• Gold hits new record again.
  Commodity hits $931.50 an ounce amid Fed cuts rate, inflation fears.
  - Read full story at »
• John Hill, a Citigroup analyst had no qualms about writing that, "Gold investors are savouring the recent emergency Fed rate cut as it invokes all three 'Horsemen': global derivatives crisis on multiple levels, clumsy central bank intervention, and deliberate currency devaluations. We continue to favour gold and expect a test of $1,000 an ounce." Kitco Daily Resource
• A monthly close above $900 this week, the first ever, would obviously be very bullish from a technical point of view for gold. Negative real interest rates (with the key discount rate less than the rate of inflation) in the world's largest economy is very inflationary and could lead to gold reaching $1,000 in the coming weeks, as the dollar comes under further pressure.
  
  The moniker 'Helicopter Bernanke' is looking more and more apposite as the Federal Reserve chairman again drops copious amounts of liquidity onto the increasingly troubled financial and economic waters. The risk is that by attempting to prevent deflation in asset classes, the Federal Reserve ends up creating stagflation and a mild form of hyperinflation. Or even worse by endeavouring to protect the banks, stock and property markets they end up putting the dollar's position as the global reserve currency at risk. Gold.ie
• GATA's advertisement in The Wall Street Journal.
  - Read full story at »
• Half of gold in central banks gone? Watchdog: 'We want to expose and stop the manipulation'.
  - Read full story at »
• U.S. treasury's gold auditor doesn't know if reserves are leased or swapped.
  - Read full story at »
• "The Eye of the Hurricane is Upon Us." Peter Grandich
  - Read full story at »
• "I first started buying gold in 2001 when it was trading close to US$300 per ounce. Since then, it has risen a lot but I happen to believe this bull-market still has room to run. After 28 years, gold has just broken out to a new record-high and this is extremely bullish and considering that it is now in uncharted territory, we could see strong momentum-led buying as the public starts to take notice." Puru Saxena
• "It is not too late to set up gold as portfolio insurance. Private and institutional investors (including pension funds and insurance companies) have investments to protect worth some $180 trillion. Not more than $600 billion worth of gold bullion is presently earmarked as hedges for portfolio insurance. In other words, only about one-third of one percent of all the investments is protected by gold while more than 99 percent is unprotected.
  
  Even this is a gross overestimate because most of the gold hedged portfolios are heavily overweight in gold, leaving that much less gold for the unprotected and thinly-protected ones. Be that as it may, if global investors decided to allocate even a modest three percent of their assets to purchase portfolio insurance, the consequence would be that $6 trillion paper assets would be chasing gold bullion worth $0.6 trillion, or one-tenth, at the present price of gold. This means ten bidders for every ounce of gold available. Portfolio insurance is still cheap, but the cost may quickly go up ten-fold or more, once the stampede starts." Antal E. Fekete
• 'It's going to be much worse'. Famed investor Jim Rogers sees hard times ahead for the United States and a big opportunity looming in China. Once again Rogers draws on the 1970s in his analysis. "Think about the story of gold in the '70s," he says. "Gold went up 600%, and then it started correcting. It went down nearly every month for two years, nearly 50% from the high point. And everybody said, 'Well, that's the end of the gold market.
  
  It was just a fluke. It's over.' It scared everybody out. And then gold turned around and went up 850% from that level. This is what happens in markets. But the fundamentals of the secular bull market in commodities are not over any more now than they were for gold in the '70s."
  - Read full story at »
• Lights Out in SA, but Gold and Platinum Glow Bright.
  - Read full story at »
• South African Mining Unions Fear Job Crisis.
  - Read full story at »
• China's metals production faces challenges from bad weather and power shortages.
  - Read full story at »
• National Bank makes massive call on gold. When you hear calls for US$1,500 gold within 12 to 18 months, you assume they're coming from the usual gold bugs. They do that kind of thing all the time. But in this case, it's coming from a much more objective source: National Bank Financial.
  
  Chief economist Clément Gignac, who has been bearish on the U.S. economy for ages, lays out five reasons why gold is making a comeback as an investment haven and should reach his lofty US$1,500 an ounce target: financial instability, massive injections of liquidity and a return to negative interest rates, the declining value and roll of the U.S. dollar, swelling U.S. budget deficits and inflation expectations, and increased financial demand for gold as a distinct asset class.
  
  None of these factors will come as a shock to anyone, but Mr. Gignac figures they will combine to keep the upside pressure on bullion well into the future. "We think gold has attractive potential for appreciation and, especially, as a tool for medium-term portfolio diversification via gold stocks or gold ETFs," he wrote in a note to clients. "The current price of crude oil, around US$90 a barrel, is about the same in constant dollars as the late-1970s high. Our new gold target of US$1,500 an ounce is still far from the early-1980s high of US$2,200 in constant dollars." Nationalpost.com
• Gold to hit $1,500-$1,800 in 2009, says Swiss Asia Capital analyst Juerg Kiener.
  - Read full story at »
• Peter Hambro, the founder of the second-largest gold producer in Russia, expects the prospect of worldwide stagflation to drive gold past the $1,000 barrier this year.
  - Read full story at »
• Russia's billionaires join next big gold rush.
  - Read full story at »
• The "Real" Gold Price. Rather than reduce inflation, the US government instead shot the messenger. By fiddling with the CPI, the US government wants us to believe that inflation is not as bad as it really is which is the same strategy it has pursued with the other important inflation messenger – gold. Government interventions to cap the gold price prevent the gold barometer from alerting everyone that inflation is a growing menace.
  
  To conclude, even though gold is trading at a record high in terms of nominal dollars, the real gold price is far below the old January 1980 record when adjusted for inflation. Gold is still good value, and more importantly, government interventions have kept gold cheap, thus enabling us to buy it at prices far less than would be the case if the government wasn't intervening. Therefore, continue to spend overvalued dollars to accumulate undervalued gold. James Turk
  - Read full story at »
• Panic at the Fed Makes $1,000 Gold Seem Imminent.
  - Read full story at »
• Could Inflation Explain the Rise in Gold Prices?
  - Read full story at »
• "Wisdom of Crowds" Helps Explain Gold's Price Climb. All around the world, investors believe in gold.
  - Read full story at »
• Central Bank Gold Sales Could See 'Significant Shortfall'.
  - Read full story at »
• Got Gold Report Gold Bullish/Bearish Battle at the COMEX Corral.
  - Read full story at »
• Gold/Silver Market Updates, Clive Maund.
  - Read full story at »
• Barrick chairman says gold will go higher. Barrick Chairman Peter Munk said he wouldn't call himself a gold bug, but after last week's rally to a new record high of $924.30, he said the yellow metal is likely to go even higher. "With increased demand and constrained supply, I'm more convinced (the price) is not only sustainable but may even reach the highs in the 1980s," he said at the World Economic Forum, Reuters reported. ResourceInvestor.com
• Long-Term Reasons to Buy Gold-James Turk
  
  With gold now above its record high price of $850, it's a good time to step back and ask: Do I still want to own it? Do I still want to buy it? Is gold still good value? The answer to all three questions is a resounding "yes."
  
  
  • Still Good Value - Adjusting for inflation, it takes $2,208 today to equal the previous high of $850 reached in January 1980. Comparing gold to the Dow Jones Industrials Average is another useful measure to determine gold's value. Gold is overvalued when it takes only one ounce of gold to buy the DJIA. For example, in the 1930s one ounce of gold at $35 bought the DJIA, and it did so again in 1980 when an ounce of gold was $850. Though this ratio has fallen from over 40 ounces in 2000, it still takes 16 ounces of gold to buy the DJIA, meaning gold is still relatively good value.
  • No Counterparty Risk - National currencies depend on the safety of the bank where you have your currency deposited. The Northern Rock crisis has highlighted that risk. National currencies have counterparty risk, but gold does not. As the subprime crisis continues to deepen, the absence of this risk more than offsets any interest income one earns on bank interest.
  • Currencies Are Managed - All national currencies are managed by central banks. Some do a better job than others, but all national currencies without exception are being debased by inflation. In contrast, an ounce of gold preserves purchasing power. The following chart of the price of crude oil shows that an ounce of gold has essentially the same purchasing power today as any other time since 1945.
  • Central Banks Losing Control - As well documented by the Gold Anti-Trust Action Committee, central banks have been intervening in the gold market. Consequently, the gold price is much lower than it would be had there been no intervention. Now that central banks are losing control, the gold price will move toward its free-market price, much like it did after central banks stopped intervening in the late 1960s.
  • Monetary System Is Broken - Global imbalances from trade and capital flows have become so huge that colossal pools of "hot money" are constantly looking for a safe home. The movements of this hot money now dwarfs the flow of capital required for global trade and commerce, and has therefore become a destabilizing force. These imbalances did not occur under the classical gold standard, proving its efficacy. I therefore anticipate that in the not too distant future gold will once again be at centre of global commerce.
  • Summary - All of the above factors will increase the demand for gold. This increased demand will cause gold's rate of exchange to national currencies to rise, meaning gold's price will rise. Therefore, gold should still be accumulated, month in and month out under a long-term savings plan. Instead of saving fiat currency, everyone should be saving sound money gold.
• Zimbabwe's gold production fell by more than a third last year as the industry grappled with widespread power cuts and a lack of foreign exchange, the Chamber of Mines has said.
  - Read full story at »

Silver

• "Hey, what about silver? Silver used to be a monetary metal, in fact, the dollar was originally defined in terms of a specific weight of silver. In 1980 gold hit a high of 850 and silver hit a high of 50. Today gold is at 940 and silver sells for 16.75 an ounce. Silver seems behind gold and platinum, silver seems cheap." Richard Russell
• Silver may outshine gold, experts say. Metal has gained 40% in past five months.
  - Read full story at »
• More questions about the silver ETF. James Turk
  - Read full story at »
• There is no Silver Surplus. Jason Hommel
  - Read full story at »
• Silver in Surplus? Roland Watson
  - Read full story at »
• Silver and the General Stock Market. Roland Watson
  - 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 »

Interest Rates

• Fed Lowers Rate to 3% as U.S. Expansion Falters. The Federal Reserve lowered its benchmark interest rate by half a percentage point to 3 percent, the second cut in as many weeks, to prevent the U.S. economy from sinking into a recession.
  - Read full story at »
• Bernanke's Rate Cut, Outlook Align Fed With Investors. Federal Reserve Chairman Ben S. Bernanke and his critics in financial markets may finally be on the same page. The central bank reduced its benchmark interest rate by half a point to 3 percent yesterday, eight days after an emergency three-quarter point move, the fastest easing of monetary policy since 1990. The Fed left the door open to more cuts by saying in its statement that "downside risks to growth remain."
  - Read full story at »

U.S. Dollar

• How Bush Destroyed the Dollar.
  - Read full story at »
• The president of Venezuela, Hugo Chávez, urged his Latin American allies to begin withdrawing billions of dollars in international reserves from U.S. banks, warning of a looming U.S. economic crisis.
  - Read full story at »
• Dollar peg pushes Saudi inflation above official interest rates.
  - Read full story at »

Global Recession Coming? - George Soros On Recession - Robert Reich Warns Of Dark Days Ahead

• Greenspan Says Global Recession Is 'Inevitable' After 'Boom'. Former Federal Reserve Chairman Alan Greenspan said he's worried that an "inevitable" global recession will create a backlash that forces countries to retreat from worldwide markets. "Globalization has been extraordinarily valuable," Greenspan said in a speech in Vancouver sponsored by BMO Financial Group, also known as the Bank of Montreal.
  
  "I'm concerned that if we get into some form of global recession, which after this extraordinary boom is inevitable at some point, that there will be a very significant retrenchment in the opening up of markets." The Fed, led by Greenspan's successor Ben S. Bernanke, lowered the benchmark U.S. interest rate by three-quarters of a percentage point on Jan. 22 amid increasing signs of recession.
  
  President George W. Bush and congressional leaders today announced they've agreed on stimulus measures to revive the economy that may total as much as $150 billion. The odds of a U.S. recession "have definitely picked up," Greenspan said today. "The probability of a recession is 50 percent or more, but we're not there yet." Greenspan, 81, left the Fed in January 2006 after almost two decades at the helm.
  
  He then returned to his role as a private-sector economic forecaster, speaking at conferences and consulting for clients such as Deutsche Bank AG. Greenspan also said the U.S. housing slump may soon be over, benefiting the economy. "We may be close to the point where actual sales levels are starting to bottom,'' he said. The "sooner we get to stabilization'' of the housing sector, the better for the economy, he said.
  - Read full story at »
• IMF Cuts 2008 Global Growth Forecast to Weakest in Five Years.
  - Read full story at »
• Greenspan doubts Fed's ability to prevent recession.
  - Read full story at »
• Global Recession Risk Grows as U.S. 'Damage' Spreads.
  - Read full story at »
• Bankers at Davos See Slump, Firms Yet to Feel Effect.
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• Soros Says Lack of Credit Raises Recession Risk. Billionaire investor George Soros talked with Bloomberg's Michael McKee about the prospects for a U.S. recession as lenders and investors stop the flow of credit, the outlook for the global economy, Federal Reserve monetary policy and Soros's support for Barack Obama in the Democratic U.S. presidential primary contest.
  
  They spoke at the World Economic Forum in Davos, Switzerland. Soros is founder of New York-based hedge-fund firm Soros Fund Management LLC, which has $17 billion in assets.
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• Darker Days Ahead? Robert Reich warns a recession, or worse, could be coming.
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• The U.S. economy nearly stalled in the fourth quarter with a growth rate of just 0.6 percent, capping its worst year since 2002.
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• U.S. House Approves $146 Billion Economic Stimulus.
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Bond Insurer Trouble

• Bond Insurer Default May Cause 'Disaster,' Bank of America Says.
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• Bond Insurer Bailout Plan May Be 'Too Late,' CreditSights Says.
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• Bond insurers. Buddy, could you spare us $15 billion? Another shady realm of finance goes begging for a massive bail-out.
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U.S. Slides Into Dangerours 1930's Liquidity Trap

• The United States is sliding towards a dangerous 1930s style "liquidity trap" that cannot easily be stopped by drastic cuts in interest rates, Nobel economist Joseph Stiglitz has warned. Professor Stiglitz, former chair of the White House Council of Economic Advisers, said it takes far too long for monetary policy to work its magic. This will not gain much traction in the midst of a housing crash.
• "People have been drawing home equity out of the houses at a rate of $700bn or $800bn a year. It's been a huge boost to consumption, but that game is now up. House prices are going to continue falling, and lower rates won't stop that this point," he said.
• "As a Keynesian, I'd say the biggest bang for the buck in terms of immediate stimulus would be unemployment assistance and tax rebates for the poor. That will feed through quickly, but set against the magnitude of the problem, even a fiscal stimulus package of $150bn is not going to be enough," he said. "The distress is going to be very severe. Around 2m people have lost all their savings," he did.
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60 Minutes - House Of Cards: The Mortgage Mess

• "60 Minutes" Reports On How The Subprime Loan Crisis Is Shaking Markets Worldwide
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Real Estate

• 3 in 10 spend too much on shelter: Stats Can. Finding affordable housing was a problem for about three in 10 Canadians between 2002 and 2004, according to a study by the Canada Mortgage and Housing Corporation and Statistics Canada.
• The study, released Friday, said that during the three-year period 28 per cent of Canadians reported spending at some point more than 30 per cent of their household income on shelter. Thirty per cent is commonly held as the upper limit benchmark in shelter cost-to-income ratio.
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• Most U.S. middle-class still can't buy a house. Prices have fallen, but not by enough to make it possible for nurses, fireman or teachers to buy homes of their own says a new report.
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• Home Prices Fell in '07 for First Time in Decades.
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• U.S. Economy: New-Home Sales Drop to 12-Year Low.
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• What The Future Housing Market Could Look Like.
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• The Housing Market Continues To Correct.
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• The Higher The Price The Harder They Drop.
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• It's what The Market Is Doing.
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• Broke U.S. homeowners linked to arsons. Authorities in economically stressed U.S. cities see an increase in torched houses. Is the mortgage mess transforming more Americans into criminals?
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• Home ownership in record plunge. Fourth quarter saw biggest one-year drop in since tracking began in 1965 - as mortgage problems and rising foreclosures take their toll.
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Foreclosure - Subprime

• Foreclosures up 75% in 2007. Defaults are way up for the year, with once red-hot Sun-Belt markets reporting the worst losses.
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• Foreclosures spike and will get much worse. Defaults are on the rise according to a new report, and the trend could last for years.
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• The FBI is investigating 14 companies embroiled in the sub-prime mortgage crisis as part of a crackdown on improper lending.
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Iran - Ahmadinejad Tells West: Accept Israel's Imminent Collapse

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• Bush: "US will 'confront' Iran if necessary."
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The GoldBugg Report - Bullion is Back
Posted by Worldwide Precious Metals on Tuesday, February 05, 2008

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