Newsroom
The GoldBugg Report – Gold Rebounds on Weak Dollar
March 25, 2008
In this week’s GoldBugg Report:
-Gold Rebounds on Weak Dollar
-Paul urges gold standard, abolition of Fed on CNBC
-Ted Butler: All into silver now
-Gold Rebounds on Weak Dollar
http://ap.google.com/article/ALeqM5jND4r3B-VBZu2Ogg2_yzjYnPIP8gD8VKJFNO0
-Paul urges gold standard, abolition of Fed on CNBC
-Ted Butler: All into silver now
-Chart of the Day. Gold has been in a strong bull market since 2001 and picked up the pace in mid-2005 and then again in mid-2007. In fact, gold has gone parabolic and today briefly crossed the $1000 per ounce level for the first time. Today’s chart illustrates how the price of gold has nearly quadrupled during its seven year bull market. Chartoftheday.com
-Greenspan: Economy worst since WWII. U.S. financial crisis to continue for months, says former Fed chairman. Today’s economic condition could likely be seen as “the most wrenching since the end of the second world war,” wrote former Federal Reserve chairman Alan Greenspan in the Financial Times on Monday. The U.S. financial crisis won’t end until housing prices stabilize, but that won’t happen for months, wrote Greenspan.
The models used by the finance industry to determine risk and measure economic strength are too simple to fully account for human responses, he said. “We cannot hope to anticipate the specifics of future crises with any degree of confidence,” he wrote. However, Greenspan said that he hoped the fallout would not take away the finance industry’s ability to regulate itself.
Market flexibility and free competition are the most reliable safeguards against economic trouble, he said; the system which is supposed to guard against unanticipated losses will need to be overhauled. Cnnmoney.com-Read more at-http://www.france24.com/en/20080317-current-crisis-most-wrenching-1945-greenspan-financial-global-economy&navi;=ECONOMIE
-Deflation. A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression.
Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind. Investopedia.com
-Dead Cat Bounce. A temporary recovery from a prolonged decline or bear market, after which the market continues to fall. Ever heard the saying, “Even a dead cat will bounce if dropped from high enough!” Investopedia.com
-Ignore the siren call of the complacent as this looks more than likely to be another dead cat bounce in equity markets and another brief sojourn of financial calm prior to the next act in the epic unfolding global financial crisis. Unfortunately, the drama looks soon to increase, intensify and degenerate from high farce to tragedy. Gold.ie
-Stock Veterans Granville, Stovall Predict More Losses. Joseph Granville and Robert Stovall, octogenarians who’ve seen every financial market downturn since the 1950s, say the current one may be the worst and is far from over. Granville, born in 1923, remembers his banker father’s bad moods following the stock-market crash of 1929.
The younger Granville began his career at defunct brokerage E.F. Hutton in 1957, quit in 1963 to begin publishing a weekly newsletter and wrote nine books on investing. “We’re in a crash,” Granville, 84, said in a telephone interview from Kansas City, Missouri, where he lives and works. “This is the worst I’ve seen, and I’ve studied every bit of history all my life.”
“I don’t see an end to this thing until sometime in 2009,” Granville said of the current market slump. “It’s going to get a lot worse before it gets better.” Read more at-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=awGilvqsJv7M&refer;=home
-Insurer Losses From Subprime Approach Katrina Claims. Read more at-
http://bloomberg.com/apps/news?pid=20601206&sid;=aH4bWZasxTUo&refer;=realestate
-Canadian economic growth seen at only 1.1% this year: TD. Read more here-http://www.cbc.ca/money/story/2008/03/19/canadianeco.html or http://www.bloomberg.com/apps/news?pid=20601082&sid;=aSdi5Vd9fj58&refer;=canada
GOLD
-Spot gold could face further profit-taking in the short term but the prospect of lower U.S. interest rates in the mid-to-longer-term paints a negative picture for the dollar and a bullish one for the precious metal, said TheBullionDesk’s James Moore. This supports the view that gold will challenge $1,250/oz in 2008, Moore added. Dow Jones
-Although traditionally a safe haven against volatile stock markets, inflation and a hedge against a weak US dollar, Ross Norman, director of TheBullionDesk.com, explained that when “things are very, very bad, gold suffers too.” He added: “There has been a sharp sell off in all metals. It is a case of selling off the good to make up for the bad.” Gold prices have risen 20pc to date this year, and 50pc since last August, leaving investors sitting on a handsome profit. Mr. Norman said: “Investors are just taking money off the table.”
Mr. Norman anticipating a further rise of 25pc for gold probably in the third or fourth quarter. He said: “I wouldn’t bail out. This is quite a healthy correction it’s the first dip in an awfully long time. “All the fundamentals are still there: the market fear factor, the subprime disaster, the ongoing dollar weakness, the supply/demand balance. “It’s an opportunity to get in.” Telegraph.co.uk
-$2,000 an ounce gold is in the cards. Frank Holmes, chief executive officer at U.S. Global Investors, says that gold will hit $2,000 an ounce and that while the move won’t be straight there from current levels investors should not be surprised by it. Holmes noted that virtually all commodities have gone through their “inflation-adjusted 1980 price levels,” with the notable exception of gold, and that to get to that range the price of gold would have to top $2,000 an ounce.
Holmes said he expects a short-term pull-back in gold based on a correction he sees coming in oil and a short rally in the dollar, both of which will impact gold prices but that the long-term trend will be strongly upward. In a radio interview with Chuck Jaffe, MarketWatch senior columnist, Holmes noted that gold correlates to the price of oil 90% of the time meaning it moves with oil prices almost all the time and has an inverse relation to the dollar 70% of the time.
With oil prices on the rise and the dollar weakening, it’s a market condition that bodes well for gold, especially because gold is “not at astronomical levels yet, when compared to other commodities. There’s a lot more room.” Holmes also noted that he’s more concerned with the market entering a “big deflationary cycle” than he is about Federal Reserve rate cuts sparking inflation, noting that “inflation is easy to stop.” Marketwatch.com
-Analyst: Faltering market conditions could push gold to $1,800/oz within year. Gold could reach $1,800 an ounce within the year as investors turn to the yellow metal for shelter amid deterioration in capital markets, an analyst said Monday. In the shadow of Sunday’s “bailout” of Bear Stearns “conditions in the major financial markets have deteriorated further, which we believe increases the probability of a sharp upward spiral in the gold price,” analyst Paradigm Capital Analyst Don MacLean said.
MacLean said he now believes there is a 40% to 50% chance that gold will reach $1,800/oz within a year, up from a previous estimate of a 25% chance back in January. April gold futures were last trading up 60 cents at $1,000.10 an ounce, after reaching a record high of $1,033.90 in intraday trading. In a note to clients MacLean cited the emergence of a confluence of factors that, historically, have pushed the price of gold upward, such as high amounts of liquidity provided by central banks, record high risk spreads, declining interest rates in major economies and a weakening U.S.
dollar.
Soaring gold prices also have the effect of drawing more interest in the gold sector, he noted. If the gold price spirals upwards, gold stocks should rise with the metal’s price, MacLean said. However, gold stocks are still equities, and broad downward pressure on equities will probably hinder their performance, he said. “Past experience suggests that gold equities will lag, viewing the spiral as unsustainable. In this case the metal is liable to outperform. It would make sense for investors to hold a meaningful portion of their gold position in ETFs for the metal.” AFXNews.com
-Gold’s fundamentals are as strong as ever as this, the worst financial crisis since the Wall Street Crash and the Great Depression, continues to worsen and deepen. Although Weimar Germany might have more parallels than the deflationary Gold Standard constrained 1930s America. Systemic risk has not been as great as this since after the crash in 1929 and the new fangled massively leveraged global financial system is in danger of unraveling.
While talk of ‘contagion’ might be considered alarmist, so would talk of nationalization of Northern Rock and bankruptcy of Bear Stearns some 6 short months ago. Global financial contagion (with its epicentre on Wall Street and in the U.S.) is now a real possibility as acknowledged by Anoop Singh, IMF director for the Western Hemisphere Department. He said yesterday that the mounting global credit crisis could result in financial “contagion” that could wipe $800 billion of value from the books of U.S. and global financial institutions.
He cited a high likelihood of a U.S. recession and said he sees losses from the U.S. subprime mortgage market crisis resulting in widening losses for European banks. That is putting it mildly. Traders and analysts are now looking at the next dominoes to fall with Citigroup and Lehman Brothers in the U.S. and HBOS, Alliance and Leicester and Bradford and Bingley in the UK looking vulnerable.
Unfortunately, financial contagion looks increasingly likely and this would result in many more Northern Rocks and Bear Stearns and the value of many assets becoming worth fractions of their previous worth. A worst case scenario is a massive financial panic resulting in stock and bond market crashing, many runs on banks and the collapse and nationalization of much of the banking system in the western world.
Gold remains the ultimate safe haven and has retained and will retain its value throughout history. Particularly with history having a terrible habit of repeating itself. Blind fate in central bankers and politicians miraculous powers to rectify this situation is dangerous and delusional. Given the current financial crisis, all investors should have an allocation to gold bullion and the allocation should be at least 20% of a properly diversified portfolio. Holding 25% in gold, 25% in cash would be appropriate as an extremely cautious, defensive and prudent investment strategy is merited now more than ever. Gold.ie
-Gold finally accomplished a close above the psychologically-important $1000/oz. mark, leaving investors to ponder the equally psychologically-important question: What now? That’s one for which there are probably as many answers as there are people who care enough to offer one. While the tanking dollar and soaring price of oil are playing their parts, few would any longer disagree that the flight into precious metals is being fueled in large part by uneasiness over the disintegration of the world financial sector.
“Gold’s assault on $1,000 is happening for a good reason,” says James Turk, of GoldMoney.com. “Gold is not only an inflation hedge, it’s a catastrophe hedge. Gold is becoming increasingly important as the credit crunch continues to spiral out of control.” The latest blow has been the collapse in liquidity at Bear Stearns, one of the biggest names on Wall Street.
“Bear is the first, who is next? That question is haunting investors right now and they are looking for a flight to quality,” said Zachary Oxman of Wisdom Financial. That flight is now so furious that it’s battering down barriers such as that noted by James Burton, CEO of the World Gold Council, who wrote that the price escalation has “posed a short-term problem in regard to consumer purchases of jewelry, gold bars and coins, acting as a disincentive to some buyers.” Kitco Daily Resource
-John Embry says sit tight, don’t let gold’s volatility bother you. Read more at-http://www.sprott.com/pdf/investorsdigest/digest.pdf
-Gold hits $1,000, John Embry comments on BNN. Watch video here-http://broadband.bnn.ca/bnn/?vid=38106
-John Embry’s address to the Vancouver Resource Investment Conference. Read more here-http://www.sprott.com/pdf/news/2008_Vancouver_Speech.pdf
-Jay Taylor on gold. Watch video here-http://broadband.bnn.ca/bnn/?noad=1&vid;=38273
-What the Price of Gold Is Telling Us. Dr. Ron Paul, U.S. Congressman-Read more at-http://news.goldseek.com/RonPaul/1205726520.php
-India’s mutual fund firm Benchmark expects its gold exchange-traded fund’s (ETF) collection to grow over 10 times to 15 metric tonnes in the next five years, a top official said on Wednesday. “We have grown substantially in terms of tonnage and number of investors,” Rajan Mehta, executive director of Benchmark Asset Management said in an interview with Reuters. Read more at-http://in.reuters.com/article/businessNews/idINIndia-32581220080319?rpc=401&
-Torontonians clear out jewelry boxes as gold prices rise. Read more at-http://www.cbc.ca/money/story/2008/03/17/gold-prices.html
SILVER
-Silver is the investment of the century. It will move with gold, but further, as has already been demonstrated. Gold is up about 200%, and silver is up more than 300% over the last couple of years. We will eventually find that silver at today’s $15 to $20 is the bargain of the century. Howard Ruff-Read full story at-http://www.kitco.com/ind/ruff/ruff.html
-There is now more reason than ever to own gold and silver. They are continuing to fulfil their function as an inflation hedge, but those who own physical gold and silver are also benefiting in another way they are protected from counterparty risk. In other words, gold and silver are a hedge against financial catastrophe, and more of that is probably on the way. James Turk
-The Telegraph in the UK says: “In the coming few weeks, financial markets f
ace their biggest test since the 1930s. This is not hyperbole.” “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 counterparty 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%.” Read full James Turk story at-http://goldmoney.com/en/commentary-print.html
-Importance of Silver and Gold. David Morgan-Read full story at-http://news.silverseek.com/SilverInvestor/1205474400.php
-Why Silver is better than Oil as an Investment. Read more at-http://news.silverseek.com/GoldIsMoney/1205600326.php
-Silver institute news for Q1. Read more here-http://www.silverinstitute.org/news/1q08.pdf
-Ted Butler silver commentary for March 11. Read more at-http://www.investmentrarities.com/03-11-08.html
-Ted Butler silver commentary for March 18. Read more at-http://www.investmentrarities.com/03-18-08.html
-When Do I Sell My Silver? People are always asking me, “When should I sell my silver?” Well that question is much easier to ask than to answer. I often times tell them whenever the government starts acting responsibly and not only balances the budget but finally decides that it has grown too fat and announces they are going on a fiscal diet. Many people want an actual dollar target to write down so that they will know exactly when to get out.
Well since the dollar is shrinking that target number keeps getting bigger. That is exactly the problem with a shrinking yardstick. It is hard to measure something today and for it to have any meaning in the future. So what can we use instead of dollars to measure when to sell our silver? Because make no mistake, there will be a time to sell sometime in the future. Robert Kiyosaki, author of “Rich Dad, Poor Dad” recently stated that he has a large position in silver and plans to exit when his target is met.
He says when the cost of a median priced single family home in the US sells for 500 oz of silver (or 40 oz of gold) he believes it will be time to exit the silver market. Of course he says he will not go back into dollars but most likely trade his silver for undervalued income producing real estate. So in other words he believes silver is still VERY undervalued at this point. As a matter of fact since the average existing single family home is now $218,000 it would take a silver price of $436/oz in today’s money for 500 oz of silver to purchase it.
So he is looking for another x 20 rise in silver value before the top is reached ($21 x 20 = $420/oz). Of course do not write $420/oz on the wall as your exit point because by the time we get there in the next 5 to 15 years that amount of federal reserve notes will not mean the same thing. You just have to stop thinking in terms of FRNs or dollars and start thinking in terms of value or what your silver will purchase. Perhaps you may want to think in terms of how much oil your silver will purchase.
In 1980 the average price of a single barrel of oil was equal to a single oz of silver or 1:1. After the 1980 silver price spike for the next 25 years the average price of a barrel of oil was just under 4.5 oz of silver (with a high of 2 to a low of 10). Today it is around 5 oz of silver for one bbl of oil. In the past 3 years the extremes have been a high of 4 to a low of 9 oz of silver per barrel of oil. Even though there has been a lot of volatility in both the oil and silver markets the average has remained around 4 to 6 oz of silver per barrel of oil.
So perhaps the next drop to par with oil or 1:1 it may be time to sell your silver and trade for oil. Currently that would represent an increase of 5 times its current value. Another consideration is the gold / silver ratio. The gold / silver ratio has been between 12 and 17 throughout most of recorded history. Only in my life time has the ratio gotten so out of balance. The high was reached in 1991 when it went up to 91 (1 oz of gold = 91 oz of silver). Since that time it has been trending downward.
Currently the ratio is around 48:1 (1 oz of gold = 48 oz of silver). It is my opinion that the ratio will come back to its traditional value of 15 or 16. Since it has been so far above its ratio it may even overshoot it and drop down somewhere below 10 before it settles back to 15 or so. Therefore a ratio of 10:1 would put silver at $102.50/oz in today’s dollars. A ratio of 15:1 would set silver’s current price at $68/oz. Another value would be the dow jones industrial average priced in oz of silver.
The low for the DJIA / silver was 18:1 in 1980 (18 oz of silver could buy the DJIA). During the 2000 stock market peak the DJIA / silver was 2,500:1 (yep, it took 2,500 oz of silver to buy the DJIA). Currently it is about 570:1. So if it approached the extreme low of 18:1 then silver would currently have to sell for $665/oz (or 30 times higher). So maybe you should consider selling when the DJIA / silver ratio gets near 20:1. So whether it is 20 times, 5 times or 30 times higher than it is right now I feel fairly confident telling anyone that the time to sell is NOT YET! Buy more and hang on for the ride of your life. Larry LaBorde
PLATINUM-PALLADIUM
-World platinum deficit to surge on production woes. The global platinum market is likely to witness a huge deficit this year and in 2009 as a power crisis in top producer South Africa hits output, while industrial demand remains strong, a Reuters survey showed. The poll of 11 analysts and traders forecast on Wednesday that the median deficit for platinum, used in jewellery and to clean vehicle exhaust fumes, is likely to widen to 470,000 ounces by the end of 2008.
The deficit is seen at 422,500 ounces in 2009. In 2007, total global platinum demand of 6.925 million ounces surpassed supply of 6.660 million, leaving a market deficit of 265,000 ounces. The market had a surplus of 65,00
0 ounces in 2006 after seven successive years of deficits. Analysts said tight market conditions were expected to put an upward pressure on the price, which hit a record high of $2,290 (U.S.) on March 4. It was quoted at around $1,933 on Wednesday.
“Electricity supply problems in South Africa have altered the outlook for platinum dramatically,” said Walter De Wet, precious metals analyst at Standard Bank. “The electricity deficit will be wiped out but, unfortunately, additional capacity doesn’t expand in a smooth line, but rather step-wise. For now, demand will outstrip supply,” Johannesburg-based Mr. Wet said. South Africa accounts for 80 per cent of the global output. Read more at-http://www.theglobeandmail.com/servlet/story/RTGAM.20080319.wplatinum0319/BNStory/energy/home
COMMODITIES
-Goldman Sees `Explosive’ Commodity Rallies, $175 Oil. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aUmQ3MBOkx_0
OIL-GASOLINE
-IEA: Non-OPEC output decline rates lower than believed. Read more at-http://www.ogj.com/display_article/323394/7/ONART/none/DriPr/1/IEA:-Non-OPEC-output-decline-rates-lower-than-believed/
-U.S. Gasoline price spike has only just begun. Motorists should expect to pay upwards of $3.75 a gallon in the coming weeks as prices at the pump catch up with record crude, but relief may arrive by summer. Read more at-http://money.cnn.com/2008/03/10/news/economy/gas_prices/index.htm?cnn=yes
-Exxon’s $12 Billion Venezuela Asset Freeze Overturned. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=ahEO3V_lPHKQ
INFLATION
-Behind Cheaper Credit, Inflation Fears Loom. Read more at-http://www.washingtonpost.com/wp-dyn/content/article/2008/03/18/AR2008031803479.html
-Inflation is Americans’ top economic concern. Read more at-
http://money.cnn.com/2008/03/18/news/economy/cnn_poll_inflation/index.htm?postversion=2008031813
-Canada’s Annual Inflation Rate Falls to Six-Month Low. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid;=a57xwz2IBojo&refer;=canada
-U.S. Producer Prices Rise 0.3%, Core Measure Climbs. Read more at-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aOBtOOloppt4&refer;=home
-Vive La France the Road to Hyperinflation. Peter Schiff-Read more at-http://www.321gold.com/editorials/schiff/schiff031408.html
-In light of the cause and effect between monetary inflation and price inflation, and given the clear findings in our Global Inflation Survey, we can only conclude that inflation in both its commonly understood forms is now baked into the proverbial cake.
As investors, that keeps us focused on gold, the world’s longest-serving form of money and an investment we have been profitably beating the drum about since 1999. Importantly, a quick scan now finds that gold is rising against a large number of currencies.
This is a very useful view of the current inflation trend in that it demonstrates that the trend has expanded considerably beyond just a weakening U.S. dollar, and is now affecting fiat currencies around the world, almost without exception. Are we seeing the end of the experiment in fiat monetary systems? It’s too early to say one way or another, but it’s not too late to shift at least some percentage of your portfolio into gold. Read more at-http://news.goldseek.com/DougCasey/1205820360.php
FINANCIAL CRISIS HITTING WORLDWIDE
-Can’t Grasp Credit Crisis? Join the Club. Raise your hand if you don’t quite understand this whole financial crisis. It has been going on for seven months now, and many people probably feel as if they should understand it. But they don’t, not really. The part about the housing crash seems simple enough. With banks whispering sweet encouragement, people bought homes they couldn’t afford, and now they are falling behind on their mortgages. Read more at http://www.nytimes.com/2008/03/19/business/19leonhardt.html?_r=1&ei;=5088&en;=b9d59d01316751bf&ex;=1363665600&partner;=rssnyt&emc;=rss&pagewanted;=print&oref;=slogin
-Global crisis deepening: IMF Chief. Read more at-
http://money.cnn.com/2008/03/17/news/international/bc.apfn.imf.globaleconom.ap/index.htm
-US economist calls financial crisis worst since 1930s. Read more at-http://economictimes.indiatimes.com/International_Business/Financial_crisis_worst_since_1930s/articleshow/2881608.cms
-Avoid financials says analysts. Friedman Billings Ramsey says investors should forsake shares of most financial institutions until the industry raises $1.2 trillion. Read more at-
http://money.cnn.com/2008/03/17/markets/avoid_financials.ap/index.htm
-Foreign investors veto Fed rescue. Read more at-
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml
-End of Cheap Credit Hits Homes, Businesses. Read more at-
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/17/AR2008031702616_pf.html
-Wall Street turmoil ripples across Main Street. Read more at-http://www.reuters.com/article/idUSN1763551620080318
-Lehman borrows from new Fed facility: report. Read full story at-
http://money.cnn.com/2008/03/17/news/companies/FGIC_earns.ap/index.htm
-Canadian Lawmakers Likely to Review Commercial Paper Collapse. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aCl.oRRnpszY&refer;=canada
BEAR STEARNS COLLAPSE
-March 14-Bear Stearns Gets Emergency Funds From JPMorgan, Fed. Bear Stearns Cos., teetering on the brink of collapse from a lack of cash, got emergency funding from the Federal Reserve and JPMorgan Chase & Co. in the largest government bailout of a U.S. securities firm. After denying earlier this week that access to capital was at risk, Bear Stearns Chief Executive Officer Alan Schwartz said today that the 85-year-old company’s cash position had “significantly deteriorated” in the past 24 hours.
The central bank agreed to provide financing through JPMorgan for up to 28 days, the bank said in a statement today. A person close to JPMorgan said the bank, led by Chief Executive Officer Jamie Dimon, would be interested in buying Bear Stearns’s prime brokerage unit, which provides loans and processes trades for hedge funds. The Fed acted to prevent the failure of the second-biggest underwriter of U.S. mortgage bonds and forestall a potential market panic as losses by banks and brokers reached $195 billion and stocks plunged for a third day this week.
JPMorgan, which has suffered fewer losses than rivals during the credit crisis, may end up owning all or part of Bear Stearns, analysts speculated. “I don’t think they can afford to let Bear go,” said Charles Geisst, the author of “100 Years on Wall Street,” referring to the New York Fed bailout. “At this particular moment in time, it would be a devastating blow to the markets.” Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=arOurF_ov.pk&refer;=home
-March 14-Fed Invokes Little-Used Authority to Aid Bear Stearns. Federal Reserve Chairman Ben S. Bernanke invoked a law last used four decades ago to keep Bear Stearns Cos. from collapsing after the securities firm sought emergency funding from the central bank. The loan to Bear Stearns required a vote today by the Fed’s Board of Governors because the company isn’t a bank, Fed staff officials said.
The central bank is taking on the credit risk from Bear Stearns collateral, lending the funds through JPMorgan Chase & Co. because it’s operationally simpler to accomplish than a direct loan, the staff said on condition of anonymity. Bernanke took advantage of little-used parts of Fed law, added in the 1930s and last utilized in the 1960s, that allow it to lend to corporations and private partnerships with a special board vote. The Fed chief probably sought to stave off a deeper blow to the financial system from a Bear Stearns collapse, former Fed researcher Keith Hembre said.
“The Fed really doesn’t have any obligation to help a non- bank aside from its role or responsibility to keep the financial markets functioning,” said Hembre, who helps oversee $107 billion as chief economist at FAF Advisors Inc. in Minneapolis. “They made a judgment, probably an accurate one, that they’re not going to function very well if you’ve got a full-blown crisis with a major Wall Street firm.” Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=abl8CI.8oF8U&refer;=home
-JPMorgan Chase to Buy Bear Stearns for $240 Million. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a4qrSYRFeOgI
-JPMorgan scoops up troubled Bear. The deal values Bear Stearns at just $2 a share. Regulators hope purchase will stave off wider chaos in financial markets. Read more at-
http://money.cnn.com/2008/03/16/news/companies/jpmorgan_bear_stearns/index.htm
-How the Bear Stearns deal got done. Without the Fed’s $30 billion, JPMorgan Chase couldn’t have bought Bear Stear
ns without writing down its own mortgage holdings. Read more at-
http://money.cnn.com/2008/03/17/news/companies/boyd_bear.fortune/index.htm
-Billionaire Lewis moves to block JP Morgan. Read more at-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/18/cnlewis118.xml
-Bear bailout can’t save shareholders. Monday’s plunge shows investors can lose their shirts even when the feds decide a firm is ‘too big to fail.’ Read full story at-
http://money.cnn.com/2008/03/17/news/toobig.fortune/index.htm
-How subprime killed Bear Stearns. A problem with risky mortgages has led to a global financial crisis. The bigger issue: Experts don’t know when it will end. Read more at-
http://money.cnn.com/2008/03/17/news/economy/gothere/index.htm
-End of Wall Street as we know it. Financial firms have relied on a highly flawed business model for years. The time has come to fix it. Read more at-
http://money.cnn.com/2008/03/17/magazines/fortune/investing/Tully_WallStIsBroken.fortune/index.htm
-Oops CNBC’s Cramer Said ‘Don’t Move’ From Bear a Week Before Collapse. ‘Mad Money’ host drastically underestimated the investment bank’s trouble surrounding the mortgage crisis. Read more at-http://www.businessandmedia.org/articles/2008/20080317110946.aspx
INTEREST RATES
-Canada’s Flaherty `Monitoring’ U.S. Interest Rates. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aYmIRUxaWwAw&refer;=canada
-Fed Cuts Main Rate to 2.25%, Says Outlook `Weakened’. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ahgKoMxfdLIA&refer;=home
-March 17-Fed Cuts Discount Rate, Lends More to Avert Meltdown. Read more at-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aWEuJN_P2JpM&refer;=home
-The Bank of Japan may cut borrowing costs next month to revive the economy even if the political dispute over the selection of a replacement for Governor Toshihiko Fukui isn’t resolved, Goldman Sachs Group Inc. said. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a4XOny5zafYM&refer;=home
U.S.-EURO-AU-NZ DOLLARS
-Dollar’s Clout Sinks Worldwide. Read more at-http://biz.yahoo.com/ap/080313/diving_dollar.html?.v=3&printer;=1
-Dollars tough to sell on streets of Amsterdam. Read more at-
-U.A.E. to Keep Dollar Peg After U.S. Pressure, Official Says. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aG3fFPVb6w4Y&refer;=home
-The Australian and New Zealand dollars rose after the Federal Reserve cut its benchmark interest rate for the sixth time since September, encouraging investors to buy higher-yielding assets. Read more at-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aAgyQn83O4Uo
U.S. RECESSION-DEBT PROBLEMS
-Poll: 71 percent think Iraq spending hurts economy. Read more at-http://www.cnn.com/2008/POLITICS/03/18/poll.iraq.economy/index.html
Story Highlights
Only 36 percent polled said the situation in Iraq was worth going to war over
Washington Post: Iraq war will wind up costing the U.S. government about $3 trillion
President Bush disputed notion that the war was negatively affecting the economy
-America’s Money: In their own words. Everyday folks tell their stories about hard economic times. Read full story at-
http://money.cnn.com/galleries/2008/news/0803/gallery.real_stories/index.html
-Recession is here poll. 71% of economists questioned by The Wall Street Journal say the economy is contracting. Read more at-
http://money.cnn.com/2008/03/13/news/economy/recession/index.htm
-Three out of four say it’s a recession survey. CNN poll of American adults sees growth in those with dim view of the economy. Read more at-
http://money.cnn.com/2008/03/17/news/economy/cnn_recession_poll/index.htm
-Social Security’s running out of time. Because the trust fund is invested in Treasuries, the real problem starts not in 2040, but a decade or so from now. Read more at-
REAL ESTATE
-Home Prices Plunge Across California Read more at-http://biz.yahoo.com/ap/080313/california_homes_prices.html?.v=3&printer;=1
-Homebuilder sentiment still low. Expectations for new home sales remains near third-lowest level, according to report from the National Association of Home Builders. Read more at-
http://money.cnn.com/2008/03/17/news/economy/homebuilder_sentiment.ap/ind
ex.htm
-U.S. Economy: Housing Starts, Permits Decline as Slump Deepens. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a2YnE7Q6fhE0&refer;=home
-How bad is the mortgage crisis going to get? What started in subprime is likely to continue cascading into the markets and keep the economy down until 2010, economist Paul Krugman forecasts. Bottom line for homeowners: An average drop of 25%. Read more at-http://money.cnn.com/2008/03/14/news/economy/krugman_subprime.fortune/index.htm
-CBS News reports from Florida. Read more at-http://thehousingbubbleblog.com/?p=4276
MORTGAGES-FORECLOSURES
-Canadian homebuyers rush to pay down mortgages. Read more at-http://www.globeinvestor.com/servlet/story/RTGAM.20080319.wcmhc0319/GIStory/
-Three Los Angeles-based mortgage lenders were shut down and seven people were arrested for running a “predatory lending scheme,” California Attorney General Jerry Brown said today. Read more at-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aXDbfX6UuV28
-More in foreclosure choose to walk away. Read full story at-http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2008/03/16/MNFFVI036.DTL&type;=printable
-The Naples News reports from Florida. Read more at-http://thehousingbubbleblog.com/?p=4284
GEOPOLITICAL
-Ahmadinejad’s Nuclear Mandate Reinforced by Election. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ayzIO0rDRzuE&refer;=home
-’Death to Ahmadinejad,’ Iranian crowds cry. Read full story at-http://www.breitbart.com/article.php?id=upiUPI-20080319-113404-3794&show;_article=1
-Retaining his tough stance against Iran, Vice President Dick Cheney said Wednesday that Tehran may have restarted the nuclear weaponization program that a U.S. intelligence report said was halted in 2003. Read more at-
http://www.breitbart.com/article.php?id=D8VGJH980&show;_article=1
-Five years later, Bush says Iraq war must go on. Read more at-http://www.cnn.com/2008/POLITICS/03/19/bush.iraq/index.html
Story Highlights
NEW: President Bush says victory in Iraq necessary to demonstrate U.S. resolve
Bush says removing Saddam Hussein from power was the right decision
Bush marks the fifth anniversary of the Iraq war with a speech at Pentagon
The president praises the so-called surge of U.S. troops in Iraq
-Bush defends Iraq record amid protests, five years on. Read more at-http://www.breitbart.com/article.php?id=080319134205.368w8zul&show;_article=1
-Five years after launching the invasion of Iraq, President Bush strongly signaled Wednesday that he won’t order troop withdrawals beyond those already planned because he refuses to “jeopardize the hard-fought gains” of the past year. Read more at-http://www.breitbart.com/article.php?id=D8VGJT8G1&show;_article=1
-McCain: Don’t Pull Troops From Iraq. Sen. John McCain, the Republican presidential nominee-in-waiting, said Tuesday that any hasty pullout from Iraq would be a mistake that would favor Iran and al-Qaida. McCain, who has linked his political future to U.S. success in Iraq, was in the wartorn country on Monday for meetings with Iraqi and U.S. diplomatic and military officials. Read more at-http://www.breitbart.com/print.php?id=D8VFSCIG0&show;_article=1
-In the face of a possible escalation with Syria and Iran’s efforts to obtain a nuclear weapon, parts of the country will shut down next month in what security officials say will be the largest emergency exercise in Israel’s history. Read more at-http://www.jpost.com/servlet/Satellite?cid=1205420704459&pagename;=JPost%2FJPArticle%2FPrinter
© 2009, Worldwide Precious Metals.
www.wwpmc.com
The GoldBugg Report – Gold Rebounds on Weak Dollar
Posted by Worldwide Precious Metals on Tuesday, March 25, 2008
The GoldBugg Report March 18th
March 18, 2008
In this week’s GoldBugg Report:
- How Subprime Killed Bear Stearns.
- Gold breaks $1000, but Silver could be an even better buy!
- Fed cuts rates by 3/4 of a point as it risks lower dollar in effort to ward off recession.
How subprime killed Bear Stearns
A problem with risky mortgages has led to a global financial crisis. The bigger issue: Experts don’t know when it will end.
http://money.cnn.com/2008/03/17/news/economy/gothere/index.htm?postversion=2008031716
-Gold touches $1,000 once more into the breach! Silver rising even faster. With gold touching $1,000 before pausing for breath, it seems the psychological barrier breach is upon us at last but silver could be an even better buy! Read more at-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=49334&sn;=Detail
Fed cuts rates by 3/4 of a point
Central bank lowers key rate to lower borrowing costs for consumers, businesses, as it risks lower dollar in effort to ward off recession. http://money.cnn.com/2008/03/18/news/economy/fed_rates/index.htm?postversion=2008031814
-Consumer Price Index (CPI). A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. Sometimes referred to as "headline inflation".
The U.S. Bureau of Labor Statistics measures two kinds of CPI statistics: CPI for urban wage earners and clerical workers (CPI-W), and the chained CPI for all urban consumers (C-CPI-U). Of the two types of CPI, the C-CPI-U is a better representation of the general public, because it accounts for about 87% of the population.
CPI is one of the most frequently used statistics for identifying periods of inflation or deflation. This is because large rises in CPI during a short period of time typically denote periods of inflation and large drops in CPI during a short period of time usually mark periods of deflation. Investopedia.com
-Producer Price Index (PPI). A family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller. The PPI looks at three areas of production: industry-based, commodity-based, and stage-of-processing-based companies. Investopedia.com
-”Regardless of the dollar price involved, one ounce of gold would purchase a good-quality man’s suit at the conclusion of the Revolutionary War, the Civil War, the presidency of Franklin Roosevelt, and today.” Peter A. Burshre
-30 years of gold highs and lows. Read full story at-http://news.bbc.co.uk/1/hi/business/7284184.stm
-Precious Gold 101: As Reliable as Ever. Read more at-http://www.resourceinvestor.com/pebble.asp?relid=41179
-Mortimer Zuckerman, co-founder of Boston Properties Inc., the largest U.S. office real estate investment trust, said the U.S. economy is in a recession and there’s no sign of a recovery.
“We are looking at the worst set of macroeconomic conditions since the Great Depression,” Zuckerman said in an interview with Bloomberg Television. “I don’t know where the bottom is. The federal government’s going to have to do a lot more to contain what I think is the potential of a perfect storm.” Read full story at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aHLKk89J4tW8
-Bank of Canada Governor Mark Carney said an end to the turmoil in financial markets “is not yet in sight,” though regulators should use their new understanding of the problems to craft a careful response. Read full story at-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aSd1i6N7PHjg&refer;=canada
-If anyone still has money in any stocks or mutual funds, it’s time to exit. The sooner the better, because the longer people wait, the less they get for their paper. And then, guess where they are going to put it? Got gold? Alex Wallenwein
-”Mr. Bernanke, with his monetary policies, he will destroy the U.S. dollar,” Marc Faber, with $300 million under management at Hong Kong-based Marc Faber Ltd., said in an interview with Bloomberg Television. The publisher of the Gloom, Boom & Doom report predicted U.S. rate cuts will spur inflation. Bloomberg
-Marc Faber remains a long-term gold bull. With prices hitting $1,000 (U.S.) an ounce this week, gold has risen so high in price he says some other bullion lovers he knows have already returned to cash. He has not. He thinks the metal could pass $3,000 an ounce, if only temporarily, like in the spike of the early 1980s. Thestar.com-Read more at-
http://www.thestar.com/printArticle/326371
-IMF’s Lipsky warns of ‘unthinkable’ in global credit crisis. The International Monetary Fund today warned authorities worldwide to "think the unthinkable" in planning to cope with a mounting crisis in the global financial system. Read more at-
http://www.iht.com/articles/2008/03/12/europe/france.php
-Miners Top MBAs as Metal Boom Makes Geologists Scarce. Read more at-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aa9YCwmKdSKA&refer;=home
-Crisis in mining deepens. Read full story at-http://working.canada.com/toronto/resources/story.html?id=faf9b33d-f118-4622-92bb-9c4ccafd70e1
-Consumer confidence lowest on record. RBC Cash Index surpasses the previous low set in February, sinks to the lowest point in data going back to 2002. Read more at-
http://money.cnn.com/2008/03/07/news/economy/consumer_confidence.ap/index.htm
GOLD
-Gold at $1,000 on Weak Dollar, High Oil. Read more at-http://biz.yahoo.com/ap/080313/gold_record.html?.v=7 or http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aBg.5gK.T.78 or http://money.cnn.com/2008/03/13/markets/gold/index.htm
-Sprott Sees Financial Turmoil Pushing Gold to $2,000 an Ounce. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aVMsmS.ikYd4&refer;=canada
-Yamana sees gold at $1,500 this year. Soaring gold prices are likely to breach $1,500 an ounce in 2008, the chief executive of Canada’s Yamana Gold Inc said on Tuesday. "There is a good chance we will see it before the end of this year," Peter Marrone told the Reuters Global Mining Summit in London. Marrone said the current environment formed "a perfect storm" for higher gold prices, which would need to rise to more than $2,000 in adjusted dollars to match the previous nominal peak of $850 set in 1980. Reuters
-Goldcorp Inc expects the price of gold to top $1,000 an ounce and stay there for a long time, a development that will allow the company to improve operating margins, Chief Executive Kevin McArthur said on Monday. In a wide-ranging interview at the Reuters Global Mining Summit, McArthur, who is also president of the Canadian gold producer, said he thinks the price of gold is not "anywhere near a bubble." "We are not replacing the reserves that we’re mining, and yet demand continues to grow worldwide. We’re going to run out of gold," he said of the global gold industry. Reuters
-Important to Focus on Long Term. Those who call a top in gold or think it is overvalued or a bubble simply because it has reached record nominal highs in the dollar (nearly the weakest currency in the world) show a fundamental lack of knowledge of markets and long term financial and economic history. Gold today is akin to the Dow Jones Industrial Average in 1954 when it had recovered to the same price that it had been prior to the Wall Street Crash in 1929 and the subsequent Great Depression.
The DJIA fell from over 400 in 1929 to as low as 50 in 1933 prior to increasing in value by some 800% in the next 20 years. Those who called a top in the DJIA in 1954 were very wrong despite the DJIA having risen some 800%. Subsequently it rallied from 400 in 1954 to over 1000 on 1966. Gold too is likely to double or treble in value from its record nominal highs of $850 set some 28 years ago.
Simply because a market has surpassed a very old nominal high or reached a new record high does not mean it is overvalued. Witness the DJIA in recent years. Was it overvalued when it reached new record highs in the 1980s (after the brutal bear market of the 1970s) and then again reached new record highs in the 1990s.
Calling a top in gold today and calling it a bubble is akin to calling a top in the DJIA in 1990 (DJIA was at 2,600) or earlier. All markets experience long term cycles of bull markets and bear markets and periods of undervaluation followed by periods of growth and then overvaluation. Gold is likely in the intermediate stage of its new secular bull market. Gold.ie
-Oil has again surged to new record highs above $110 confounding the usual ‘don’t worry be happy’ pundits who declared that oil was a bubble at $50 through to $100 per barrel. Gold will do the same thing in the coming weeks. Analysts who are either uninformed or would prefer not to face reality will say gold is overvalued and due for a correction (for the umpteenth time – as the same thing was said when gold was at $500, $600, $700, $800 and $900).
They will be proved wrong again as gold is more than likely to surpass it’s inflation adjusted dollar high of $2,300 per ounce in the next 3 to 7 years. Unfortunately misguided and dangerous prognostications will have lulled many investors into a continuing false sense of security. Thereby resulting in the majority of investors being exposed to the coming serious recession in the UK, US and much of the western world.
Over optimism and irrational exuberance loses investors money. Paying lip service to diversification is particularly dangerous in the current times. Individual, pension and institutional investors are not diversified simply by allocating to cash, property and equities. Every portfolio also should have an allocation to commodities to protect against the ravages of inflation and an allocation to the finite currency of gold which is the essential financial insurance of a truly properly diversified portfolio.
The confluence of a possible energy and inflation crisis, monetary crisis (centered on the current global reserve currency the dollar), credit crisis and likely coming solvency crisis is a classic perfect financial storm. A ‘hear no evil, see no evil’ approach to finance and economics can be extremely injurious to an individual, company and nation’s financial health.
While we all hope for a benign outcome to this the most serious financial and economic crisis since the Great Depression, it is important to deal in reality and be prudently prepared for any likely fallout from this economic crisis. As ever, paying down debt, avoiding extravagant and unnecessary consumption, risk aversion and real diversification should be the order of the day. Gold.ie
-A Super-Dangerous Dow-Gold Divergence. Gold’s been going up and the Dow has been dropping for months, now. If this persists for more than maybe two more months, it can spell utter doom for global equities markets and will cause a huge explosion in precious metals prices and shares. Alex Wallenwein-Read more at-http://www.small-business-goldmine.com/dow-gold-divergence.html
-Potential targets for the Dow & Gold. Read full story with charts here-http://www.financialsense.com/fsu/editorials/2008/0307.html
-South Africa’s mine industry body confirmed the end of more than a century of dominance as the world’s biggest gold producer as ageing ore bodies and safety- related mine stoppages slashed output by 7.4 percent last year.
The country, where three of the world’s six biggest gold producers are based, produced 254.7 metric tons (8.19 million ounces) of the metal last year, the Chamber of Mines of South Africa said, pushing it below China’s 276 tons, according to estimates by London-based researcher GFMS Ltd. Read more at-http://www.bloomberg.com/apps/news?pid=20601116&sid;=aRK_iG4wmyzU&refer;=africa or http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=49132&sn;=Detail
-CPM forecasts new gold supply, increased demand and mine production. CPM Group said Tuesday that the gold market is in disarray with 2008 expected to be more extreme as far as the economic and political conditions that affect gold prices, market trends and development. Read more at-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=49237&sn;=Detail
-Investment Demand Surges in Gold. While 2007 was a banner year for gold investors, the just released 200+ page CPM Gold Yearbook sees the potential for further strength for the yellow metal in years to come so as long as investor demand remains at historically elevated levels.
The CPM Group, which has been publishing its annual analysis of the gold market for over three decades, today unveiled its latest offering, which especially highlights the role of investment demand in driving the mammoth seven year bull market. Read more with charts here-
http://www.resourceinvestor.com/pebble.asp?relid=41116
-Clive Maund-Gold/Silver Market Updates. For story and charts click here-http://www.321gold.com/editorials/maund/maund031308.html
-Record gold prices spawn new lightweight jewellery trend. The era of bling and, in particular, big, heavy gold chains may be waning as record gold and platinum prices are forcing consumers to seek lightweight or hollow jewellery pieces. Read more at-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=49075&sn;=Detail
-So, will gold play catch-up with oil in inflation-adjusted terms? Will we see gold at $2300 per ounce? My guess is that we will. Clearly OPEC is not in the mood to carry the burden of competitive currency devaluations further.
The historic relationship between oil and gold is likely to reassert itself, and it is unlikely that it will be because crude oil took a fall. Gold, when viewed in inflation-adjusted terms, looks like quite the bargain. Michael J. Kosares-Will Gold Catch-Up with Crude? Read full story with charts here-http://news.goldseek.com/GoldSeek/1205263969.php
-Germany’s central bank Bundesbank will hold on to gold reserves. For the present, the president of Germany’s Bundesbank said Tuesday the central bank will hold on to the majority of its gold reserves until bank officials meet in September. Read more at-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=49215&sn;=Detail
-The World Gold Council wants to cross-list its New York-listed StreetTRACKS Gold Shares GLD.P, a gold exchange-traded fund (ETF), in Japan and Hong Kong by September, the industry body’s chief executive said on Tuesday. James Burton also said that the global demand for gold was likely to have fallen in the March quarter owing to high prices and volatility, but did not give an estimate of the change.
"I am pretty confident that in the next two quarters we will be able to cross-list our ETF in Japan and Hong Kong," Burton said after a board meeting of the WGC in Mumbai. Greg Wilkins, president and chief executive of Barrick Gold Corp, the world’s largest gold producer, was appointed as the WGC’s new chairman in the meeting. Wilkins said he would focus on developing ETFs and enhancing the reputation of the gold mining industry.
The WGC was looking at markets such as Dubai to sponsor new ETFs, but it had no plans to start such a fund in India, which has a nascent ETF market where five players collectively hold less than four tonnes of gold. "We have chosen not to launch our own product in India to compete with existing ETFs as we would like to see how the market develops," Burton said.
For now, the trade body funded by producers was content to promote gold jewelry in India, the world’s largest consumer of gold, said Pierre Lassonde, the outgoing chairman of WGC. "We have increased our budget by six times in the last three years in India," Lassonde said. Demand in India, which imports over 700 tonnes of the yellow metal, has taken a hit from soaring gold prices.
In the fourth quarter of 2007, global gold demand dropped 17 percent from a year earlier to 843 tonnes due to a sharp drop in jewelry buying by India, WGC data showed, and Burton said demand was likely to have eased in the current quarter. "There are some positives and some negatives," but overall it would be a "down quarter", he said. Reuters
SILVER
-Continue to watch silver, whose ratio with gold will surely improve. In other words, silver gains will outpace those of gold. The desperate central banks have no silver to dump on the market. Jim Willie CB-Dollar-Gold: A Perfect Storm-Read full story with charts here-http://www.321gold.com/editorials/willie/willie030708.html
-Is Silver the Sleeper? "The major monetary metal in history is silver, not gold." Coming back to forecasting the price of silver, we need to define a methodology. One way is to use what I call the classic, or monetary, ratio. This is based upon a bimetallic standard, which was exercised when both gold and silver were used daily as money.
The ratio was fixed between 15-16 to 1. In other words, one ounce of gold bought 16 ounces of silver. If we use our gold price of $2900 derived in last week’s column, and divide by 16, that puts silver at $181.25 per ounce. Is this possible? Under our current financial conditions I am reluctant to rule out anything, but I am also a practical investor.
Before we ever get to even $100, which I have forecast as a price I do expect silver to achieve, we must move above $30, then $40, and take out the old nominal high of $50. I think you see my point, and the ultimate high price is impossible to determine, because only the market knows. But in my view, silver has way too many things going for it not to continue higher over the next several years. Consider the following points:
•Silver has every monetary attribute of gold and is far more affordable to the general public
•Monetary worry was primarily U.S.-based in 1980; today it is a worldwide concern
•The U.S. was in far stronger financial condition in 1980 than today
•The Silver ETF did not exist in 1980
•Silver is a much smaller market than gold, and therefore any new buying (or selling) has much more effect on the price
•In 1980, silver hit $50 per ounce when there were at least two billion ounces of silver in bullion form; today there is less than one-fourth that amount. David Morgan-Read full story at-
http://www.ibtimes.com/articles/20080307/is-silver-the-sleeper.htm
-Three Pictures of Silver. Short-Term Picture, 36 Months. There are two things to notice on this chart: The Upper bound of the Up-Channel has not been reached yet; so there is a potential here. Ascending triangle (grey area on the chart) places the up-side target at $25.00.
Mid-Term Picture, 7 years.
So far so good – the pattern proves persistent rate of growth and almost identical time span for subsequent consolidations, each consolidation lasted two years. However, we expect increased volatility and ascent of silver price to accelerate. We’re five years into this bull market and there is no cycle top in sight yet.
-Longer-Term Picture, 28 Years. This chart is for those who thinks it’s "too late" to buy Silver. As you can see below, Silver just broke out from a 28 year base formation. On a time basis, this cycle is just getting started. SilverStratetgies.com team
-One of the most important aspects of investing is that it is genuinely hard work. There are no shortcuts. Taking it easy for a while simply isn’t an option if you strive to make a decent return every year. One has to stay focused, in order that they will be able to anticipate and then take advantage of great opportunities, things which are rare. And yet, we are now being handed a great opportunity on a silver platter.
This is an opportunity that could be life changing for many. I know that I have said it before, and that to some of you may think I sound like a broken record, but it is crucial for investors to act quickly in order that they might profit from this chance of a lifetime. Several updates ago, in the October 2007 issue of the Resource Fortunes Premium Newsletter, I outlined my expectations for the price of silver during the coming years based on the gold-silver ratio.
I made the case that silver should soon being accelerating its advance against gold if my thesis were true, and I think we have just witnessed the early stages of the declining gold-silver ratio. Lately, silver has been making huge daily swings, and the big picture is becoming clearer and clearer. If the weekly chart in this month’s update is correct, we are on the verge of completing the presented head and shoulders pattern, triggering a gold-silver ratio of 12 to 14.
If the neckline is taken out, we should see the next stage in this cycle occur, i.e. another acceleration in the declining gold-silver ratio. If this transpires, silver producers and explorers could really take off, sending their share prices into orbit. Breaking this neckline would cause the price of Silver to explode, so much so that we might even begin to see the price rising dollars at a time, instead of just cents, quite similar to the price action in the late 1970s and early 1980s.
The difference is that this time the rise will be the cause of an ever growing crowd of individuals, rather than two brothers. Personally, I’m boarding this train before it leaves the station. Even if it turns out that I’m a bit early, I’m confident that the real thing is underway and would rather suffer in the short term than be left wondering whether or not I should buy a ticket as silver vaults higher and higher. Roy Martens-Read more at-http://news.silverseek.com/SilverSeek/1205273785.php
-Silver Nanoparticles Deadly to Bacteria. Read more at-http://www.physorg.com/printnews.php?newsid=124376552
PLATINUM-PALLADIUM
-Platinum jewellery roundup for February 2008. Read full story at-http://www.platinum.matthey.com/media_room/1204714817.html
-Norilsk-led palladium alliance to push jewellery usage. Palladium’s lower unit price means that it continues to eat into platinum’s market share in the jewellery industry. The industry overall continues to show a very healthy rate of growth, however. Read more at-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=49009&sn;=Detail
COMMODITIES
-Farmers struggle to keep up with world food demand. Read more at-http://www.iht.com/articles/2008/03/09/business/crop.php
-Investors Plan to Buy More Commodities, Barclays Says. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aB_d6g4UnuGE&refer;=canada
OIL-GAS
-Oil, a dollar-denominated commodity that has reaped big gains from the greenback’s recent tailspin, is likely to keep pushing higher as the dollar continues its slide, say analysts. Read more at-http://www.marketwatch.com/news/story/dollars-continued-drop-could-mean/story.aspx?guid=%7bEEC538E0-F5C8-4D28-9321-B076DEE21BF7%7d&dist;=TNMostRead&print;=true&dist;=printTop
-Oil Prices Too High But Don’t Look to OPEC for Help. Read more at-http://www.resourceinvestor.com/pebble.asp?relid=41146
-Oil spike to last through 2008: OPEC president. Read more at-http://biz.yahoo.com/rb/080310/opec_khelil.html?.v=1&printer;=1
-Natural Gas Hits $10; Higher Utility Bills for Canadians Expected. Read more at-http://www.resourceinvestor.com/pebble.asp?relid=41107
-European Gas Sector Threatened by Shortages. Read more at-http://www.resourceinvestor.com/pebble.asp?relid=41058
INFLATION
-Surging costs of groceries hit home. Read more at-http://www.boston.com/business/personalfinance/articles/2008/03/09/surging_costs_of_groceries_hit_home?mode=PF
-China Inflation Surges 8.7% on Blizzards, Food. Read more at-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=ayx1ENtw.uK4&refer;=home
-Surging Commodities May Be Signalling Stagflation, Hicks Says. Read more at-http://www.bloomberg.com/apps/news?pid=20601012&sid;=anHP.rxOfFRY&refer;=commodities
-Recession, GDP and Inflation: Conventional Wisdom or Data. Bud Conrad-Read full story at-http://www.321gold.com/editorials/casey/casey031208.html
U.S. FINANCIAL CRISIS CONTINUES
-Fed to Lend $200 Billion, Take on Mortgage Securities. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aXFA6cyhCF7M&refer;=home
-Subprime-related losses at global financial institutions have so far totaled as much as $215 billion, with about 55 percent of that coming from the United States, the head of Japan’s financial regulator said on Monday.
The estimates from Japan’s Financial Services Agency (FSA) come after JPMorgan Chase & Co said in a report late on Friday Wall Street banks are facing a "systemic margin call" that could deplete them of up to $325 billion in capital. European losses totaled about 8 trillion yen ($78.5 billion), while Asia and Canada together accounted for about 1.4 trillion, FSA Chairman Takafumi Sato told reporters at a regular briefing.
Japan’s financial institutions have so far avoided the massive subprime losses taken by overseas rivals, but they have not escaped unscathed. Subprime losses at Japanese banks more than doubled to 600 billion yen in the last quarter of last year, with total exposure to subprime investments hitting 1.5 trillion yen, the FSA said last month. "Compared to overseas, Japan’s subprime-related losses and exposure are relatively limited," Sato said. Reuters
-Fed takes boldest action since the Depression to rescue US mortgage industry. Read more at-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/12/cnfed112.xml
-S&P; Says End in Sight for Writedowns on Subprime Debt. Standard & Poor’s said the end is in sight for writedowns by the world’s largest financial institutions. Writedowns from subprime-mortgage securities will probably rise to $285 billion, New York-based S&P; said today in a report titled “Subprime Write-Downs Could Reach $285 Billion, But Are Likely Past The Halfway Mark.”
The ratings company had previously estimated losses of $265 billion in January. S&P; raised its estimate because of increased loss assumptions for collateralized debt obligations, the company said. “The positive news is that, in our opinion, the global financial sector appears to have already disclosed the majority of valuation writedowns,” S&P; credit analyst Scott Bugie said in an accompanying statement. Bloomberg
-U.S. Treasuries riskier than German debt, default swaps say. Read more at-http://www.bloomberg.com/apps/news?pid=20601103&sid;=aVl4JGYmkX0M&refer;=us
HEDGE FUNDS IN COLLAPSE
-Carlyle Capital Nears Collapse as Rescue Talks Fail. Carlyle Group said creditors plan to seize the assets of its mortgage-bond fund after it failed to meet more than $400 million of margin calls on mortgage backed collateral that plunged in value. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aFDtyjWMME5M&refer;=home
-Drake May Shut Largest Hedge Fund; GO Capital Halts Redemptions. Drake Management LLC, the New York- based-firm started by former BlackRock Inc. money managers, may shut its largest hedge fund, while GO Capital Asset Management BV blocked clients from withdrawing cash from one of its funds. Drake told investors today that it would either liquidate its $3 billion Global Opportunities fund, continue to restrict redemptions or allow clients to shift assets to a new fund. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aka3h3.0KKrg&refer;=home
-ING New Zealand Suspends Withdrawals From Two Funds. Read more at-
http://bloomberg.com/apps/news?pid=20601208&sid;=abSxJA8iOjOc&refer;=finance
U.S. FISCAL-TRADE DEBT
-Federal budget deficit up more than 60%. Government spending rises to trillion-dollar range while revenue is up slightly. The federal budget deficit for the first five months of this fiscal year has risen more than 60% from the prior year after ballooning by more than expected in February, the Treasury Department said Wednesday. In its monthly finance review, the Treasury Department said the budget deficit totaled $263.3 billion for the fiscal year that began Oct. 1, up from $162.2 billion reported in the same period a year earlier.
The deficit for the month of February reached $175.6 billion. A consensus of analysts polled by Briefing.com expected a budget deficit for the month of $170 billion. Thus far, government spending has risen 10.2% to $1.2 trillion compared to the previous year, while revenue has risen only 1.3% to $967.2 billion. "In the short run, given the economy is weak, budget deficit is probably a good thing because that means the government is spending money to stimulate the economy," said Gus Faucher, an economist with Moody’s Economy.com.
Faucher said that we still have yet to see the affect of the government’s stimulus package. Stimulus rebate checks $600 for individuals and $1200 for couples filing jointly, plus $300 per child are expected to be mailed out to qualifying households in May. The government projected that the budget deficit for all of fiscal 2008, which includes stimulus package spending, will total $410 billion, unchanged from last month’s estimate, and near 2004’s record high of $413 billion.
However, "budget deficit in the long-term means that the government is essentially soaking up money that would normally be invested in the private sector to grow the economy," added Faucher. Congress began debating two rival plans Wednesday aimed at balancing the budget. One, backed by Democrats, would rely on tax hikes when President Bush’s tax cuts expire in about three years. The other, backed by Republicans, would preserve the tax cuts, but slash costly entitlement programs such as Medicare and housing. Cnnmoney.com
-U.S. January Trade Deficit Rises 0.6%; Exports Gain. Read more at-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aV5igqR6Ae38&refer;=home
JIM ROGERS SAYS ABOLISH THE U.S. FED
-Federal Reserve Chairman Ben Bernanke should resign and the Fed should be abolished as a way to boost the falling dollar and speed up the recovery of the U.S. economy, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe Wednesday. Asked what he would do if he were in Bernanke’s shoes, Rogers, who slammed the Fed for pouring liquidity in the system and accepting mortgage-backed securities as guarantees, said: "I would abolish the Federal Reserve and I would resign."
If this happened, "we don’t have anybody printing money, we don’t have inflation in the land, we don’t have a collapsing U.S. dollar," he told "Squawk Box Europe." The Federal Reserve announced on Wednesday a rescue package that it would put around $200 billion into banks and investment houses and allow them to put up risky home-loan packages as collateral. Wall Street responded to the news with the biggest rally of the year, but Rogers reminisced of the 1970s, when the Fed printed money to avert a recession, boosting inflation and then forcing interest rates to more than 20 percent to keep a lid on price rises.
"No country in the world has ever succeeded by debasing its currency," he said. "That’s what this man is trying to do. He’s trying to debase the currency as a way to revive America. It has never worked in the long term or the medium term." The Fed’s move to accept risky collateral is not part of the central bank’s business, he added. "What is Bernanke going to do? Get in his helicopter and fly around the world and collect rents? That’s absurd," Rogers said.
A recession may be a good way to clean up the economy, while trying to prevent one may cost more and actually worsen the recession, Rogers said. Also, investment banks should be allowed to fail. "Listen, investment banks have been going bankrupt since the beginning of time. If people make mistakes if you bail out every investment bank that gets in trouble, that’s not capitalism, that’s socialism for the rich," he said.
The weakest financial institution is Fannie Mae, in Rogers’ opinion, "but all of them have problems." He said he had a short position on all investment banks and is buying agricultural commodities such as cotton, wheat, coffee and sugar and was also buying the Chinese yuan and the Japanese yen. "Buy agriculture. Agriculture is one of the few places where you’re going to make a fortune in the next years," Rogers said. CNBC
DERIVATIVES THE NEW TICKING BOMB
-Derivatives the new ‘ticking bomb.’ Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen. "Charlie and I believe Berkshire should be a fortress of financial strength" wrote Warren Buffett. That was five years before the subprime-credit meltdown. "We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside.
In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal." That warning was in Buffett’s 2002 letter to Berkshire shareholders. He saw a future that many others chose to ignore. The Iraq war build-up was at a fever-pitch. The imagery of WMDs and a mushroom cloud fresh in his mind. Also fresh on Buffett’s mind: His acquisition of General Re four years earlier, about the time the Long-Term Capital Management hedge fund almost killed the global monetary system.
How? This is crucial: LTCM nearly killed the system with a relatively small $5 billion trading loss. Peanuts compared with the hundreds of billions of dollars of subprime-credit write-offs now making Wall Street’s big shots look like amateurs. Buffett tried to sell off Gen Re’s derivatives group. No buyers. Unwinding it was costly, but led to his warning that derivatives are a "financial weapon of mass destruction."
That was 2002. Derivatives bubble explodes five times bigger in five years Wall Street didn’t listen to Buffett. Derivatives grew into a massive bubble, from about $100 trillion to $516 trillion by 2007. The new derivatives bubble was fuelled by five key economic and political trends:
Sarbanes-Oxley increased corporate disclosures and government oversight
Federal Reserve’s cheap money policies created the subprime-housing boom
War budgets burdened the U.S. Treasury and future entitlements programs
Trade deficits with China and others destroyed the value of the U.S. dollar
Oil and commodity rich nations demanding equity payments rather than debt-Read more at-http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid=%7bB9E54A5D-4796-4D0D-AC9E-D9124B59D436%7d&dist;=sp_inthis&print;=true&dist;=printTop
U.S. DOLLAR
-Chart of the Day. Thanks in part to a large US trade deficit and a weak US economy, the US dollar continues to trend lower. For some perspective, today’s chart illustrates the current trend in the US dollar (blue line) as well as that other world currency, gold (gray line). As today’s chart illustrates, the performance of the US dollar has varied inversely to that of gold since October 2005. It is worth noting that the US dollar is currently testing support.
-James Turk-A New Record Low for the Dollar. The US dollar took centre stage this past week by plumbing new depths. The US Dollar Index made a record low, as we can see on the following chart.
I first presented the arrow on the above chart in my alert on November 11, 2007, and made the following observation. "When taken together, the eerie calm as the dollar collapses and the arrow in the above chart pointing to the building downside momentum suggest that the dollar is nowhere near its final low." That eerie calm remains. Few people are yet facing the facts.
For example, this past week I heard a business television reporter make the following ridiculous comment: "The dollar is at an all-time low because the European Central Bank doesn’t want to cut interest rates." It is of course easy to blame others for the dollar’s problems, rather than those truly culpable, namely, the spendthrifts in Washington, D.C. and the apparatchiks in the Federal Reserve who provide the politicians with all the dollars they want.
Another example of ignoring reality are the misguided media reports that state rising commodity prices are due to crop shortages. In reality, a tight supply of wheat cannot possibly explain why the prices of nearly all commodities are rising. It’s not because there are too few commodities, but rather, too many dollars.
The Federal Reserve stopped reporting M3, the total quantity of dollars, in March 2006. But thanks to the work of John Williams of www.shadowstats.com we know how rapidly M3 is growing. The red line on the following chart shows the growth in M3 since the Fed stopped making that data available. The Fed obviously did not want us to know how many dollars they would be creating, which is now approaching record rates of growth.
The dollar is falling off the edge of a cliff, and for good reason. I continue to believe that the possibility of a dollar collapse is both real and imminent, and the probability of this outcome for the dollar increases with each new high in the precious metals like those achieved this past week. Ominously for the dollar, the following charts indicate that more new highs in gold and silver look probable in the weeks immediately ahead.
-Dollar still stronger than it might be, IMF says. The euro’s rise has put it on the "strong side" on a medium-term basis but the U.S. dollar’s value still needs to come down despite its recent decline, the International Monetary Fund said. Just a few months ago the IMF said the euro’s exchange rate was broadly in line with medium-term fundamentals.
"Our view now is that after the appreciation it is now on the strong side in relation to its medium-term fundamentals in relation to its broad trading partners," IMF spokesman Masood Ahmed told a news briefing.
He said the dollar’s decline had brought the U.S. currency closer to its fundamentals "but it remains within that framework still on the strong side," adding: "Our view on the dollar hasn’t changed. The depreciation of the dollar in terms of its multilateral real effective exchange rate has brought it much closer to its fundamentals but it remains within that framework still on the strong side." Read full story at-http://www.gata.org/node/6074
REAL ESTATE
-Next-door foreclosures slam home values. Read full story at-http://www.businessweek.com/ap/financialnews/D8VC3T483.htm
-Misjudging The Depths Of The Real Estate Bust. Read more at-http://thehousingbubbleblog.com/?p=4263
-They Just Wanted A Little More In California. Read more at-http://thehousingbubbleblog.com/?p=4249
-Where Is The Bottom To This Housing Free Fall? Read more at-http://thehousingbubbleblog.com/?p=4251
FORECLOSURES-MORTGAGES
-Foreclosures hit all-time high. Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on payments. Read more at-
http://money.cnn.com/2008/03/06/real_estate/defaults_continue_climb/index.htm
-U.S. Home Defaults, Foreclosures Rise 60% in February. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=auB36HQoB6Uw&refer;=home
-Foreclosure crisis has ripple effect. Read more at-
http://www.usatoday.com/news/nation/2008-03-11-foreclosures_N.htm
-The next shoe to drop in housing. Rising foreclosures and big losses at Fannie Mae and Freddie Mac are making it harder for people with good credit backgrounds to get a traditional mortgage. Read more at-http://money.cnn.com/2008/03/13/news/economy/conformingloans/index.htm?postversion=2008031308
-House’s Frank Unveils Foreclosure-Prevention Legislation. U.S. House Financial Services Committee Chairman Barney Frank unveiled legislation to expand the federal government’s role in shielding consumers from losing their homes as foreclosures reach record levels.
Frank’s proposal would allow the Federal Housing Administration to insure and guarantee refinanced mortgages after lenders and loan holders reduce principal to a level borrowers can repay, according to a draft of the legislation released today by Frank’s office in Washington. “This could potentially refinance between 1 and 2 million loans and help these families stay in their homes, protect neighborhoods and help stabilize the housing market,” according to the draft from Frank, a Massachusetts Democrat. Bloomberg
GEOPOLITICAL
-Cost of Afghanistan and Iraq operations soars. Read more at-http://www.guardian.co.uk/politics/2008/mar/10/iraq.defence/print
-Iraq war costs US$12 billion per month: study. Read more at-http://www.abcnews.go.com/International/wireStory?id=4418698
-MI5 targets four Met police officers ‘working as Al Qaeda spies’. Read more at-http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=528813∈_page_id=1770
© 2009, Worldwide Precious Metals.
www.wwpmc.com
The GoldBugg Report March 18th
Posted by Worldwide Precious Metals on Tuesday, March 18, 2008
The GoldBugg Report – Precious Metals: The best performing financial assets this year.
March 11, 2008
-Gold Beats Financial Assets as Investors Seek Haven. Gold, silver, platinum and palladium may be the best-performing financial assets this year as inflation and slowing growth erode the value of the world’s major currencies, bonds and stocks. Precious metals have risen at least twice as fast as the euro and yen in 2008 and returned six to 20 times as much as U.S. Treasuries. The Standard & Poor’s 500 Index and all other major gauges of equities are down. Gold futures reached an all- time high this week, while silver traded at its most expensive price since 1980.
Investors are using metals to preserve their buying power as the U.S. Dollar Index falls to a record and inflation accelerates. Gold, platinum and palladium may gain at least 27 percent this year as Federal Reserve Chairman Ben S. Bernanke prioritizes cutting interest rates over controlling consumer prices, said Ron Goodis, a trader at Equidex Brokerage Group Inc. in Closter, New Jersey, who has been buying and selling gold since 1978.
"It is hard to see how the monetary environment is going to be anything but supportive of higher gold and commodity prices anytime this year,” said Chip Hanlon, who holds gold as manager of $1.5 billion at Delta Global Advisors Inc. in Huntington Beach, California. "If currencies don’t carry a favorable interest over metals, then why not own gold or platinum?” Read full story at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a32yIjCiPM9E&refer;=home
-Agflation. An increase in the price of food that occurs as a result of increased demand from human consumption and use as an alternative energy resource. While the competitive nature of retail supermarkets allows some of the effects of agflation to be absorbed, the price increases that agflation causes are largely passed on to the end consumer.
The term is derived from a combination of the words “agriculture” and “inflation.” Interest in alternative energies contributes to agflation. In order to produce biofuel (such as biodiesel and ethanol), manufacturers need to use food products such soybeans and corn. This creates more demand for these products, which causes their prices to increase.
Unfortunately, these price increases spread to other non-fuel related grains (such as rice and wheat) as consumers switch to less expensive substitutes for consumption. Furthermore, agflation will also affect non-vegetative foods (eggs, meat and dairy) as the price increases for grain will make livestock feed more expensive as well. Investopedia.com
-”The natural tendency of every government is to grow steadily worse that is, to grow more satisfactory to those who constitute it and less satisfactory to those who support it.’ H.L. Mencken
-”I’ve reluctantly discarded the notion of continuing to manage the portfolio after my death abandoning my hope to give new meaning to the term “thinking outside the box.’ Warren Buffett-On the search to succeed him as investment manager of Berkshire Hathaway-Read more at-http://money.cnn.com/2008/02/29/news/newsmakers/barr_buffett_succession.fortune/index.htm
-Gold near $1,000 no panacea to falling supply. A jump in the gold price over the magical $1,000 per ounce level would not be enough to bring on a surge of new production due to uncertainty over long-term prices, logistics problems and scarcity of projects. Global gold production has slipped by six percent since 2001 and analysts say current record prices are not expected to reverse the eroding trend in the next several years. Read full story at-http://www.reuters.com/article/hotStocksNews/idUSL0475144320080304
-On an historic basis, the statement “Gold is a better buy than oil” makes sense. During the past 18 years the gold/crude oil averaged 14 times. The current ratio is 9.71 and recovering. Gold is cheap relative to crude oil. Read more at-http://money.cnn.com/2008/03/03/news/economy/bank_failures/index.htm?source=yahoo_quote
GOLD
-When gold breaks above $1,000, then what? Should the the price of gold burst through the $1,000-per-ounce barrier, which it nearly did on Wednesday, experts predict it could reach higher records and even double this year. “We could see gold spike this year and hit $1,500,” said Jay Taylor, who produces an investor newsletter, Gold & Technology Stocks.
“Gold has a shot at $1,200 or even $1,500 this year and ultimately will go a lot higher,” said Peter Schiff, chief executive of Euro Pacific Capital in Darien, Connecticut. Peter Spina, who runs goldseek.com, a gold investor web site, said of the surge: “It’s mostly institutional investors now, but we are seeing more enthusiasm and $1,500-$2,000 gold in the next 12 months is definitely possible.”
Thomas Winmill, portfolio manager of the $290-million Midas Fund in New York, said, “If gold crosses $1,000 and does not significantly jump in price, I would say that the rally has legs because we haven’t gotten to the point where people are investing just because gold is going up. Read more at-http://in.reuters.com/article/businessNews/idINIndia-32321120080305
-Short term support is now at $950 below that at $930 and $915. Strong support in gold is now seen at $890 to $900. The $1000 price level remains a realistic short term price target and $1,200 remains a realistic possibility in the coming weeks. Gold.ie
-It seems that many in the financial markets and even in the precious metal markets do not fully understand the ramifications of a real short squeeze in the precious metals. A massive short squeeze could propel gold and especially silver to far higher levels in the coming weeks. As always best to focus on the medium to long term and the continuing strong fundamentals with uncertainty in equity and property markets, oil at over $100 a barrel, the dollar under continuing pressure and the credit crunch deepening.
These will likely result in any correction in gold being of a short duration prior to challenging the inflation adjusted high of some $2,400 per ounce in the coming years. It is important to focus on the long term fundamentals and not get too caught up in what might be a wave of bullishness followed by a short term correction before continuing higher. We can’t say for sure if this current wave will turn into a parabolic short squeeze which will result in a significant increase in volatility and markedly higher prices.
Thus it would be wise to continue to avoid ‘timing the market’. Investors nervous of buying near a top should adopt a dollar cost averaging approach and maybe buy 33% or 50% of their bullion allocation now and the balance in the coming weeks. This ensures not buying near an intermediate top and ensures getting an average intermediate price. We continue to be confident that our 2008 predictions of $1,200 in gold and $25 in silver remain more than likely. Gold.ie
-Commodity research analysts at London-based Standard Chartered wrote that gold will probably rise more than twice as fast as last year. The price will probably average $934 an ounce in 2008, they predicted, and increase to an average $1,100 an ounce in 2009. Kitco Daily Resource
-Gold, More room to run? Yes, says Mark Hulbert, editor of the Hulbert Financial Digest. Hulbert reports that despite the runup in price, “the editors of gold timing newsletters aren’t becoming commensurately more bullish.’ And “Therein lies a contrast that, from a contrarian point of view, bodes well for gold.’ Kitco Daily Resource
-Will gold finally break $1000 this week? This month? “The answer is any day now,’ said Kevin Kerr, editor of Global Resources Trader. “The talk of yet another rate cut and the dollar continuing to spiral down is all it will take.’
Kerr said he expects $1,000-an-ounce gold in the back months within a week or so and in the spot market within two or three weeks, as long as the dollar continues to slide. “Stops are also likely heavy at that level [$1,000] since it is so psychological,’ he added. After breaching $1000, Kerr thinks gold will hit a wall around $1,150 to $1,200 an ounce. Kitco Daily Resource
-People’s aversion to paper is not just an American phenomenon any more. From the mid-summer trough last year, gold is up about 40% against the British pound, 35% against the euro, 25% against the Japanese yen, and 35% against the renminbi. We don’t know where this trend is heading, but we do know what’s driving it. Paper is paper, and gold is gold. Kitco Daily Resource
-$10,000 per Ounce Gold. Shayne McGuire, an investment expert in the U.S., director of global research for the $115 billion Texas Teacher Retirement System and author of the forthcoming book ‘Buy Gold Now’, said that world gold mining had peaked in 2001 and fallen since, squeezing supply.
“There are strains on supply, as the mining industry struggles to increase production, and there are signs that central banks may begin to slow down their sales of gold after decades of dumping. Clearly, to this last point, there has not been a free market in gold. Perhaps we will soon discover gold’s real value, and I think it’s not cheap. Clearly, central banks have impeded a truly free market in gold. In the years ahead we will discover gold’s true value, and I think it’s several thousand dollars higher than what we see today.”
He said that all the gold in the world was worth $3.4tn, yet only a small fraction of that amount was traded on financial markets. “If 1% of the global value of stocks and bonds roughly $960bn went into gold, the precious metal would sky-rocket.” McGuire added: “Thinking of prices well above $10,000 per ounce would suddenly become rational. Guardian.co.uk
-Gold rises during times of uncertainty, it rises during times of inflation and easy money, it rises when the dollar is weak, and all of this is currently keeping a strong foundation under the gold price. So again, keep your gold for the long-term. It’s today’s best investment and it’s been a great investment for years. Despite normal ups and downs, we strongly believe you’ll be glad that you continued to hold onto your gold, and of course your silver too. Mary Anne & Pamela Aden-Read full story at-http://www.kitco.com/ind/Aden/aden_feb292008.html
-Higher inflation to push gold to $1000/ounce, says RBC. RBC Capital Markets says increased inflation expectations are not priced into the gold price, but it highlights risk of significant physical selling. Read more at-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=48479&sn;=Detail
-Soaring cost of gold causes jewellery market pandemonium. Read more at-http://www.ft.com/cms/s/0/0b05b67c-e733-11dc-b5c3-0000779fd2ac.html
-India Consumed 715 Tonnes of Gold Last Year. Read more at-http://www.resourceinvestor.com/pebble.asp?relid=40919
-IMF says any gold sales will only substitute for unsold central bank quotas. Read interview here-http://www.gata.org/node/6051
-Video of Richard Nixon announcing the end of the gold standard. Watch video here-http://alsblog.wordpress.com/2008/01/25/nixon-ends-gold-convertability/
SILVER
-Silver Price Trades at Record $20 an ounce. The spot price of silver reached new record levels, touching a fresh 28 year peak. The price of silver was quoted bid $20 a troy ounce in overseas trading, surpassing the $20 mark at just after 23:45 Eastern Time, Sunday March 2, 2008. This historic event is document below showing the opening of markets starting in Australia and Asia with a slight pullback to $19.73 before seeing two significant buying waves. Silverseek.com
-Silver breaks through $20 up around 35 percent this year. Read more at-http://www.mineweb.com/mineweb/view/mineweb/en/page675?oid=48478&sn;=Detail
-Silver Buying Spree Pushing Prices to Record Highs. Read more at-http://www.resourceinvestor.com/pebble.asp?relid=40898
-How high can gold and silver go? David Morgan has the answer. Read more at-http://news.goldseek.com/SilverInvestor/1204614180.php
-Silver is still in the early to middle phase of the current intermediate uptrend that promises to drive the price rapidly to the long-term uptrend channel return line now at about $30, so this figure is our target for this advance, on a medium-term basis. Note that silver may considerably overshoot the $30 objective, because the uptrend could well accelerate, especially if the dollar burns a hole in the floor. Clive Maund-Read full story with charts at-http://www.321gold.com/editorials/maund/maund030308.html
-Predicting the Silver Top. Silver is rocketing, the silver shorts are sweating profusely and silver continues to outperform gold as the next big silver spike begins to take shape. The main question now is at what price will you exit your silver position? Readers have queried me for my view on the matter but plainly no one knows to the dollar at what price silver will form a major top in the months ahead.
Some will get it right but there will be more luck than judgment about such price prophecies. At times like these, the venerable record of $50 is looked upon as an obvious target, whilst others state the inflation adjusted measure of $135. Other investors perceive a paradigm shift and see higher prices even than these with $200 for some reason being mentioned more than once. Others seeing a hyperinflationary apocalypse suggest that the price of silver will become meaningless as the dollar vaporizes before our eyes. People like to work with solid numbers, especially ones that are rounded off to the nearest tens or hundreds.
In other words, you won’t get a consensus which is hardly surprising since the price in question lies in the future. Looking at the current price of $20, some may be getting a bit edgy as they look at their increasing profits and fear the top is in and $9 silver is the next objective decimating their new found wealth in the process. That is a natural fear, as natural as the greed that will make others hang on for ever greater prices. What is the happy rational medium between these two dominating emotions? Read full story at-
http://news.silverseek.com/SilverSeek/1204596000.php
-The Silver commercial signal failure appears to be accelerating in silver. Despite surging prices the silver open interest fell continues to fall showing that this is not a speculative bubble, rather a possible commercial signal failure where the huge and unprecedented concentrated short positions in silver are being forced to cover their shorts and buy back silver in significant volumes.
We could see the commercial shorts forced to panic cover en masse creating a massive surge in the silver (and gold) price. This eventuality is looking increasingly likely, especially in the light of the very significant macroeconomic and systemic risks facing the U.S. and many western economies.
Silver has now surpassed the predicted high of most silver analysts in the world who have failed to realise the massive growing supply/demand imbalance in silver and how the humongous and unprecedented short position in silver would lead to prices being propelled to levels that may shock even silver’s more bullish enthusiasts. This happens in most bull markets but will be a sight to behold in silver in the coming years. Gold.ie
-Is this the time for an epic short panic in silver? Perhaps, especially as more people recognize the problem. The combination of severe recent financial stress on the shorts, the fundamentals and index fund buying, combined with the impossibility of buying back the out-sized short position easily makes it a difficult situation for the shorts. A wounded animal is always dangerous, depending on how serious the wounds. They are up against a wall and, if not resolved soon, it is likely to fall on them. Ted Butler-Read full story at-
http://www.investmentrarities.com/03-04-08.html
-Please examine the following two charts-http://www.jsmineset.com/cwsimages/Miscfiles/5841_Silver_Charts_for_3-4-2008.pdf
The first is a silver inflation adjusted chart using the government’s CPI numbers. The second is of the gold/silver ratio. When the ratio is increasing, gold is outperforming silver. When the ratio is declining, silver is outperforming gold. You can see that lately silver has been outperforming gold due to a combination of investment fund money pouring into the grey metal which has also generated quite a significant short squeeze.
The reason that so much money is pouring into silver can be seen by referring to the first chart of inflation adjusted silver. Even after it’s very impressive move of the last few weeks, silver is six times cheaper than its all time record high on an inflation adjusted basis. It would have to exceed $130 to match the 1980 spike high in real terms. You have already seen the inflation adjusted gold chart which shows gold less than half of its all time high in real terms and platinum which has exceeded its all time inflation adjusted high.
When one considers those two metals and then looks at silver, it is no small wonder that the giant commodity index funds are moving into silver in a big way. Keep this in mind when someone yells that silver is overpriced. Dan Norcini
-Video of Robert Kiyosaki Talking about Silver. Watch more at-http://youtube.com/watch?v=FOKn7tiUMyc&feature;=related
PLATINUM-PALLADIUM
-UBS AG, Europe’s largest bank by assets, raised its one-month estimate for platinum 25 percent to $2,250 an ounce, citing "scarcity concerns.” Prices will climb to $2,400 an ounce in three months, London-based analyst John Reade wrote in an e-mailed note. The previous one-month and three-month forecasts were $1,800. Platinum and related metals, or PGMs, have climbed this year after mines were shut for five days in South Africa, the biggest producer of platinum and second biggest for palladium.
The one-month palladium price forecast was raised to $550 from $380 and for three months to $600 from $350, UBS said. Silver will climb to $21.50 in one month, up from $16 previously forecast, and $23 an ounce in three months, up from $14. "A combination of dollar weakness, broad commodity price strength, risk aversion buying and scarcity concerns (about PGMs specifically) will see precious metals trade higher over the next three months,” Reade wrote. Bloomberg
-Platinum deficit will likely widen in ‘08. The platinum market is expected to continue in a supply deficit in 2008, HSBC metals analyst Victor Flores said on Sunday, with the actual size of the shortfall likely to be determined by whether prices remain at current or higher levels, what the higher prices mean for jewellery demand, the extent to which automakers react to supply concerns in South Africa and demand from exchange-traded funds (ETFs).
Based on various scenarios and price levels, Flores forecasts the platinum market will show a deficit of between 500 000 oz and two-million ounces in 2008, although the latter figure is “at the high end” of predictions. Recent electricity-related supply disruptions in the world’s main platinum producer, South Africa, were largely to blame for the expected deficit growth. Read more at-http://www.miningweekly.co.za/print_version.php?a_id=128232
-During a recent CBS broadcast of 60 Minutes, veteran commentator Andy Rooney asked what was all the fuss concerning the recent astronomical rise in platinum prices.
Pricey Platinum affects air pollution control. Read full story at-http://www.processingtalk.com/news/clk/clk109.html
-Platinum, Palladium Are Hot. Both Are Up 50%; Play crucial role in the auto industry. While gold and base metals get most of the attention, platinum and palladium have emerged as a hot topic at this year’s PDAC conference as the industry digests massive price increases with the possibility of even more on the horizon. The two precious metals have been on a tear all year, with prices up about 50% for each, including a record high for platinum yesterday of US$2,277.50 an ounce.
Those gains accelerated in the last week amid blackouts and a worsening power crisis in South Africa, which is responsible for nearly 80% of the world’s platinum and more than 30% of its palladium. The sudden leap in prices serves as a stark reminder of the tightness of many metal markets and how much the world relies on a small number of sources for many of the secondary metals. Read full story at-http://www.financialpost.com/trading_desk/mining/story.html?id=353621
-Palladium stars as investors focus on future substitution. Standard Bank says in a report that both the palladium price and ETFs has surged as investors have focused on its substitution value. Palladium is set to enter the $650-$685 target zone. Read more at-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=48621&sn;=Detail
-Investors, Automakers to Drive Platinum Prices in 2008. Read full story at-http://www.resourceinvestor.com/pebble.asp?relid=40935
-PGM Bull Markets. Scott Wright-Read full story at-http://www.321gold.com/editorials/wright/wright022908.html
COMMODITIES
-Metals Outlook Bullish for Investors With Faith in Emerging Markets. Investors looking to cash in on the increasingly bullish outlook for metals and mining should carefully consider what a slowdown in the U.S. economy will mean for the sector. Read more at-http://www.resourceinvestor.com/pebble.asp?relid=40855
-Rice prices have surged to a 20-year high in the latest sign of global food inflation, creating policy headaches in Asia, where more than 2.5bn people depend on cheap and abundant supplies of the grain. Read more at-http://us.ft.com/ftgateway/superpage.ft?news_id=fto030320081932501720&page;=2
-Calpers to Boost Commodity Investments Through 2010. The California Public Employees’ Retirement System, the largest U.S. pension fund, may increase its commodities investments 16-fold to $7.2 billion through 2010 as raw materials prices surge to records. Calpers, which has about $240 billion in assets, agreed at a Feb. 19 board meeting to hold between 0.5 percent and 3 percent of its assets in commodities, spokesman Clark McKinley said. The Sacramento, California-based fund last year put $450 million into commodities, its first such investment. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aps_cctZFFP0
OIL-GAS
-Crude oil may rise to $120 a barrel within six months due to the dollar weakness and global political tensions, the chief executive officer of Abu Dhabi National Energy Co. said. "I think a trading range between $80 and $120 a barrel this year is about right,” Peter Barker-Homek, the head of the United Arab Emirates state-controlled company, which is also known as Taqa, said in an interview in Dubai today. "But with the softness of the dollar, and the occasional interruptions that you have because of politics, I think we could see $120 oil.” Read more at-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=autFGntuNqZY
-Crude Oil Rises as OPEC Agrees to Maintain Production Targets. Read full story at-http://www.bloomberg.com/apps/news?pid=20602099&sid;=aXF1Y6DWOQuc&refer;=energy
-Matt Simmons peak oil presentation. Is it real? When might it occur. Read more at-http://www.simmonsco-intl.com/files/Kayne%20Anderson%20Energy%20Funds.pdf
-Saudi Arabian Oil Minister Ali al- Naimi, who controls the world’s biggest oil exports, said crude prices are unlikely to fall below $60 a barrel because of rising costs to develop tar sands and alternative fuels. Producing oil from the alternatives costs about $60 to $70 a barrel, "and, therefore, a line has been drawn below which the price cannot fall,” al-Naimi said in an interview published in Petrostrategies, a Paris-based industry newsletter. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=akoKcVKBjiJc&refer;=home
-Exxon Mobil Corp., which recorded the biggest profit ever for a U.S. company last year, plans to raise 2008 capital spending to more than $25 billion to cope with escalating costs for drilling rigs and engineers. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a2FeQRQN8_3o&refer;=home
-Australian oil production is set to drop 8 percent this fiscal year as shutdowns of wells at offshore fields cancel out the effect of project start-ups, the Australian Bureau of Agricultural and Resource Economics said. Read more at-
http://www.bloomberg.com/apps/news?pid=20601081&sid;=aNA4w4BcWspQ&refer;=australia
-China’s Oil Product Demand to Rise 6.5% in 2008. Read more at-http://www.resourceinvestor.com/pebble.asp?relid=40921
-U.S. to permit $5.2B pipeline from Canada. A TransCanada and ConocoPhillips-owned pipeline would transport 590,000 barrels of oil daily through seven U.S. states; State Dept. admits it will cause environmental harm. Read more at-http://money.cnn.com/2008/03/03/news/economy/CanadaUS_oil.ap/index.htm
-Imperial Says Some Fuel Shortages Likely in Western Canada. Imperial Oil Ltd., Canada’s largest refiner, expects "sporadic outages” for several weeks at fuel stations in western Canada after equipment problems reduced output at its Edmonton, Alberta, refinery.
Stations in British Columbia, Alberta, Saskatchewan and Manitoba may temporarily run out of gasoline and diesel after the plant last month "experienced a series of operating issues in the fuel processing units,” Imperial spokesman Gordon Wong said today in a telephone interview. The Calgary-based company isn’t providing details on reduced supplies, he said. Read more at-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aUto8V2klzzs&refer;=canada
-If you’re going to be heading down the Big Sur Coastline anytime soon, you’ll probably going to want to have a full tank before you leave with the price of crude oil skyrocketing. With gasoline following the same direction, the Americo gas station in Gorda, just south of Big Sur is selling premium unleaded gas for $5.39 a gallon. If you can do without premium regular’s a relative bargain at $5.19.
Prices in many Bay Area cities remain above the statewide average with the price for a gallon of gas in Oakland at $3.51; San Francisco, $3.64; Salinas, $3.56; San Jose, $3.52; and Santa Cruz, $3.51. The average price for a gallon of gas in Santa Rosa sits just under the statewide average at $3.49 and in Vallejo a gallon is averaging $3.47, according to AAA. Read more at-http://www.kion46.com/news/local/story.aspx?content_id=df1239b4-5366-4489-86eb-77e6dc9249bc
INFLATION
-The Return of the 1970s. We’ve believed for quite some time that the current period bears much resemblance, economically speaking, to the 1970s. Consider the following trends, all of which took place in the 1970s and are doing so again today:
- The stock market remains range-bound over the long term as inflation eats away at real stock valuations.
- Real bond yields remain very low and sometimes go negative.
- Gold, commodities, and other inflation-hedge investments are in a multi-year bull market.
- The Federal Reserve is continually behind the curve on fighting inflation.
- On weekends I wear plaid Sansabelt slacks and a mint-green polyester jacket with lapels so enormous that I am occasionally borne aloft during strong winds.
We can add another similarity to the list: the term “stagflation” is now showing up all over the news again. Read more at-http://www.pcasd.com/the_return_of_the_1970s
-U.S. Congressman Ron Paul takes Ben Bernanke to school about inflation. Watch video here-http://news.goldseek.com/GoldSeek/1204213214.php
-Inflation tops China 2008 agenda. Tackling record levels of inflation is one of China’s major tasks for this year, Premier Wen Jiabao has said. Inflation rose by 7.1% in January the highest level in more than a decade and opinion polls show it is one of Chinese people’s top concerns. Speaking at the opening of China’s annual parliamentary session, he said economic growth would slow to about 8%.
Chinese politicians are worried higher food prices could lead to discontent and social unrest, correspondents say. Prices, particularly for basic food items such as pork and eggs, rose markedly last year in China, partly because of supply problems. An unusually cold winter in southern China this year also damaged winter crops, pushing up prices further. Read more at-
http://news.bbc.co.uk/2/hi/asia-pacific/7278450.stm
-Iran Inflation Surges on Ahmadinejad Subsidies, Price Controls. On a deserted Tehran street, an ex- geologist named Reza was hawking black-market fuel from the back of a battered van for about four times the legal price. "I’m a free-marketeer,” said Reza, 48, who asked that his full name not be used for fear of arrest. "Everything in this country works through fixers,” he said as he poured gasoline from a 20-liter jerry can into a car, using a plastic water bottle as a funnel.
"That’s because of government mismanagement.” Iran, the world’s fourth-largest oil producer, is facing gasoline shortages, as well as youth unemployment of 21 percent and U.S. economic sanctions. President Mahmoud Ahmadinejad has responded by imposing gasoline rationing, boosting subsidies and raising government spending, sending inflation to its highest annual pace in eight years. Read more at- http://www.bloomberg.com/apps/news?pid=20601109&sid;=aEgZoLZVrMPo&refer;=home
INTEREST RATES
-The Bank of Canada cut its benchmark interest rate by half a point and signalled further reductions are needed to offset a slump in exports to the U.S. Mark Carney, in his first decision as governor, lowered the target rate for overnight loans between commercial banks to a two-year low of 3.5 percent, the biggest reduction since 2001. Thirteen of 26 economists surveyed by Bloomberg News predicted the size of today’s move.
"Further monetary stimulus is likely to be required in the near term,” the central bank said today in a statement from Ottawa. Signs of economic slowdown in Canada are "materializing and, in some respects, intensifying.” Tumbling exports to the U.S. will limit 2008 economic growth to a seven-year low of 1.8 percent, the central bank says, and have erased the country’s broad trade surplus for the first time since 1999. The bigger rate cut today also helps catch up with moves by the U.S. Federal Reserve, and may slow the Canadian dollar’s advance that has battered manufacturers.
"You can cut rates 50 basis points today and 50 at the next meeting and probably not do a lot of damage to the near term inflation outlook,” said Andrew Pyle, investment adviser at Scotia McLeod in Peterborough, Ontario, a division of Scotia Capital Inc. "It’s a fairly cheap insurance policy.” Read more at-
http://www.bloomberg.com/apps/news?pid=20601082&sid;=aZcR9N4Mt6J0&refer;=canada
-Federal Reserve Bank of New York President Timothy Geithner said the central bank may need to keep interest rates low for a while if financial markets remain under stress and threaten economic growth. "If turbulent financial conditions and the associated downside risks to growth persist, monetary policy may have to remain accommodative for some time,” Geithner said in prepared remarks to the Council on Foreign Relations in New York.
The New York Fed chief identified the ongoing strains in the financial markets as the "critical risk” to the economy and said the central bank must be ready to move "proactively” to address it. Fed officials are in the seventh month of a credit crisis that began with rising delinquencies on subprime mortgages, and spread into the worst housing recession in a quarter century. Banks are making it tougher to get loans after financial companies posted more than $181 billion in asset writedowns and credit losses since the beginning of 2007.
Geithner also said that central banks worldwide have more leeway to tackle the financial turmoil than in the past because of their enhanced credibility as inflation-fighters. "The improvements in monetary policy credibility and financial strength developed over the past few decades mean that policy around the world has more room to adjust” to deal with "the challenge in the present environment,” he said. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a_QzTA8h_lcc&refer;=home
-The Federal Reserve’s 2 1/4 point cut in the federal funds rate since the middle of September may be doing more harm than good if it is doing any good at all. Read more at-http://www.marketwatch.com/news/story/story.aspx?guid=%7BA998669F-3FCF-4A3C-B756-6FA6FC3C39B1%7D&siteid;=rss&print;=true&dist;=printTop
-The Federal Reserve’s rescue has failed. Read more at-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/03/ccview103.xml
-The Bank of England says it is keeping official interest rates unchanged at 5.25%, meeting expectations from most economists. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a6PXu0.BNiHg
-New Zealand’s dollar advanced after the central bank said the nation’s benchmark interest rate will remain at a record high. Read more at-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a7N7Wu9zS29M
-China’s central bank Governor Zhou Xiaochuan said he’ll consider raising interest rates to tame the fastest inflation in 11 years. "There is still room for further interest-rate increases,” Zhou said today at the annual meeting of China’s legislature in Beijing. Any decision is complicated by the U.S. Federal Reserve cuts to borrowing costs and the government’s goal of increasing consumer spending, he said. Read more at-http://www.bloomberg.com/apps/news?pid=20601080&sid;=a0_RYdn_7hVE&refer;=asia
U.S. DOLLAR-EURO-U.S. PENNY
-Japan may move to support tumbling dollar. Pressure is building in Japan for official intervention to cap the surging yen before it triggers a sharp industrial slowdown and tips the country back into slump. Read more at-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/03/ccjapan104.xml
-Petrodollar tsunami to hit euro and dollar. With crude oil at $100 a barrel, there is going to be a massive transfer of global financial wealth from oil consuming countries to oil exporters. Some of these windfalls will be absorbed by the economies of the oil producers, but a far larger amount will be invested outside them. Indeed, a petrodollar tsunami is coming, with significant consequences for global financial markets. Read more at-http://www.ft.com/cms/s/0/c56c0aa8-e93f-11dc-8365-0000779fd2ac.html
-Buffett’s Brazilian windfall. Berkshire Hathaway has made billions betting against the dollar most recently with a $100 million gain from the growth of the Brazilian real. Read more at-
http://money.cnn.com/2008/02/29/news/international/buffett_dollar.fortune/index.htm
-As dollar falls, Israelis see virtues of their own currency. Read full story at-http://www.gata.org/node/6056
-IMF chief says euro is overvalued. The euro is overvalued and the European Central Bank needs a political counterweight to compensate for the fact that is it ‘ultra-powerful’, the head of International Monetary Fund was quoted as saying on Monday.
IMF director general Dominique Strauss-Kahn praised the ECB for containing inflation, but told Le Monde newspaper that eurozones countries needed to appoint a political supremo to make sure economic growth was promoted. ‘The problem with the euro is that the European Central Bank, which does a good job controlling inflation, is ultra-powerful,’ Strauss-Kahn was quoted as saying. Read more at-http://www.ft.com/cms/s/0/d0ce1520-e918-11dc-8365-0000779fd2ac.html
-Gulf May Form Common Bourse After 2010 Currency Union. Saudi Arabia, the United Arab Emirates and four other Gulf Arab states may form a common stock exchange after completing a currency union planned for 2010, the head of the Abu DhabiSecuritiesMarket said.
"You will see in this region a common capital market and securities market after the Gulf common currency,” Tom Healy, director general at the bourse, said in an interview in Abu Dhabi today. The exchange would start "some years” after regional monetary union, he said, without being more specific. Read full story at-
http://www.bloomberg.com/apps/news?pid=20601013&sid;=aMPHQNnep.BA&refer;=emergingmarkets
-Russia Quietly Starts to Shift Its Oil Trade Into Rubles. Read more at-http://www.nytimes.com/2008/02/27/business/worldbusiness/27place.html?_r=2&oref;=slogin&ref;=worldbusiness&pagewanted;=print
-Paulson: Penny’s not from heaven. Treasury Secretary says he would like to get rid of 1-cent coin, but that other challenges take precedence. Read more at-
http://money.cnn.com/2008/03/01/news/economy/bc.paulson.penny.ap/index.htm
-Don’t take a penny or a nickel at face value. It is no longer really a penny for your thoughts. To be precise, a thought is now worth 1.67 cents. And when someone offers you their 2 cents, they are really giving you 3.34 cents’ worth of advice. That is because the government shells out 1.67 cents to manufacture one penny, up from 0.93 cents in 2004, according to The United States Mint.
It costs a mint to make pennies. Case in point: The U.S. Mint produced billions of pennies in the last fiscal year, costing taxpayers about $130 million; the coins have a face value of $80 million. Read more at-http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20080303/REG/988309947/1008&fromRSS;=true&template;=printart
U.S. RECESSION WATCH
-Billionaire Warren Buffett said Monday that the U.S. economy is essentially in a recession even if it hasn’t met the technical definition of one yet. Buffett said in an interview with cable network CNBC the reports he gets from the retail businesses his holding company owns show a significant slowdown in purchases. The chairman and CEO of Omaha-based Berkshire Hathaway Inc. said millions of people have also lost equity in their homes because home prices have dropped.
The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation’s gross domestic product. “I would say, by any commonsense definition, we are in a recession,” Buffett said on CNBC. But Buffett said it’s not clear how far the recession will go because that is difficult to predict. The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation’s gross domestic product. Read more at-http://biz.yahoo.com/ap/080303/buffett_economy.html?.v=1&printer;=1
-U.S. recession: A classic 12-act tragedy. Paul B. Farrell-Read full story at-http://www.marketwatch.com/news/story/tragedy-recession-its-bad-ending/story.aspx?guid=%7b5D72D7E3-76BB-4CAB-B4D0-60F87DA734B7%7d&dist;=TNMostRead&print;=true&dist;=printTop
How this 12-act drama plays out will have an enormous impact on your future:
1. Home prices will fall 20% to 30% from the peak. Roughly $4 trillion to $6 trillion of household wealth will vanish. Large home builders may go bankrupt, triggering further declines in home-builder stocks. Even Fed Chairman Ben Bernanke admitted last week that housing prices could fall into 2009.
2. Prime and near-prime mortgages losses. “This is a generalized mortgage crisis and meltdown, not just a subprime one,” warns Roubini. “About 60% of all mortgage origination from 2005 through 2007 had these reckless and toxic features. And losses among all sorts of mortgages will sharply increase as home prices fall sharply and the economy.” Add another $300 billion in losses.
3. Consumer debt defaults will increase sharply. Nothing’s safe: “There are tens of millions in subprime credit cards and subprime auto loans in the United States.” Defaults “will not be limited to subprime borrowers,” adding “more to bank and financial-company losses, increasing the credit crunch.”
4. The credit insurers rescue package is insufficient. Even $10 billion to $15 billion won’t do the trick. Ratings downgrades will “add another $150 billion write-downs on asset-backed securities portfolios,” triggering more losses to their muni and money-market portfolios, says Roubini.
5. Commercial real estate loan market will deteriorate. Commercial real estate lending practices “were as reckless as those in residential real estate.” Demand for new offices, stores and shopping centers will drop.
6. Some large banks with heavy mortgage exposure will fail. Scary, but some big regional and national banks “may join the 200-plus subprime lenders that have gone bankrupt, adding to an already severe credit crunch.”
7. Banks’ losses grow as asset values drop further. Banks still have “hundreds of billions of dollars of leveraged loans stuck on their balance sheets at values well below par.” Now 90 cents on the dollar, soon bigger discounts.
8. Once the recession gains speed, expect corporate defaults. Corporate default rates average about 3.8% long-term. They were a low 0.6% in 2006-2007, thanks to easy credit, liquidity and low spreads. Junk-bond debt will soon have higher refinancing costs. “Corporate default rates will surge during the 2008 recession and peak well above 10%.” In turn, they will trigger major losses in the “credit default swaps (CDS) that provided protection against corporate defaults.” Loss estimates range from $20 billion to $250 billion, probably at the higher end.
9. Unregulated ’shadow banking system’ facing huge problems. Now more than $500 trillion. These institutions “borrow short and in liquid forms and lend or invest long in more illiquid assets.” But unlike banks, they can’t tap into a “central bank’s lender of last resort support as they are not depositary institutions.” Bankruptcies will follow: “Large hedge funds, a few money-market funds, the entire SIV system and, possibly, one or two large and systemically important broker-dealers.”
10. As recession spirals out-of-control, stock markets drop again. “Investors have begun to realize that the economic downturn is more severe than anticipated, that the [credit insurers] will not be rescued, that financial losses will mount and that earnings will drop sharply in a recession, not just among financial firms but also non-financial ones.”
Roubini warns: “Another round of massive equity shorting will take place, leading to a cascading fall in equity markets in the United States and a transmission to global equity markets. U.S. and global equity markets will enter into a persistent bear market, as in a typical U.S. recession the S&P; 500 falls about 28%.”
11. Credit crunch will dry up liquidity in many financial markets. Roubini says “another round of credit crunch in interbank markets will ensue triggered by counterparty risk, lack of trust, liquidity premiums and credit risk. A variety of interbank rates will massively widen again.” Central bank injections of liquidity will offer only temporary relief as interbank spreads widen.
12. Massive global recession spreading, spiraling down. Vicious circle: “Losses will lead to more margin calls and further reduction of risk taking by a variety of financial institutions that will then be forced to mark to market a forced fire sale of assets in illiquid markets will lead to further losses that will further contract credit and trigger further margin calls and disintermediation of credit,” with further drops in equity prices, more margin calls, an out-of-control spiral down, even a run on some banks. As “the credit losses and the credit crunch spread around the world, U.S. and global financial markets will experience their most severe crisis in the last quarter-century.”
-Ben S. Bernanke, the Federal Reserve chairman, told Congress last week that fighting off a possible recession in the United States was Job 1 for his crew. But a consumer-led recession has already begun, according to a new index that reflects how much money Americans can actually spend right now.
The new indicator comes courtesy of Charles Biderman, the founder and chief executive of TrimTabs Investment Research, a proprietary research firm in Santa Rosa, Calif. “The big picture is: the amount of money people have to spend, which includes money on real estate transactions, is plummeting, and it started to break down in October,” he said.
Consumer spending, don’t forget, accounts for about two-thirds of gross domestic product. Naturally, all eyes are on what consumers are doing with their money. Mr. Biderman said his data, in contrast to the indicators the federal number crunchers produce, are contemporaneous and offer much more insight into what is happening in the economic here and now. Read more at-http://www.nytimes.com/2008/03/02/business/02gret.html?_r=2&ei;=5089&en;=be4bd10058e17668&ex;=1362114000&oref;=slogin&partner;=rssyahoo&emc;=rss&pagewanted;=print&oref;=slogin
-Unexpected Drop in Private-Sector Jobs Reported. Read more at-http://www.nytimes.com/reuters/business/business-usa-economy-employment-adp.html?_r=2&ei;=5088&en;=f0c3bf45524c132a&ex;=1362459600&oref;=slogin&partner;=rssnyt&emc;=rss&pagewanted;=print&oref;=slogin
-Fed Beige Book Reports Growth Has Slowed Since Start of Year. The Federal Reserve said economic growth has slowed in eight of 12 U.S. regions since the start of the year, hurt by faltering retail sales and manufacturing and a continued decline in housing. “Two-thirds of the districts cited softening or weakening in the pace of business activity, while the others referred to subdued, slow or modest growth,” the central bank said in its regional business survey, known as the Beige Book for the color of its cover.
The report provided anecdotal evidence of a cooling economy that echoed reports this week showing a contraction in manufacturing and services in February. Fed Chairman Ben S. Bernanke indicated to lawmakers last week that the central bank is prepared to lower interest rates further as needed to avert a deeper downturn. “Retail activity in most districts was reported to be weak or softening,” the report said. “Manufacturing was said to be sluggish or to have slowed in about half the districts.”
Traders expect the Federal Open Market Committee to lower the benchmark rate by 0.75 percentage point by the end of the next meeting on March 18, based on futures prices. Policy makers have lowered the rate 2.25 percentage points since September, to 3 percent. The economy expanded 0.6 percent at an annualized pace last quarter. Read more at-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=azVx7NViUmo8&refer;=home
-Manufacturing in the U.S. shrank at the fastest pace in almost five years and construction spending fell the most since 1994 as the economy moved closer to a recession. The Institute for Supply Management’s factory index dropped to 48.3 in February from 50.7 the previous month, the Tempe, Arizona-based group said today. Fifty is the dividing line between contraction and expansion. At the same time, the Commerce Department reported that spending on building projects slumped 1.7 percent in January, more than anticipated. Read more at-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=agp_O0RLVx54&refer;=home
BANKRUPTCY FILINGS SURGE AMONG U.S. CONSUMERS
-American consumers’ bankruptcy filings jumped 15 percent in February from the previous month and a steeper rise is looming because of the subprime mortgage crisis, the American Bankruptcy Institute said. Consumer bankruptcy filings in February totaled 76,120, up from 66,050 recorded in January, the non-partisan bankruptcy research group said.
The February number was 37 percent higher than in the same month a year ago, according to the institute. “February’s bankruptcy spike the highest single month since the 2005 (bankruptcy) law changes forecasts the start of more to come for the balance of 2008,” said Samuel Gerdano, ABI executive director. Read full story at-http://www.cnbc.com/id/23454160 or http://www.nytimes.com/2008/03/05/business/05bankruptcy.html?ref=business&pagewanted;=print
BANKS LOSSES COULD PUT $900 BILLION SQUEEN ON CONSUMERS
-The retailer Sharper Image offers a stark image of how the credit crisis on Wall Street is becoming a widespread credit crunch for the rest of America: The purveyor of gadgets recently declared bankruptcy, citing a tougher climate for financing among the reasons. That company is not an isolated case. Consumers and businesses now face an economic downturn made more difficult by a contraction among banks and other lenders. In fact, the health of banks has become perhaps the biggest source of uncertainty about the economy.
How bad is the damage? By one new estimate, troubled mortgages alone could knock a full percentage point off economic growth in the year ahead. And mortgages are just part of the problem. With losses also rising on loans for everything from cars to commercial real estate, banks effectively will have less money available to make new loans perhaps $900 billion less.
“The reality is that banks are in trouble,” says Ed Yardeni, an economist who until recently has been optimistic about the economy’s prospects for avoiding recession. “I don’t think they’ll go bankrupt. [But] we’re in the process of cleaning up the mess that the financial engineers created” by reselling shaky home loans to investors. Read more at-
http://www.csmonitor.com/2008/0305/p02s01-usec.htm
THE $34 TRILLION PROBLEM-U.S. MEDICARE
-The $34 trillion problem. Medicare is poised to wreak havoc on the economy. And our presidential candidates are avoiding the issue. Twice I have asked Alan Greenspan what he considers the greatest threat to the U.S. economy, and both times he has answered immediately with a single word: Medicare.
He isn’t so worried about the trade deficit and the housing crash; he figures market forces will sort them out. But Medicare is something else a multitrillion-dollar problem that’s about to get dramatically worse, and one that nobody wants to talk about. You’d think that the greatest threat to America’s economy would be Topic A for the presidential candidates. But it’s actually a topic they hate to touch.
Especially now. An analysis of their speeches shows that last year Senators Hillary Clinton, John McCain, and Barack Obama would occasionally mention the Medicare mess. But recently, with the economy slowing and voters feeling insecure, all three candidates have turned more populist: Their economic talking points are about feel-good reassurances, not about facing hard realities. Read full story at-http://money.cnn.com/2008/03/03/news/economy/104239768.fortune/index.htm
U.S. HOMEOWNER EQUITY IS LOWEST SINCE 1945
-Americans’ percentage of equity in their homes fell below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday. Homeowners’ portion of equity slipped to downwardly revised 49.6 percent in the second quarter of 2007, the central bank reported in its quarterly U.S. Flow of Funds Accounts, and declined further to 47.9 percent in the fourth quarter the third straight quarter it was under 50 percent.
That marks the first time homeowners’ debt on their houses exceeds their equity since the Fed started tracking the data in 1945. The total value of equity also fell for the third straight quarter to $9.65 trillion from a downwardly revised $9.93 trillion in the third quarter.
Home equity, which is equal to the percentage of a home’s market value minus mortgage-related debt, has steadily decreased even as home prices jumped earlier this decade due to a surge in cash-out refinances, home equity loans and lines of credit and an increase in 100 percent or more home financing. Economists expect this figure to drop even further as declining home prices eat into the value of most Americans’ single largest asset. Read more at-http://apnews.myway.com/article/20080306/D8V82V580.html
REAL ESTATE
-Vacant Homes in U.S. Climb to Most Since 1970s With Ghost Towns. Read more at-http://www.bloomberg.com/apps/news?pid=20601109&sid;=au67GKPyS_Dg&refer;=home
-Home sales stay weak in Realtors’ report. Read more at-
http://money.cnn.com/2008/03/06/news/economy/pending_home_sales/index.htm
-Canadian Home buying intentions at ‘lowest level in several years,’ RBC finds. Read full story at-http://www.cbc.ca/cp/Home+Family/080304/U030421AU.html
-A Year of Capitulation in Florida. Read more at-http://thehousingbubbleblog.com/?p=4224
-Today’s New Normal. Read more at-http://thehousingbubbleblog.com/?p=4232
FORECLOSURES
-U.S. Mortgage Foreclosures Rise as Owners `Give Up’. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ayvTOmZMGXhE&refer;=home
-In Parts of U.S., Foreclosures Top Sales. Read more at-http://www.nytimes.com/2008/03/01/business/01charts.html?_r=2&ei;=5089&en;=097caf29e732c0a8&ex;=1362114000&oref;=slogin&partner;=rssyahoo&emc;=rss&pagewanted;=print
-The Foreclosure Situation Is Affecting Prices In California. Read more at-http://thehousingbubbleblog.com/?p=4209
-Fremont General Corp. said Tuesday it received default notices on about $3.15 billion of loans it sold in March 2007. Read more at-http://money.cnn.com/2008/03/04/news/companies/bc.apfn.fremont.default.ap/index.htm
-Bernanke: More mortgage, home woes ahead. Federal Reserve chairman says delinquencies and foreclosures are likely to rise, and home prices will fall further. Read full story at-
http://money.cnn.com/2008/03/04/news/economy/bernanke/index.htm?postversion=2008030410
-Bernanke Urges Banks to Forgive Portion of Mortgages. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aPPTlQVJXUro&refer;=home
-’Ninja’ loans explode on sub-prime frontline. Never in her 20 years in the property market has Heidi Mueller been so much in demand. As one of the leading foreclosure and short sales agents in the San Francisco property market, she is the first person you go to when you can’t afford your mortgage payments and need to sell your home, fast. Read more at-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/03/ccsubprime103.xml&page;=1
IRAQ WAR COSTS COULD REACH 5 TRILLION
Read more at-
http://www.bloomberg.com/apps/news?pid=20601068&sid;=acXcm.yk56Ko&refer;=economy
GEOPOLITICAL
-Eight killed at Jerusalem school. Eight people have been killed and nine wounded by a Palestinian gunman who infiltrated a Jewish seminary in West Jerusalem, Israeli officials say.
Witnesses said the gunman went into a crowded hall during dinner at the Mercaz Harav seminary in the city’s Kiryat Moshe quarter and opened fire. Read more at-
http://news.bbc.co.uk/2/hi/middle_east/7282269.stm
-The Prince and The Taliban. Afghan militants claim they knew English royalty was in their midst. Read more at-http://www.newsweek.com/id/117793
-Terror target Harry arrives back in Britain as Al Qaeda threatens to take revenge for ‘royal aggression against Muslims.’ Read more at-http://www.thisislondon.co.uk/news/article-23445647-details/Harry+the+No+1+terror+target+as+Al+Qaeda+threatens+to+take+revenge+for+’royal+aggression+against+Muslims’/article.do
-Petraeus: Al Qaida trying to ‘come back in’ ‘We can feel it.’ U.S. military officials said there will be no significant reduction in coalition troops in the Baghdad area as part of an effort to stop the Al Qaida offensive in northern Iraq. Read more at-http://www.worldtribune.com/worldtribune/WTARC/2008/ss_iraq_03_05.asp
-Iranian President Mahmoud Ahmadinejad on Monday dismissed U.S. accusations that his country is training extremists and demanded that the Americans withdraw from Iraq. Speaking in a nearly hour-long news conference at the end of an unprecedented visit to Iraq, Ahmadinejad said the U.S. allegations that Iran is training Shiite militants who target American troops and Muslim rivals don’t matter to the Iranians.
“Of course American officials make such remarks and such statements, and we do not care because they make statements on the basis of erroneous information,” said the hard-line Iranian leader, who smiled through much of the session. “We cannot count on what they say.” He said the foreign presence in Iraq was an “insult to the regional nations and a humiliation.” Read more at-http://apnews.myway.com/article/20080303/D8V5V0V00.html
-Chavez says Venezuela doesn’t seek war. President Hugo Chavez charged Wednesday that Colombia and its allies in Washington are responsible for the intensifying crisis in this region and said perpetual conflict with the United States is inevitable.
“It must be said: They, the empire and its lackeys, are war. We are peace. We are the path to peace,” Chavez said in a televised speech, his first since Colombia alleged that documents found in a leftist rebel’s computer show the Venezuelan leader has been supporting Colombian guerrillas for years. Read more at-http://news.yahoo.com/s/ap/20080305/ap_on_re_la_am_ca/colombia_venezuela&printer;=1
-Seized laptop shows Chavez-rebel ties. A single laptop can reveal much, and so it is with the digital treasure chest that Colombian commandos found in the jungle quarters of slain rebel leader Raul Reyes. Files in the computer seized in Saturday’s raid into Ecuador that claimed the lives of Reyes and 23 of his comrades offer an intimate portrait of Venezuelan President Hugo Chavez’s desire to undermine Colombia’s U.S.-allied government.
If authentic, the documents show that sympathies Chavez first aired publicly in January grew out of a relationship that dates back more than a decade. But Chavez is not one of the correspondents, and his sentiments mentioned in these documents are relayed solely through the rebels. Venezuela says the documents are lies and fabrications. If they are, they are expertly done. Read more at-http://news.yahoo.com/s/ap/20080305/ap_on_re_la_am_ca/colombia_farc_laptop&printer;=1
-Colombia is worried about a document on the laptop of a slain rebel leader indicating the guerrillas were trying to obtain uranium, but has no evidence they intended to use it as a weapon, the vice president said Wednesday. Read more at-http://news.yahoo.com/s/ap/20080306/ap_on_re_la_am_ca/colombia_uranium
-Colombia Pipeline Bombed by FARC after Ecuador Attack. Colombian rebels bombed an oil pipeline and Venezuelan President Hugo Chavez said he may seize local assts of the neighboring country’s companies after a Colombian raid into Ecuador killed a rebel leader. Read more at-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ahXn5_r5Yjl0&refer;=home
-The Organization of American States approved a resolution on Wednesday declaring the Colombian military raid into Ecuador a violation of sovereignty, in a move aimed at easing a diplomatic crisis in the Andes involving Colombia, Ecuador and Venezuela. Read more at-http://www.iht.com/articles/2008/03/06/america/06venez.php
© 2009, Worldwide Precious Metals.
www.wwpmc.com
The GoldBugg Report – Precious Metals: The best performing financial assets this year.
Posted by Worldwide Precious Metals on Tuesday, March 11, 2008
The GoldBugg Report – Profit During Times of High Inflation, Own Precious Metals
March 4, 2008
- Paul van Eeden claims the banking system in the United States is broke.
- Inflation-The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year. Most countries’ central banks will try to sustain an inflation rate of 2-3%. Investopedia.com
- Hyperinflation-Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. This is a situation where price increases are so out of control that the concept of inflation is meaningless. The most famous example of hyperinflation occurred in Germany between January 1922 and November 1923. By some estimates, the average price level increased by a factor of 20 billion! Investopedia.com
- Core Inflation-A measure of inflation that excludes certain items which face volatile price movements. Core inflation eliminates products that can have temporary price shocks because these shocks can diverge from the overall trend of inflation and give a false measure of inflation. Core Inflation is thought to be an indicator of underlying long-term inflation.
Core inflation is most often calculated by taking the Consumer Price Index and excluding certain items from the index, usually energy and food products. Other methods of calculations include the outliers method, which removes the products that have had the largest price changes. Investopedia.com
- “Gold bears the confidence of the world’s millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future.” Oakley R. Bramble
- The Dow currently trades 13% below its all-time record high. For some further perspective into how the stock market is actually performing, today’s chart presents the Dow divided by the price of one ounce of gold.
This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 12.9 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces back in the year 1999. When priced in that other world currency (gold), the Dow is in the midst of a massive eight year bear market! Chartoftheday.com
- Jim Rogers says US ‘out of control. ‘Rogers who co-founded the now closed Quantum Fund with George Soros told 750 global fund managers in Tokyo today that, America is “completely out of control”, there will be a 20-year bull market in commodities and that prices will be in turmoil. And he also warned that it “made sense” if global competition for resources ended in armed conflict.
Mr. Rogers told delegates to the CLSA investment forum that the prices of all agricultural products would “explode” in coming years and that the price of gold, which hit an all-time high this week, will continue its surge to as much as $3,500 an ounce. Gold would continue to rise, the analyst Christopher Wood told fund managers, “because it is the exact opposite of a structured finance product”.
In a blistering attack on US monetary policy and the “helicopter cash drop” responses of the Federal Reserve, Mr. Rogers described the American dollar as a “terribly flawed currency”. He said that the plan by Ben Bernanke, the Fed Chairman, to “crank up the money-printing machines and run them until we run out of trees” had exposed America’s weakest point to her rivals and enemies. The dollar may have declined recently, he added, “but you ain’t seen nothing yet”.
- Facing Public Pressure, Bush Administration Will Continue Site Tracking U.S. Economic Indicators. On Feb. 13, ThinkProgress reported that facing a faltering U.S. economy, the Bush administration was attempting to hide economic data by shutting down the award-winning website EconomicIndicators.gov. As Forbes explained when it awarded the site one of its “Best of the Web awards, Economic Indicators is a “necessary” portal because it provides easy access to aggregated economic data across government agencies.
More significantly, people can sign up to receive e-mails as soon as new data becomes available. Yet recently, the Bush administration announced the site would be shut down on March 1 because of “budgetary constraints.” Thinkprogress.org
- Performance of different assets over the past 2 Months. Alf Field
GOLD
- Strong support in gold is now seen at $890 to $900. Short term support is now at $925 and below that at $915. The $1000 price level remains a short term price target and $1,200 is now a realistic possibility in the coming weeks. Gold.ie
- Counter intuitively, this newest in a long line of mooted IMF gold sale proposals may again be bullish for gold. When Gordon Brown telegraphed his sale of British gold reserves in 1999 the market was initially concerned that the sales could lead to falling gold prices. This concern was proven false and look how gold has performed since rising from below $300 to over $900. Gold.ie
- U.S. Treasury Under Secretary David McCormick said on Monday it was still unclear when the U.S. Congress would be asked to approve proposed International Monetary Fund gold sales and the move would depend on implementation of the IMF’s reform agenda.
“We’ve done a fair amount of work already in terms of doing outreach to members of Congress,” McCormick told an audience in Washington, saying there was already bipartisan support for the move. “We would hope that we will be able to build support for action while President (George W.) Bush is still in office. If that turns out not to be the case given the timing then we hope the work we’re doing will lay groundwork for the next president,” he added. Reuters
- Read full story at or at »
- IMF sales a perspective. The gold for sale is different from the rest! It looks as though any sales by the IMF will be restricted to 400 tonnes used in a previous sale and repurchase agreement and in any case would be made within the existing CBGA sales Agreement. The market is right to remain unfazed!
- Precious Metals Remain Undervalued and Are in a Classic Bull Market. To those not familiar with the precious metals markets, gold and silver look overvalued due to the recent increase in prices and many believe this is a prelude to a 1980 style gold price collapse. This is extremely unlikely for a variety of reasons. Indeed quite the opposite is true, a gold panic and mass exodus into the safe haven of gold is more likely than any ending of this secular bull market.
Firstly, gold and silver’s rise in recent years has been gradual and orderly and both show the price movement of a classic bull market. Volatility has been less than in the benchmark S&P; 500 with daily price movements averaging around 1%. Very rarely have there been price movements of 3% or more up or down and rarely have there been weekly movements of more than 5%. The bull markets in precious metals have been marked by periods of price strength, price corrections and consolidations prior to further increases in price.
Classic bull market behaviour designed to put off and deter weak hands and uninformed investors (who unfortunately will only partake in the bull market in the final blow out stage which is likely some 5 to 12 years away). Continuously many analysts and much of the media has exaggerated gold’s sell offs and there have been many times when market tops have been called. At $600, $700, $800, $850 and $900 there have been doubters and naysayers who have warned that gold was overvalued and ripe for a correction or price ‘collapse’.
This is the classic grind of ‘two steps forwards and one step back’ and the wall of worry that all bull markets are subject too. But particularly the gold market due to the lack of informed comment and analysis. To further put gold’s bull market in context, oil is up some 1,000% in recent years from $10 to over $100 per barrel. Wheat is up some 100% in the last 6 weeks while gold is up 100% in the last 3 years. Again gold is only up 365% in 9 years.
Calling a top in gold now is akin to calling a top in the Dow Jones Industrial Average in 1997 when it reached 7,000. The DJIA has risen from a post 1987 crash level of 2000 to 7000 in 1997. It subsequently doubled in value. Finally, in 1980 gold had risen from $35 to $850 or 3,000% in 9 years. Today gold has risen from $260 in 1999 to over $950 today or some 365% in 9 years.
So gold had a 3,000% increase in the 1970s and has seen a 365% increase in the 2000s. And this increase in price has been in U.S. dollars which has been the weakest currency in the world (after the Zimbabwean dollar). Hardly the stuff of speculative bubbles. Gold will likely double in value in the coming years and will reach its 1980 adjusted for inflation high of some $2,300 per ounce (based on CPI calculation of inflation). Gold.ie
- Any good, service or commodity has value if it is useful. Gold’s value derives from its usefulness as money. In other words, gold’s value arises from its usefulness in economic calculation. This point is self-evident from the following chart, which presents a Base-100 analysis of the price of crude oil in terms of US dollars and goldgrams.
When viewed in terms of gold, the price of crude oil is essentially unchanged throughout the six decades presented in this chart. It is the dollar that is volatile, not gold. Economic calculation becomes sensible when prices are viewed in terms of gold, which provides a stable purchasing power over long periods of time. James Turk-An Overview of Gold’s Supply & Demand
- Gold and the U.S. dollar conclusion. As the many rescues planned and put in place, monetary inflation will be mammoth. The US$ will inevitably be sacrificed in the housing crisis and mortgage debacle, in addition to reviving the banks. The US$ will be weighed down further, in order to lead the US Economy out of recession. Cheap money is coming again, and globally. The US Fed will not be able to escape the clutches of 1.0% interest rates again, coupled with the extreme shame.
The US Dollar will not be able to escape the plumbing of lower exchange rates, like down to the 70 level. The gold price will feed off lower interest rates, as speculative gains will be back in vogue, even called a good thing. There is nothing like a bout with deflation to change the mindset of speculation and its vagaries, turning it positive. The gold & silver prices will rise from the cheap money, low interest rates, stimulus packages to ward off recession, rescues to banking, and lower US Dollar.
But the US Economy desperately needs the next ‘Policy Bubble’ in order to come back to life, to produce jobs, to change national psychology, to revive hope. Without a plan to puff a new bubble, which will buy some years of time, the nation will morph into chaos. A military dictatorship would be the only alternative. The urgent next step is leaders with some vision, rather than a plan for private profiteering, founded upon fear. Hope pays off more than fear, unless fascism is the end game. Jim Willie CB
- Gold Sales Volume in Greater China Rises 23% in 2007.
- Flight to safety and stagflation fears boost gold.
- The gold standard. A precious metal that’s not just an investment but a worldview too.
- The dollar versus gold? No contest. Why China and India have always been heavy-metal fans.
- Gold dehedging persists in Q4 07, more expected in ‘08.
- Read full story at or at »
- Gold Fields to Close Shafts, Reduce Output in South Africa.
- Read full story at »
SILVER
- Silver Now Outperforming Gold. Clearly since mid-2006, silver has had the upper hand on the HUI basket of stocks and without the risks that accompany such stocks. That is why The Silver Analyst prefers silver to gold as a majority holding in precious metals. As silver attacks $20 and beyond, we hope to see this leverage over gold increase until the final blow off which in our estimation cannot be too far away now. Roland Watson
- What lit the fire under silver this week? That’s a tough one, as there appeared to be no particular driver save strength in copper, to which silver is somewhat tied. Perhaps a moment of reckoning is nearing, as the redoubtable Ted Butler insists. Butler writes about short sales and unbacked silver certificates, and combining these two he asserts that “more silver is pre-sold than real metal that exists in the world. This will invariably drive prices to unbelievable heights.” Kitco Daily Resource
- As we stated in the past, silver remains undervalued and $25 looks likely in 2008. Silver’s nominal high of $50 per ounce is likely to be reached in the next 3 to 7 years. Nearly all other commodities have reached their nominal record highs and some have reached their inflation adjusted record highs. Silver remains the laggard and this will likely change soon as silver plays catch up. Gold.ie
- Speaking at the inaugural Global Capital Forum on gold and silver in London, Jessica Cross of the VM group was very positive about the price prospects for the metal, despite there being an apparent supply surplus and a steady fall in usage in its principal industrial use in the photography sector.
Cross described silver as “exciting and often ignored, competing in the shadow of gold and platinum”. Indeed since the low point in precious metals markets in 2001, silver has outperformed gold by rising 254% as against gold’s 235%. As for platinum, which has actually recorded an even greater rise on a genuine supply shortage, that’s another issue altogether! Cross said silver had sometimes been somnolent “but boy it can move!”
- Positive portents still for gold and silver. With South African gold output continuing to fall, exacerbated by the power problems being experienced there, the gold price is being underpinned by production losses and the continuing ‘managed’ devaluation of the US dollar.
PLATINUM-PALLADIUM
- Many assume that the surge in platinum in recent weeks must be a speculative blow off and will result in a sharp selloff soon. This is highly unlikely as this has not been a speculatively driven market. The FT reports that CFTC data showed a reduction in the speculative net long position for a sixth consecutive week in spite of prices rising to record levels amid concerns about the South African power crisis causing a supply shortfall this year.
John Reade of UBS said the data was a clear indication that speculators were not the driving force behind rising platinum prices. “Over the counter buying from funds and investors, together with some producers scrambling to cover contractual requirements have been behind the move in platinum (prices) this year,” said Mr. Reade. Mr. Reade said that “supply deficits of more than 700,000 ounces a year will result over the next three years.
The only way the market can be brought back to near balance is for higher prices to displace jewellery demand and encourage scrap (supplies) and profit taking from investors.” The shortfall in platinum production appears to be creating a structural change in the platinum market that will result in materially higher prices and $3,000 per ounce is being spoken of as a realistic medium term target. Gold.ie
- Platinum could hit US$3,000 an ounce as car consumption increases. Rising demand and constrained demand for Platinum could lead to lead to substantial rises in its price taking it up to around US$3,000 an ounce, predicts Daniel Sacks, portfolio manager on the Investec GSF Global Gold Fund.
COMMODITIES
- Coxe: Global bull market for metals has just begun.
- The bull run in commodities is far from over, according to a prominent market strategist who predicts base metal stocks will take a breather before resuming their ride on a “once-in-a-millennium” boom that will last at least two decades. Bank of Montreal global portfolio strategist Don Coxe is expected to deliver his exceedingly bullish forecast at an industry conference in Florida today where the bulk of the world’s major mining executives have gathered.
Mr. Coxe, who correctly predicted the start of the mining boom at the same conference six years ago, believes that metals demand from the roaring economies of China, India and other developing nations will outweigh the effects of a U.S. recession and equities bear market.
“It has become clear that this is a once-in-a-millennium commodity boom that will last at least as long as the commodity crash – two decades,” Mr. Coxe wrote in a report titled “The Music of the Metal Markets.”
- The ethanol bust. The ethanol boom is running out of gas as corn prices spike.
- The first flight by a commercial airline to be powered partly by biofuel has taken place.
- Wheat Breaches $12 for First Time After Biggest Gain Since 2002.
- High food prices may force aid rationing.
- Commodities Boom Sends French Food Prices Rocketing. Prices of grain and milk-based food products have surged in France in recent months due to booming commodities prices, a French consumer group said in a report.
- Global shortage of metals looming. Our peak oil thesis gained some new respect last week as oil prices hit yet another record, the first close over US$100 per barrel. Demand fluctuates, but it is all about supply, and supply concerns this week showed how tight the market really is. Peak oil has lots of press, but what about peak copper? Peak zinc? Peak gold? Sounds preposterous, but maybe it’s not so far-fetched.
Nearly every commodity is experiencing some supply issues, for a host of reasons. Add it all up, and it means potential supply shortages in the future. Demand may slacken this year, but in the next 10 years today’s high commodity prices may actually look like a bargain.
Let’s take a look at some of the issues facing commodity projects today, and give some examples of companies that have already been impacted by them. Cost overruns: Inflation, equipment shortages, and labour issues have combined to wreak havoc on so many new commodity projects that long-term supply issues may result.
OIL-GAS
- Saudi Arabia, the world’s biggest oil producer, may lobby OPEC to maintain output quotas at its March 5 meeting while trimming its own production to curb global supply, the Centre for Global Energy Studies said. “OPEC is likely to desist from making any output cuts until the second half of the year,” the London-based center, known as CGES, said in a report e-mailed today. “Saudi Arabia may insist on keeping quotas the same while varying its own output in pursuit of high prices.”
- Are the days of easy-to-reach oil at an end? Apart from a new price high, this week has been more of the same oil prices have been high, and boy, are they looking to stay that way. But what people are talking about now is the one factor that may keep those prices in place. And the words of the day are ‘peak’ and ‘oil’.
- Bush to veto bill rolling back tax breaks for oil. White House says the president will refuse to sign a bill that puts an end to $18 billion in tax cuts for the oil industry.
- Energy Sector Trends Paint “A Very Alarming Picture.” The concept of ‘peak oil’ has been derided by the big oil companies for years, but last week the chief executive of the oil giant Royal Dutch Shell, Jeroen van der Veer, released a study forecasting the end of easy oil.
- U.S. Should Release Oil, Not Store It, Bingaman Says.
- Exxon vs. Chavez: More Smoke than Fire. These are the following three essential facts about the U.S. oil predicament.
- The U.S. produced less oil in 2006 than it did in 1950.
- Venezuelan oil accounts for 10% of total U.S. oil imports.
- Oil imports made up 40% of the U.S. trade deficit last year.
- Norwegian state-owned petroleum company Petoro reported a 6.7 percent drop in oil production for the fourth quarter on Thursday though higher gas output kept total production steady.
GLOBAL FINANCIAL CRISIS
- Even Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. may find they haven’t dodged the credit crisis. The new source of potential losses: so-called variable interest entities that allow financial firms to keep assets such as subprime-mortgage securities off their balance sheets.
VIEs may contribute to another $88 billion in losses for banks roiled by the collapse of the housing market, according to bond research firm CreditSights Inc. Goldman, which hasn’t had any of the industry’s $163 billion in writedowns, said last month it may incur as much as $11.1 billion of losses from the instruments.
- CIBC reported the second-biggest loss in its 141-year history writing down $1.46B.
- Read full story at or at »
- Two Bank of Montreal commercial- paper funds were downgraded to junk by DBRS after the funds failed to meet margin calls for collateral, raising the prospect of more writedowns for the bank.
- Read full story at or at »
- American International Group Inc., the world’s largest insurer by assets, posted its biggest quarterly loss as a publicly traded company as it wrote down guarantees sold to protect fixed-income investors. The company declined in extended trading. The fourth-quarter net loss of $5.29 billion, or $2.08 a share, compared with profit of $3.44 billion, or $1.31, a year earlier.
- Ambac Bailout May Cause Crisis. A consortium of banks is considering injecting $3 billion dollars into Ambac, the mono-line insurer that relies on its AAA rating to insure, amongst others, municipal bonds and CDOs (collateralized debt obligations). What appears as a rescue plan and may appease the markets short-term, may plant the seeds for disaster. Axel Merk
- Fannie Mae, the largest source of money for U.S. home loans, posted a $3.55 billion fourth-quarter loss and said its slump will worsen this year as rising foreclosures send credit costs soaring. The net loss was triple analyst estimates. Fannie Mae recorded a $3.2 billion drop in the value of derivative contracts and $2.9 billion in credit expenses, according to a filing with the Securities and Exchange Commission.
- Freddie Mac, the second-largest mortgage-finance company, posted a record $2.45 billion loss for the fourth quarter as rising defaults sent credit costs soaring. The net loss, which amounted to $3.97 a share, widened from $401 million, or 73 cents, a year earlier, the McLean, Virginia- based company said in a statement today. Freddie Mac, which buys and guarantees home loans, had predicted the results would be similar to the third-quarter’s $2 billion loss.
- Mortgage woes force Thornburg to pay $300M. If available cash cannot cover future margin calls, Thornburg Mortgage may have to begin selling assets to raise cash. Thornburg Mortgage Inc., a mortgage lender, said Thursday it has been the subject of margin calls on a portfolio of securities backed by alt-A mortgages.
Alt-A mortgages are loans given to customers with minor credit problems or who cannot document their income or assets to get a traditional, prime mortgage. Margin calls force borrowers to repay loans or put up more collateral to secure them.
- FDIC to Add Staff as Bank Failures Loom.
- London Scottish Bank closing door to borrowers. Lender to focus on debt collection business, won’t pay dividend.
U.S. RECESSION
- Economy Slows to Near Crawl. Economy Slowed to Near Crawl, Minuscule 0.6 Percent Growth Rate in 4th Quarter.
- Read full story at or at »
- Recession more likely this year survey. Business economists see growing evidence that the country has toppled into a recession.
- Greenspan negative on US economy. The former chairman of the US central bank Alan Greenspan has warned that US economic growth has stalled and a quick recovery is not likely.
“As of right now US economic growth is at zero,” he said, adding the longer it stayed this way the greater the risk of a deep recession.
Wall Street giants Goldman Sachs and Merrill Lynch have both forecast that the US economy will contract in 2008. The US Federal Reserve has said 2008 growth will be between 1.3% and 2%. The forecast, made last week, was half a percent lower than the Fed’s previous estimation. The gloomy outlook was blamed on falling house prices, reduced bank lending, turmoil in the financial markets and higher oil prices.
- Consumer confidence lowest in 14 years. Conference Board’s measure tumbles below expectations amid concern about jobs and slowing business activity.
- 11 reasons Bernanke’s recession lasts till 2011. Last summer they assured us the subprime-credit crisis was “contained.” We now know that was a big lie. They knew, had the facts, early warnings, lied and are still lying. More proof? They just told Congress: “America will avoid a recession.” New data tells a different story.
- Stagflation: Bernanke’s no-win Achilles heel.
- Housing-credit meltdown: We’ve got a long way to go!
- Commodities: World’s new reserve ‘currency,’ not dollars.
- Toxic derivatives: World’s $516 trillion ticking time bomb.
- Massive debt: Everywhere, trade, federal, states, local.
- America’s new ‘pushers:’ Banks feeding consumer addicts.
- More wars: Pentagon predicts bigger, costlier conflicts.
- Greed: Wall Street and Corporate America’s defining ‘value.’
- Democracy failing: America now run by 35,000 lobbyists!
- America’s already in a recession, and in denial.
- Class warfare: Superrich vs. Main Street America.
U.S. DOLLAR-EURO
- Greenspan tells Gulf oil producers to dump the dollar.
- The dollar fell to a record low against the euro for a third straight day as a weakening U.S. labor market and slower-than-forecast economic growth bolstered bets the Federal Reserve will cut interest rates through June.
- Dollar to slip into steady decline as expert paints a bleak picture. The dollar is heading into a period of sustained decline as recession tightens its grip on the US economy, one of the world’s leading investment gurus claimed yesterday.
Painting a bleak picture of the road ahead, Jim Rogers, the former head of research with the global Quantum Fund investment partnership, blamed the US Federal Reserve for tipping the US economy into crisis, stating that it has made the same mistakes the Bank of England did in the 1960s when sterling lost its position as a global reserve currency along with its status as the preferred medium of exchange for trade in many commodities.
Mr. Rogers said that some countries, such as Iran, were already demanding euros for their oil and that this trend will grow, extending to other commodities as the currency declines in value. He declined to put a value on the size of the potential dollar decline. He was slightly more forthcoming on the length of the downturn in financial and property related investments. “You do not undo a bubble that was 15 years in the making in a few years,” he advised, stating that it could take years to unwind the mess created by the subprime crisis in the US.
- Real, Peso Show U.S. Hegemony Fading in Latin America.
- Soaring euro threatens European jobs exodus.
INFLATION
- Wholesale Prices Jump in January. Higher Costs for Food, Energy and Medicine Push Wholesale Prices Up Sharply. Battered by bad economic news, consumer confidence plunged while wholesale food, energy and medicine costs soared, pushing inflation up at the fastest pace in a quarter century. The Labor Department said Tuesday that wholesale inflation jumped by 1 percent in January, more than double the increase that analysts had been expecting.
Meanwhile, the New York-based Conference Board reported that its confidence index fell to 75.0 in February, down from a revised January reading of 87.3. The drop was far below the 83 reading that analysts had forecast and put the index at its lowest level since February 2003, a period that reflected anxiety in the leadup to the Iraq war.
- Stagflation not a problem Bernanke. Federal Reserve Chairman Ben Bernanke says the 1970s conundrum is far off, but rising inflation makes economic stimulus difficult.
- Unfortunately one of the few things still made in America is inflation. In fact, it now ranks as our greatest export. A significant by-product of the current global economic system, wherein Americans spend money they do not earn to buy foreign products that they do not make, is that trillions of dollars are now parked in foreign banks just looking for somewhere to go. Peter Schiff
- Double trouble for consumers: Oil, food spike. Sharply higher prices at the supermarket and the gas pump are squeezing discretionary spending. As anyone who’s been to the gas station or supermarket lately knows, the prices of fuel and food are on the rise. And you haven’t seen anything yet, some experts say.
- Gas Prices Soar, Posing a Threat to Family Budget.
- Bush finds out about $4 gas forecasts. President says best way to help consumers cope is to make his tax cuts permanent.
- A top Federal Reserve official said on Tuesday that a weakened U.S. economy was a bigger worry than higher inflation, suggesting a willingness to lower interest rates further as the central bank tackles “difficult times.” “I do not expect the recent elevated inflation rates to persist,” Fed Vice Chairman Donald Kohn told business school students at the University of North Carolina at Wilmington.
“In my view, the adverse dynamics of the financial markets and the economy have presented the greater threat to economic welfare in the United States,” he said. Kohn painted a gloomy picture of economic prospects. Retail sales and manufacturing data have been weak, and surveys of consumers and businesses in the current quarter have been almost uniformly downbeat, he said. The central bank has wanted to reassure “lenders and spenders” that it stands ready to prevent “an especially adverse outcome,” he said.
- U.K. Shoppers warned bigger bills on way.
INTEREST RATES
- Bernanke Signals Fed Prepared to Lower Rates Again. Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank “will act in a timely manner” to insure against “downside risks” to the economy. “The Federal Open Market Committee will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,” Bernanke said in semiannual testimony on the economy before the House Financial Services Committee in Washington.
Bernanke’s remarks may reinforce investors’ expectations that the central bank will lower interest rates further to help a faltering economy. While officials have expressed concern that inflation is accelerating, Bernanke signaled he shares Vice Chairman Donald Kohn’s view that financial market turmoil and slowing growth pose the “greater threat.” The Fed chief’s testimony came as government figures today showed the U.S. economic expansion, now in its seventh year, is increasingly in peril. Durable-goods orders fell 5.3 percent, more than forecast, in January as companies reduced spending.
New-home sales fell last month to the lowest level since February 1995 even as prices slid by a record 15 percent from a year ago. Bernanke referred to “downside” risks for the economy four times in his testimony, and noted that data since the last Fed meeting in January pointed to “sluggish” growth. Policy choices have also become more complicated as energy and commodity prices rose in recent weeks, he indicated.
- Bernanke Readiness to Cut Rates Stokes Price Concerns. Federal Reserve Chairman Ben S. Bernanke’s readiness to cut interest rates to avert a recession is stoking concerns that prices will get out of hand. “Bernanke has really overweighted the economic risks relative to inflation,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, following the Fed chief’s testimony to Congress yesterday. “He may get some disagreement” among colleagues on the Federal Open Market Committee, Silvia said.
Investors’ expectations for inflation over the next 10 years jumped to the highest since June after Bernanke pledged to the House Financial Services Committee to act in a “timely manner” to combat “downside risks” to growth. A day after government figures showed wholesale costs rose 7.4 percent in January from a year ago, Bernanke said the price outlook has deteriorated “slightly.”
“They will keep cutting,” said Kurt Karl, chief U.S. economist at Swiss Reinsurance Co. in New York. “If inflation looks like it is taking off quite rapidly, or inflation expectations take off, they will have to backtrack.” The FOMC last month lowered the benchmark rate by 1.25 percentage points in nine days, the steepest reduction in two decades, to 3 percent. The two decisions each saw one dissenting vote on the Fed panel.
- Ben S. Bernanke, who has reduced interest rates faster than any Federal Reserve chairman since 1982, is failing to bring down the cost of credit for most American homeowners. The average fixed rate for a 30-year home loan rose more than half a percentage point during the past four weeks to 6.04 percent, according to Freddie Mac, the world’s second-largest mortgage buyer after Fannie Mae. The increase occurred after the Fed lowered its benchmark rate by 0.75 percent on Jan. 22 and cut the rate by a further half-point eight days later.
- BoE fears largest ever peacetime liquidity crisis. The Bank of England’s Deputy Governor today warned that the ongoing credit crunch had left the Monetary Policy Committee uncertain as to its next move as it and fellow central banks face up to what she described as the “largest ever peacetime liquidity crisis.
- The perceptive Charles Dumas of Lombard Street Research said that the policy of even more interest rate cuts is “disastrous”. Dumas said the policy could actually lead to recession, rather than avert it, as the resulting inflation was eventually squeezed out of the U.S. economy or as consumers’ real incomes fell because of higher prices.
“The Fed’s childish denial that food and energy prices matter (they are not included in the “core” inflation measure) is contributing to the strong upward trend in commodity prices, as investors globally fly from the dollar into real assets,” he said. Gold.ie
- 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.
REAL ESTATE
- Existing Home Sales Hit 9-Year Low.
- Read full story at or at »
- New home sales near a 13-year low. January home sales slip 2.8%, below consensus estimates, as prices continue their decline.
- The decline in residential real estate accelerated though the end of 2007, and home prices in 20 key markets plunged 9.1% for the year, according to a survey released Tuesday.
- Homeowners Losing Equity Lines.
- The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today’s McMansions into tomorrow’s tenements. The Next Slum?
- Say good-bye to granite countertops. High-end kitchen and bath renovations just aren’t boosting a home’s value the way they used to. Sellers who succumbed to home over-improvement syndrome are feeling the pain.
- It’s Not Surprising Prices Are Declining.
- A Market that’s Still Rolling Downhill In California.
- A Metaphor For The Building Boom Gone Bust.
- A Reality Check For Unsold Realty.
- It Was Definitely A Bubble.
- Sellers Trying To Catch A Slinky Going Down The Stairs.
- There Will Be Blood In California.
- Too Much Supply, Not Enough Demand In Florida.
- The InvesTech Housing Bubble Bellwether Index bounced up once again this past week and is nearing its recent peak of early February. While some may feel that a bottom in the housing market may be near, we will closely watch mortgage rates, housing sales and inventories during the spring selling season.
Existing home sales remain in a steep downdraft. Figures for January are off 33 percent since June of 2005. As recession fears continue, downward pressures will not likely diminish anytime soon. Analysis by James Stack, InvesTech Research.
FORECLOSURES-MORTGAGES
- U.S. Home Foreclosures Jump 90% as Mortgages Reset. Bank seizures of U.S. homes almost doubled in January as property owners failed to make higher payments on adjustable-rate mortgages. Repossessions rose 90 percent to 45,327 last month from the same period a year ago, according to RealtyTrac Inc., a seller of foreclosure statistics that has a database of more than 1 million properties. Total foreclosure filings, which include default and auction notices as well as bank seizures, increased 57 percent.
- Read full story at or at »
- White House to veto foreclosure bill. $4 billion housing bill is too expensive for the administration and would ’slow the recovery of the housing sector.’
- Housing bill will ‘bail out lenders’ Bush. President reiterates his objection to a proposed change to help homeowners in bankruptcy and the creation of a $4 billion fund to let agencies buy foreclosed homes.
- Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish. Joe Lents hasn’t made a payment on his $1.5 million mortgage since 2002. That’s when Washington Mutual Inc. first tried to foreclose on his home in Boca Raton, Florida.
The Seattle-based lender failed to prove that it owned Lents’s mortgage note and dropped attempts to take his house. Subsequent efforts to foreclose have stalled because no one has produced the paperwork.
- Cleveland: ghost town created by America’s loan scandal.
- Vulture Fund Deals With Delinquent Homeowners Lost by Subprime.
THE THREE TRILLION DOLLAR WAR
- The cost of the Iraq and Afghanistan conflicts have grown to staggering proportions.
GEOPOLITICAL
- Al-Qaeda Directing Terrorist Groups on Afghan Border, U.S. Says.
- Kurd-Arab Kirkuk Clash Is ‘Ticking Time Bomb,’ UN Mediator Says.
- Iran ‘number one world power’: Ahmadinejad. President Mahmoud Ahmadinejad declared on Thursday that Iran was the world’s “number one” power, as he launched a bitter new assault on domestic critics he accused of siding with the enemy. “Everybody has understood that Iran is the number one power in the world,” Ahmadinejad said in a speech to families who lost loved ones in the 1980-1988 Iran-Iraq war.
“Today the name of Iran means a firm punch in the teeth of the powerful and it puts them in their place,” he added in the address broadcast live on state television. Ahmadinejad’s comments come amid renewed Western efforts on the UN Security Council to agree a third package of sanctions against Tehran over its refusal to suspend sensitive nuclear activities.
- Iran Won’t Comply With Proposed UN Nuclear Demands, Envoy Says.
- The U.N. nuclear monitoring agency presented documents Monday that diplomats said indicate Iran may have focused on a nuclear weapons program after 2003 – the year that a U.S. intelligence report says such work stopped. Iran again denied ever trying to make such arms. Ali Ashgar Soltanieh, the chief Iranian delegate to the International Atomic Energy Agency, dismissed the information showcased by the body as “forgeries.”
- Iran fails to answer weapons questions: IAEA.
- Iran’s Supreme Leader Ayatollah Ali Khamenei has hailed Iran’s “great victory” over its nuclear programme. Mr Khamenei praised President Mahmoud Ahmadinejad’s handling of the issue. Last week, the UN nuclear watchdog said Iran was being more transparent, but had not given “credible assurances” that it was not building a bomb. On Monday, the agency heard that Iran may have continued secret work on nuclear weapons after 2003, the date US intelligence suggested the work ceased.
- Ahmadinejad: US Should Apologize to Iran. Iranian President Mahmoud Ahmadinejad called on the U.S. and its allies to “apologize” to Iran for accusing it of seeking nuclear weapons a day after the U.N. nuclear watchdog released its latest report on Iran’s atomic program. Ahmadinejad said the report by the International Atomic Energy Agency vindicated Iran and warned that Tehran would take unspecified “reciprocal measures” against any country that imposed additional sanctions against Iran.
The IAEA report said several past questions about Iran’s nuclear program had been resolved, but highlighted Tehran’s continued refusal to halt uranium enrichment. Ahmadinejad said in a televised address to the nation that the best way for the U.S. and its allies to “compensate for their mistakes” is to “apologize and pay compensation.” “If they continue” pursuing sanctions, he said, “we have definitely drawn up reciprocal measures.” Ahmadinejad did not elaborate. AP
- Hizbullah head Hassan Nasrallah on Friday said Israel’s “disappearance” is an inevitable fact. “If Israel’s attacks Lebanon again, we will wage war without any preconditions,” Nasrallah said during a speech in Beirut in honor of Hizbullah arch-terrorist Imad Mughniyeh, who was assassinated last week in Damascus. “The disappearance of Israel is an inevitable fact. It is an historical process in the region which will come to an end in several years,” he said.
- Canada and the U.S. have signed an agreement that paves the way for the militaries from either nation to send troops across each other’s borders during an emergency, but some are questioning why the Harper government has kept silent on the deal. Neither the Canadian government nor the Canadian Forces announced the new agreement, which was signed Feb. 14 in Texas.
The U.S. military’s Northern Command, however, publicized the agreement with a statement outlining how its top officer, Gen. Gene Renuart, and Canadian Lt.-Gen. Marc Dumais, head of Canada Command, signed the plan, which allows the military from one nation to support the armed forces of the other nation during a civil emergency. The new agreement has been greeted with suspicion by the left wing in Canada and the right wing in the U.S. The left-leaning Council of Canadians, which is campaigning against what it calls the increasing integration of the U.S. and Canadian militaries, is raising concerns about the deal.
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The GoldBugg Report – Profit During Times of High Inflation, Own Precious Metals
Posted by Worldwide Precious Metals on Tuesday, March 4, 2008
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