Newsroom
The GoldBugg Report - May 13, 2008
May 13, 2008
-"(Gold-Silver) This is the best opportunity I have seen in 45 years in the investment business." John Embry-Sprott Asset Management
-"If you don't own gold, silver and/or their related assets, we suggest that your last investment be the purchase of a pancake flipper so that by your surviving relatives can remove and separate your body from the flattened vestiges of our economy." Bob Chapman
-Jim Sinclair, of jsmineset.com, isn't mincing his words on the subject. "Keep in mind," he writes, "that the fundamental reason for gold's normal violent reaction was the euro coming off the $1.60 level, seen by some as a top. It is NOT!"
He goes on to say that "it is unlikely that the ECB will join the Fed in the race to 0%. Considering inflation even at the manufactured rate the PPI and CPI show, the Fed is giving away money in exchange for garbage paper at ZERO percent." Sinclair concludes: "I dare to say the bottom in gold has occurred this week. Gold will take out $1024 on the third try. Now the magnet is at $980 to $985." Kitco Daily Resource
GOLD
-Irrational Exuberance Again. Markets have entered a new irrationally exuberant phase where risk is again being massively discounted once again and the cheerleaders put on the blinkers. Denial is rampant and the word ‘stagflation' is verboten despite it being an increasingly likely reality.
It is important to remain cognoscente that the U.S. is suffering from ever-increasing credit losses for both consumer and commercial loans due to a weakening economy and ongoing housing crisis. The UK, Ireland and Spain face similar issues. The U.S. is likely already in what will most probably be a severe recession. The notion that the worst of the credit crisis is over is positively delusional.
Indeed the next phase of the crisis will be even more severe as the Alt-A mortgage market implodes it may make subprime crisis look like small beer. We are clearly in the end of the beginning phase rather than the beginning of the end phase, as permabulls would have us believe, and risk aversion and long term diversification into gold remains prudent. Gold.ie
-"The real current threat to the economy is inflation, as food and fuel are taking a big bite out of everyone's wallet," said Miguel Perez-Santalla, of Heraeus Precious Metals Management in New York. "With this kind of mixed news [strong dollar vs. rising inflation], the market is sure to be choppy in metals and any big dips may be considered good buying opportunities." Kitco Daily Resource
-Julian Phillips, an analyst at GoldForecaster.com, admits that the finance ministers from the G-7 industrialized nations "have made it clear that they do not like a weak dollar and will do something about it, which could be why the dollar is stronger" against the euro. However, "We believe the gold price will soon reflect a bigger picture than simply the euro/dollar exchange rate," Phillips said. Kitco Daily Resource
-The wheat price has broken. Rice price has a short-term top. Corn may be topping out. Gold is down. Silver has taken a dive. Housing prices are in the middle of decade long bear market. Yet, oil futures continue to move higher, fuelled by margin led speculation. All of that oil action is happening when no shortages of petroleum seem to exist anywhere.
Oil price is rising due to 93+% financing of the purchase price of a futures contract. With that level of margin requirements, one has to wonder if the NYMEX is acting responsibly. We need to ponder how low Gold might slide when paper oil does finally start liquidation. Gold certainly has neither confirmed the recent oil price, nor the possible negative ramifications of persistent $121+ oil. Does Gold know something the paper oil speculators do not?
Gold continues to digest the juices that pushed it to more than $1,000. A second period of deeply over sold conditions developed last week. That was expected as a correction is composed of several such events. Corrections are a series of sharp rallies from deeply over sold, followed by further corrective action. That chain continues till the final bottom is found. We never know the final bottom on a correction till well after the fact. For that reason, investors should be adding to portfolios during those periods of an extreme emotional absence of buyers.
Market participants have convinced themselves that the U.S. dollar's bear market should pause. That pause, while they trade paper oil, has contributed to Gold's correction. But a nation's money is really no more than a claim on the net assets, or equity, of a country. As past and present policy errors at the Federal Reserve continue to push the value of the U.S.'s equity ever lower, the dollar's bear market will renew. $1,500+ Gold is not a dream, but rather it seems a policy goal of the Federal Reserve. Ned W. Schmidt
-In Defense of Gold-Frank Holmes. The price of gold has corrected by close to 20 percent since peaking on March 17. If you have been listening to the popular press and business TV, you may be convinced that the gold and commodity "bubbles" have popped.
Once you back away from the day-to-day noise and put things into perspective, we believe this correction in gold, while painful in the short term, is just another pause in a long-term secular bull market. As it has been said, bull markets climb a wall of worry.
Over the past year, gold bottomed around $640 per ounce in late June. As the financial crisis unfolded, it staged a spectacular rally, surging more than 60 percent to $1,032. Gold has since pulled back, but given that the long-term fundamentals remain intact, we believe it is setting the stage for the next leg up. Here are some of the reasons why:
Negative real interest rates-The macro environment for gold is still supportive based on negative real interest rates. The one-year Treasury bill is offering just 2 percent, while the official inflation rate is around 4 percent. Negative interest rates make gold look more attractive compared with other safe investment alternatives, such as T-bills and certificates of deposit.
We believe the Federal Reserve will keep interest rates below the rate of nominal economic growth in order to support a fragile economy in an election year. Negative real rates between mid-2001 and spring 2005 powered gold's biggest bull run in decades, with prices rising from $255 to $455 per ounce.
Real inflation is underreported-The official inflation rate is around 4 percent, but when you include the rapidly rising prices for food and energy and understated housing costs, the real inflation rate is even higher. One of the best ways to protect yourself against inflation is to participate in it by investing in commodities such as oil and agricultural products. Historically, gold also has proven to be a viable hedge against rising inflation because it maintains its purchasing power.
We agree with those who estimate that the actual inflation rate is close to double digits due to the Fed's massive injection of new money into the economy to avert a recession. MZM (money zero maturity), the amount of money in the economy that's easily accessible for spending, is up 15 percent compared with the same time last year.
ETF redemptions-The current correction in gold has been led by sizable ETF redemptions. The StreetTracks Gold Shares ETF (ticker GLD) lost 1.3 million ounces of gold over the past two weeks, with nearly a third of that amount being redeemed this Tuesday alone. This may mark the first-ever ETF-led gold correction.
This correction is not surprising, given the strong acceleration in the first quarter of 2008 and typical seasonal trends. Some short-term profit-taking is likely, along with speculation that prospects have improved in financials and technology.
But in our opinion, this move out of gold is not indicative of the smart money, as momentum investors chased performance on the way up. The price action appears to be signaling a rotation from weak gold holders, perhaps back into the broader equity market.
Other factors-On top of the factors above, there are other fundamental factors that we believe will drive the price of gold higher over the longer term. Declining output from existing mines, particularly in South Africa, and a virtual absence of large new discoveries will reduce the supply of gold available in the market. At the same time that gold supply is falling, demand is increasing due to rising wealth levels in China, India and other nations with cultural affinity for gold.
In addition, history suggests that jewelry demand, which fell off when gold surpassed the $1,000 mark, is likely to pick up again during a gold-price retrenchment. It's easy for investors to get swept up in the emotion of a strong rally or a significant correction. In these volatile times, we suggest that investors protect themselves from suboptimal decision-making by not losing sight of their long-term asset allocation strategy.
-Is IMF trying to recover its gold by pretending to sell it? Read more here-http://www.gata.org/node/6281
-Gold is back, but how long can it last? London-based VM Group* forecasts the possibility of gold trading within a wide range over the next 18 months from $700 to $1,300 as it falls back from its recent peaks. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=52167&sn=Detail
-Gold Pausing Before the Next Advance. Read more here-http://www.silverbearcafe.com/private/5.08/pausing.html
-Peter Brimelow: Buggiest bugs show grit about gold. Read more here-http://www.gata.org/node/6277
-Money Pours Into Precious Metals Funds. Investors continued to pour into precious metals in March, adding a hefty $1.2 billion into the mutual funds and exchange-traded funds that concentrate on the specialty sector. That brought the total flow of cash into the subsector for the first quarter to $3.6 billion as investors sought safe-haven assets amid the ongoing credit crisis, which brought investment bank Bear Stearns to its knees, surviving only after a rescue by JPMorgan Chase. Read more here-http://www.thestreet.com/print/story/10415032.html
-Metals Surge as Rationing Cuts Power at Biggest Mines. Chile's worst drought in five decades and power rationing from South Africa to China mean the price of aluminum, gold, copper and platinum will keep climbing as the lights go out in the world's biggest mines. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=aCUU6NbjPfmM&refer=home
-Barrick concerned about lack of new gold industry discoveries, drop in global mine production. Barrick Chairman Peter Munk declared Tuesday at the company's AGM that, "this is as tough a business as it gets, and it's not getting any easier." Meanwhile, ailing CEO Greg Wilkins made a surprise appearance. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=52491&sn=Detail or http://www.resourceinvestor.com/pebble.asp?relid=42554
-AngloGold to Reduce Gold Hedge Book by 45%. New CEO Mark Cutifani is not all talk. After months of openly expressing his distaste for AngloGold's massive gold hedge book, he announced plans during the company's quarterly results presentation on Tuesday to sell $1.6 billion worth of shares to cut the company's hedge book down by about 45%. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42567
-Akshaya Tritiya: Indian Jewellers Ready for Gold Buying Spree. Jewellery showrooms across India are all decked up with 'golden make-up' to celebrate Akshaya Tritiya, the Hindu religious festival considered an auspicious time to buy gold. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42542
-And now it's the Peruvian miners planning to strike. Gold silver and base metals would be impacted. As another example of continuing simmering unrest in the mining sector, Peruvian unions say they will call their mineworker members out on strike from May 12th. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=52493&sn=Detail
or http://www.bloomberg.com/apps/news?pid=20601091&sid=asjNuYf3ghlg&refer=india
SILVER
-Investment Demand Could Be a Silver Lining. The silver price enjoyed four consecutive years of double digit gains from 2004, averaging $13.38/oz in 2007, a 27 year high. It began 2008 just shy of $15/oz but then rocketed 40% to peak at almost $21 on 17th March only to fall below $17 by the beginning of April.
Nonetheless precious metals consultancy GFMS, who launched the World Silver Survey 2008 at the Silver Institute in New York today, anticipates that investors will drive silver back towards $20/oz by the end of the year from its current level of $16.80 even though the supply/demand fundamentals for the metal are likely to be weaker than last year.
A key development in silver's changing fortunes, argues GFMS, has been the pronounced shift in investment behavior in the silver market. The market has moved from a situation of net disinvestment in the 1990s (when there was dishoarding after the boom/bust of the 1970s/1980s) to net investment. The investment boom, which began around 4 years ago, received a huge boost in 2006 from the launch of the ETFs in silver.
Even though the annual investment figures remain small relative to other components of supply and demand (and to investment in gold) GFMS contends that investment has "punched above its weight" in the determination of the silver price. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42589 or http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=52519&sn=Detail
-Silver outshines gold as inflation hits Egyptians. Silver is gaining ground in Egypt's jewellery market amid record gold prices and as surging inflation cuts the purchasing power of Egyptians, once leading world gold buyers. Read more here-http://www.gulfnews.com/business/Commodities/10210828.html
-Silver Zinc Batteries last 40 Percent Longer. Read more here-http://news.idealo.co.uk/news/1559/zpower-silver-zinc-batteries-last-40-percent-longer.html
-Laptops May Get More Battery Life From Silver-zinc. Laptop users may soon get longer battery life from their machines, with ZPower set to plug in its new silver-zinc batteries, which it claims last significantly longer than traditional lithium-ion batteries. The batteries will be available in consumer and business laptops from major PC makers starting in August, according to Ross Dueber, the CEO of ZPower, although he declined to name any of the vendors on Thursday.
Silver-zinc batteries pack more energy than lithium-ion batteries, giving laptops 40 percent more run time, according to Dueber. If a laptop runs for two hours with a lithium-ion battery, it should run for closer to three hours with a silver-zinc battery, he said. The battery's water-based chemistry also makes it nonflammable, compared to lithium-ion, which uses dimethyl carbonate, a flammable liquid. Cells can go off "like firecrackers" in lithium-ion batteries, Dueber said.
The silver-zinc batteries also won't degrade in capacity during the first year, while lithium-ion batteries can lose up to 30 percent of their capacity over that period, Dueber said. After a year, however, silver-zinc batteries start degrading at a rate similar to lithium-ion batteries. Read more here-
-A Silver Coating in the Fight Against Microbes. Silver nanoparticles could be the next step forward in antibacterial products. A new technique in paint making could soon make almost any surface germfree. Researchers have made paint that is embedded with silver nanoparticles known for their ability to kill bacteria and other microbes, in the hope that hospitals will coat their walls and countertops to fight infection.
According to the U.S. Centers for Disease Control and Prevention (CDC), more than one million people a year contract bacterial infections in hospitals. Silver itself is an excellent bacteria fighter, and in nanoparticle form it is even more potent at killing microorganisms. So far it has not shown any adverse effects in humans. Read more here-
http://www.sciam.com/article.cfm?id=silver-coating-fights-microbes
-Why Is Canada's Mint Doubling Its Gold & Silver Debts? This report is the result of a passing interest in the Royal Canadian Mint's latest annual report (2007). I wanted to further validate whether silver sales for last year were up substantially and if so, why the Mint's bullion revenues were not substantially higher.
Those revenue numbers seem to check out, but in the process I uncovered a matter potentially far more serious: the doubling of both gold and silver debt obligations. Excerpts from the Annual Report are bulletted and in italics. The remainder is my commentary. I would like to thank silver analysts Ted Butler and Jason Hommel for taking the time to review this before I posted. Read more here-http://news.silverseek.com/SilverSeek/1210053660.php
PLATINUM-PALLADIUM
-First U.S.-Listed Platinum ETNs to Launch on NYSE. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42637
COMMODITIES
-Commodity Investments at $225 Billion, Barclays Says. Read more here-
http://www.bloomberg.com/apps/news?pid=20601072&sid=auwCOfI.aW4Q&refer=energy
-Zinc Price May Jump More Than 50% in Five Years, Macquarie Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid=aCPNe.ePEIws&refer=commodities
-Congress considers the steel penny. Cost of making a penny is more than a penny, pushing the government to think about bringing back the steel-made pennies of World War II. Read more here-http://money.cnn.com/2008/05/07/news/economy/steel_pennies.ap/index.htm
-Chinese economic boom to last until at least 2020. Read more here-http://www.chinadaily.com.cn/china/2008-05/01/content_6656452.htm
OIL-GASOLINE
-Analyst predicts $200 oil could happen this year. Goldman analyst predicts $150 to $200 oil could soon be reality, but peak price still unclear. A Goldman Sachs analyst predicts that oil prices could reach $150 to $200 a barrel over the next 6 months to two years, but said that how far prices could climb still "remains a major uncertainty."
"We believe the current energy crisis may be coming to a head, as the lack of adequate supply growth is becoming apparent," analyst Arjun N. Murti wrote in a client note. Read more here-http://biz.yahoo.com/ap/080506/oil_200.html?.v=1&printer=1 or http://www.bloomberg.com/apps/news?pid=20601087&sid=ayxRKcAZi630&refer=home
-Oil Prices May Climb to $150 a Barrel, Boone Pickens Says. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ajs4Ujqxar2I
-Tracking Saudi Oil from Space. How much do they really have? Read more here-http://online.wsj.com/article/SB121002229576468609.html?mod=googlenews_wsj
-OPEC to earn over $1 trillion from oil exports-EIA. Read more here-http://uk.reuters.com/article/oilRpt/idUKN0717698020080507
-OPEC April oil output slips. OPEC oil supply fell in April to its lowest this year as a strike cut Nigerian output and top OPEC exporters Saudi Arabia and Iran trimmed production, a Reuters survey showed last Thursday. Output from the Organization of the Petroleum Exporting Countries slipped to 31.64 million barrels per day in April from 32.05 million bpd in March, according to the survey of oil firms, OPEC officials and analysts.
The 12 members bound by output targets, all except Iraq, pumped 29.41 million bpd, down from 29.75 million bpd in March and below their target of 29.67 million bpd, the survey found.
OPEC pumps about two in every five barrels of oil. Reuters
-Iran Doubles Oil Stored in Tankers, Bolstering Rates. Read more here-
http://www.bloomberg.com/apps/news?pid=20601109&sid=akLt5fJKQNr8&refer=home
-Non-OPEC oil producers hampered in efforts to boost output. Oil producers outside the OPEC cartel are unable to pump enough oil to reduce crude prices, hampered by robust domestic demand, weak investment and exhausted oil fields, analysts say. In the short term, "no non-OPEC member is in a position to produce more," said Francis Perrin of the publication Petrole et Gaz arabes.
"They are selling all the oil they can." The Organization of Petroleum Exporting Countries, by contrast, has reserves equivalent to about 2.0 million barrels a day, essentially in the hands of Saudi Arabia. Read more here-http://afp.google.com/article/ALeqM5jKirnHzlnzQIkNXO82_-ZfB_ey2Q
-Indonesia May Leave OPEC in 2009 as Oil Output Drops. Indonesia, the only OPEC member in Southeast Asia, may leave the group as early as next year because shrinking production has made the country a net importer of oil. ``We are now studying the option,'' Energy Minister Purnomo Yusgiantoro told reporters in Jakarta today.
The government may leave the Organization of Petroleum Exporting Countries in 2009 because it has paid its membership fee for this year, he said. Read more here-
http://www.bloomberg.com/apps/news?pid=20601080&sid=aR0tAsnC7ua8&refer=asia
-India Crude Oil Imports Rise 9.1% in 2007-08. India imported 9.1% more crude in 2007-08 compared to the earlier financial year as refining capacities expanded and local demand clocked the highest growth in eight years, official data indicated. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42444
-Venezuela's oil reserves swell to 130 bln barrels. Venezuela's proven crude oil reserves had swelled to 130 billion barrels as of late April, marking a rise of 30 billion from its prior estimate, energy and oil minister Rafael Ramirez said Thursday.
-Why $120 oil is good. Speculators are often blamed for artificially inflating crude prices, but some experts say high prices are needed to cut demand and develop new resources. Read more here-http://money.cnn.com/2008/05/07/news/economy/120_oil/index.htm?postversion=2008050812
-Retail gas prices soar to fresh record. With nationwide prices at an all-time high of $3.645 a gallon, drivers now pay 20% more than they did last year. Read more here-
http://money.cnn.com/2008/05/08/news/economy/gas_prices/index.htm?postversion=2008050806
FOOD CRISIS
-Brace yourself, Canada, for higher grocery bills. Read more here-http://www.cbc.ca/world/story/2008/05/02/f-food-inflation-canada.html
-Global free market for food and energy faces biggest threat in decades. Read more here-
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/08/bcnfood108.xml
-Food crisis payback for '20 years of mistakes': UN expert. Read more here-http://afp.google.com/article/ALeqM5jPVE6iCKQ9smXW6zFJXz74OHqgOg
-Central bankers sound alarm over food prices. Read more here-http://www.reuters.com/article/idUSL0512998320080505
CREDIT-LIQUIDITY CRISIS
-Investment guru Warren Buffett says the worst of the global credit crunch is over for Wall Street, but not for the average man or woman on the street. The CEO of Berkshire Hathaway said there would be "a lot of pain to come" for mortgage holders. He made the comments as Berkshire Hathaway's annual meeting got under way in Omaha, Nebraska, attended by a record 31,000 people. Read more on Buffett here-http://www.bloomberg.com/apps/news?pid=20601068&sid=ahKOXy.Kublo&refer=economy or http://www.bloomberg.com/apps/news?pid=20601087&sid=aMWbId0HNwOk&refer=home
-Credit crisis far from over: expert. A Derivatives expert who two years ago warned of a potential meltdown in global credit markets has cautioned that the crisis is far from over, and has endorsed recent calls to relax controls on inflation and allow higher prices to help markets trade their way out of their problems. Longtime critic of derivatives markets, Satyajit Das, says those who believe the US sub-prime loans crisis, and the drought in credit markets it triggered, are nearly over are wrong.
"I think the cycle has some way to run yet," he told a Financial Services Institute of Australasia function in Sydney yesterday. "It's a matter of years, not a matter of months." In particular, investors in the US stock market, which has climbed off its lows amid a growing mood that the worst of the crunch was over, were being too optimistic, he said. The author of Traders, Guns & Money warned that many of the problem financial instruments were still hidden and the total amount of debt attached to them largely unknown.
Losses incurred by US banks were certain to rise as $US1 trillion ($1.06 trillion) in sub-prime housing loans was due to reset to higher interest rates in the next two years. The use of credit card debt now totaling $US915 billion was cushioning US home owners. But, in an ominous sign, card issuers were rapidly increasing their provisions for bad debts, by as much as 500 per cent in the case of one bank. The use of sub-prime debt structures was also a feature of other markets, such as private equity, where $US300 billion in loans were due to be refinanced in the next two years.
Mr. Das said another $US1-$US5 trillion of assets would have to come back on to US bank balance sheets as a result of defaults on housing and other debts, and it was unclear how the banks could fund them issuance of preference shares by US banks was already at a record high. He said losses at financial institutions from the credit crunch were likely to almost double to $US400 billion. There were also second-round effects to come as the damage done to the real economy from financial sector losses fed back into further bank losses.
Mr. Das said there needed to be a massive reduction in debt levels globally or a "nuclear deleveraging" before the crisis could be said to be over. That could be achieved through an economic crash "on the scale of 1929" but allowing inflation to rise would help to avoid that scenario. Higher inflation was a legitimate policy option since it reduced the real value of debt and gave companies and individuals breathing space to reduce their leverage by helping to put a floor under asset prices.
His comments come as some economists urge Australia's Reserve Bank to relax its inflation targeting policy to help avoid a severe economic downturn. He acknowledged that as inflation rose higher it was more difficult to control it, but noted the global economy was moving into a period of higher inflation anyway. "It could be the lesser of two evils," he said. Theaustralian.news.com.au
-JPMorgan says no near end to financial crisis: report. Read more here-http://www.reuters.com/article/idUSL0353675920080503
-Swiss Bankers Assn head sees more nasty surprises ahead in financial crisis. Read more here http://www.forbes.com/markets/feeds/afx/2008/05/05/afx4969231.html
-Outstanding short-term loans to banks by the Federal Home Loan Banks are on pace to hit $1 trillion by August as financial institutions continue to seek liquidity for housing, the federal regulator of the FHLB said on Tuesday.Read more here-http://www.reuters.com/article/idUSN0656294220080506
-Fed Survey Shows More U.S. Banks Tighten Loan Terms. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=a45nIbT1eKLo&refer=home
-Fannie Mae, the largest U.S. mortgage finance company, reported a wider loss than analysts estimated, cut its dividend and said it will raise $6 billion in capital as the worst housing slump since the Great Depression deepens. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=ava6rLMVLLA4&refer=home
-American International Group Inc., the world's largest insurer by assets, said it will raise $12.5 billion after posting back-to-back quarterly losses for the first time as a publicly traded company. AIG had a record first-quarter net loss of $7.81 billion, or $3.09 a share, compared with earnings of $4.13 billion, or $1.58, a year earlier, the New York-based company said today in a statement. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=adyL.GUyLSbM&refer=home
THE FOUR MEGA DANGERS INTERNATIONAL FINANCIAL MARKETS FACE
-In my judgment, there are currently four major dangers facing the world economy, and all of them are currently obscured by the fact they play themselves out slowly.
The Four dangers,
The first danger we have witnessed since August 2007: The subprime mortgage crisis gave rise to a liquidity crisis in the international banking system, due to uncertainty about who holds the losses. This is leading to reduced lending to firms and households. But that is not the end of the story, because the reduced lending will lead to reduced consumption and investment. With a lag, reduced sales of goods and services will reduce stock market valuations. And, with another lag, the lower stock market prices will in the absence of any favorable fortuitous events intensify the banks' liquidity crisis.
The second danger lies in the dynamics of U.S. house prices. As more and more U.S. households find themselves unable to repay their mortgages, foreclosures are on the rise, more houses are put on the market, the price of houses falls further with further lags this leads to more foreclosures and declines in housing wealth. This dynamic process plays itself out only gradually, as households face progressively more stringent credit conditions and house sales gradually lead to lower house prices.
The third danger results from the interaction between wealth, spending and employment. As U.S. households' wealth in the housing market and the stock market falls, their consumption is beginning to fall and will continue to do so, again with a lag. This decline in consumption is leading to a decline in profits, of which more is on the way, which in turn will lead to a decline in investment. The combined decline in consumption and investment spending will eventually lead to a decline in employment, as firms begin to recognize that their labor is insufficiently utilised. The decline in employment, in turn, means a drop in labor income, which, with a lag, leads to a further drop in consumption.
And that leaves the fourth (and possibly the nastiest) of the dangers, one that concerns the latitude for monetary policy intervention. As the Fed reduces interest rates to combat the crisis, the dollar is falling. This is leading to higher import prices and oil prices in the United States, putting upward pressure on inflation. The greater this inflationary pressure which is currently in excess of 4 percent the more difficult it will be for the Fed to reduce interest rates in the future, without running a serious risk of inflaming inflationary expectations and starting a wage-price spiral. U.S. firms and households will gradually recognize this dilemma and the bleak prospect of little future interest rate relief will further dampen consumption and investment spending.
Eventually, of course, the decline in spending will lead to a decline in inflation, but this will only happen with a lag. The longer the lag turns out to be, the longer the period over which the U.S. economy will endure stagflation, that is, a cruel combination of rising prices and falling aggregate demand. Much hinges on how persistent U.S. inflation is. More persistent inflation will inevitably give rise to higher inflationary expectations, leading gradually to higher inflation, and so on. It took central banks over a decade, in the 1980s and early 1990s, to get inflationary expectations under control, and the fruits of this battle are now in danger of being lost. Dennis J. Snower-Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42413
INFLATION
-Fed's Hoenig Says Inflation `Serious,' May Prompt Rate Increase. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=apCx9hwG3ZQ4&refer=home
-IMF Says Inflation Back After Years of `Quiescence'. Inflation is reemerging as a threat to economic stability after years of ``quiescence,'' and officials must be wary of policies that stoke consumer prices, the International Monetary Fund's deputy chief said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aQobtd4SwuXw&refer=home
-Trichet Sees `Rather Protracted' High Inflation. European Central Bank President Jean- Claude Trichet said inflation will remain ``high'' for some time, signaling that the bank is in no rush to lower interest rates as economic growth slows. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZrZpAw8DbmI&refer=home
INTEREST RATES
-Inflation worries will drive interest rates higher: Rubin. Read more here-
http://www.globeinvestor.com/servlet/story/RTGAM.20080505.wrates0505/GIStory/
-Bank of England Keeps Rate at 5% to Gauge Inflation. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=awuqFMLD7KlU&refer=home
-ECB, BOE Keep Main Rates Unchanged to Fight Inflation. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=akvg.YMVjX6c&refer=home
-Fed likely to prefer more lending over interest-rate cuts. Read more here-http://www.gata.org/node/6274
-Fed is running out of room to help economy. Read more here-http://www.nypost.com/php/pfriendly/print.php?url=http://www.nypost.com/seven/05012008/business/fed_is_running_out_of_room_to_help_econo_108979.htm
-Global monetary policy. Disentangling the links between the Fed, the falling dollar and the soaring price of the world's commodities. Read more here- http://www.economist.com/finance/PrinterFriendly.cfm?story_id=11294547
-Ben Bernanke is no Paul Volcker. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff050208.html
U.S. RECESSION-BANKRUPTCIES
-It's a recession to 4 out of 5 Americans. A CNN/Opinion Research poll shows that the nation is becoming more convinced the economy is in a nosedive. Read more here-
http://money.cnn.com/2008/05/06/news/economy/recession_poll/index.htm?postversion=2008050705
-Economy May Face Prolonged Pain, History Suggests. The worst of the financial pain may have passed, but the economic pain could be just starting. Read more here-
http://online.wsj.com/article_email/SB120993516590765753-lMyQjAxMDI4MDA5NTkwMzU1Wj.html
-Feldstein Says U.S. Economy `Sliding' Into Recession. Harvard University economist Martin Feldstein, a member of the committee that charts the American business cycle, said the U.S. economy is ``sliding into a recession.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=aLkqZ.fSIOdY&refer=home
-Americans skeptical of Fed. Poll shows that majority of respondents are unsure about the central bank's ability to improve the economy. Read more here-
http://money.cnn.com/2008/05/07/news/economy/fed_poll/index.htm
-Why the economy is worse than we know. Read more here-http://www.mindfully.org/Reform/2008/Pollyanna-Creep-Economy1may08.htm
-Low Spending Is Taking Toll on Economy. Read more here-http://www.nytimes.com/2008/05/01/business/01econ.html?_r=4&oref=slogin&ref=business&pagewanted=print
-False hope' seen in April store sales gains. Analysts, citing numerous headwinds, aren't buying that last month's gains indicate a rebound in consumer spending. Read more here-
http://money.cnn.com/2008/05/08/news/economy/retail_sales/index.htm?postversion=2008050810
-U.S. Consumer Debt Rises More Than Forecast in March. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=aSN4AbFYIoCc&refer=economy
-Vallejo, California, Officials Vote for Bankruptcy. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aCWpB6JlHN9Y&refer=home
-Consumer bankruptcies jump 47.7 percent. Read more here-http://www.reuters.com/article/idUSN0217061320080502
-U.S. April Business Bankruptcy Filings Increase 49. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adsu_ZvUytSs
-Tropicana Entertainment files for bankruptcy. After losing its New Jersey gaming license, president says the casino operator needs a 'breathing spell.' Read more here-
http://money.cnn.com/2008/05/05/news/companies/tropicana_casino.ap/index.htm
-Subject: Filed for Bankruptcy. Just in case you didn't know, the following companies just filed for Bankruptcy. Jim Sinclair
- Hollywood Video
- Levitz
- Sharper Image
- Performance Team Freight
- Linens-n-Things
• Circuit City
-Down on Its Luck. Las Vegas used to be a recession-proof oasis. Not anymore. Read more here-http://www.newsweek.com/id/135638/output/print
-Economic Troubles Affect the Vegas Strip. Read more here-
http://www.nytimes.com/2008/05/06/business/06vegas.html?_r=2&oref=slogin
-Failing Economy Predicts Worse Health. Read more here-http://www.time.com/time/printout/0,8816,1737546,00.html
U.S. DOLLAR-FOREIGN CURRENCY
-Dollar's reserve status is tale of fading glory. Read more here-http://www.gata.org/node/6272
-Nameless central bankers try talking dollar back up via FT. Read more here-http://www.gata.org/node/6284
-Michael Kosares, proprietor of Centennial Precious Metals in Denver and host of its invaluable Internet bulletin board, the USAGold.com Forum, speculates in commentary posted today that the European Central Bank has begun to intervene surreptitiously in the currency markets to halt the euro's rise, and that gold's recent fall can be largely attributed to this. Kosares' commentary is headlined "Has Europe Declared War on the Weak Dollar?" and you can find it at USAGold here-http://www.usagold.com/amk/usagoldmarketupdate050108.html
STOCK MARKET
-"Suckers' Rally" Signaled After S&P 500 April Surge. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid=acxhKAQnJ9JA&refer=home
-Are Canadian investors being too cautious? Read more here-http://www.cbc.ca/money/story/2008/05/07/cibc.html
REAL ESTATE
-Home Prices Fall in 22 Cities as Foreclosures Rise. Read more here-
http://www.bloomberg.com/apps/news?pid=20601103&sid=aCOFOjeLZx.Q&refer=news
-Pending Sales of Existing Homes in U.S. Decreased 1%. Fewer Americans signed contracts to buy previously owned homes in March for the second consecutive month as falling prices and tougher loan rules discouraged buyers. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYwV23U9qcv4 or http://money.cnn.com/2008/05/07/news/economy/pending_home_sales/index.htm?postversion=2008050710
-U.K. house prices fall at sharpest pace since 1993. Read more here-http://uk.reuters.com/article/idUKNOA22571120080502
-U.K. house Prices Fall by £45 A Day. Read more here-http://uk.news.yahoo.com/skynews/20080430/tuk-house-prices-fall-by-45-a-day-45dbed5.html
-U.K. Nationwide Consumer Confidence Falls to Lowest Since 2004. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=alpWNX070i5M&refer=home
-How low will real estate go? Read more here-http://www.latimes.com/business/la-fi-forbes-housing5-2008may05,0,1708683.story
-Are house prices heading for a 1990s-style crash? Read more here-http://timesbusiness.typepad.com/money_weblog/2008/05/are-house-price.html#more
-Bulletproof housing markets get hit. The mortgage meltdown has finally gotten to Seattle, Charlotte and and other cities where prices had been holding up. Read more here-
http://money.cnn.com/2008/05/01/real_estate/bulletproof_cities/index.htm?postversion=2008050611
-It's Newer Homes That Stand Empty as Vacancies Rise. Read more here-http://www.nytimes.com/2008/05/03/business/03charts.html?_r=1&oref=slogin&ref=business&pagewanted=print
-The incredible shrinking house. Soaring fuel costs, environmental concerns and aging baby boomers mean the American dream home is a lot smaller than it used to be. Read more here-
-Canadian home sales will fall 11.5% this year, realty group predicts. Read more here-http://www.cbc.ca/money/story/2008/05/06/realestate.html
-Housing starts decline in April: CMHC. Read more here-http://www.cbc.ca/money/story/2008/05/08/housing-starts.html
-Building permits cool on Alberta weakness. Read more here-http://www.cbc.ca/money/story/2008/05/06/buildingperms.html
FORECLOSURES-MORTGAGES
-U.S. House Approves Democratic Anti-Foreclosure Bill. The U.S. House of Representatives approved legislation to let the government insure up to $300 billion in mortgages to help homeowners avert foreclosure over White House objections the measure would force the government and taxpayers to take on excessive risk. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=aRtzYp_OzosY&refer=home
-Americans split on homeowner bailout poll. Poll: About half of Americans favor special treatment for homeowners facing mortgage default. Read more here-
http://money.cnn.com/2008/05/08/real_estate/mortgage_poll/index.htm?postversion=2008050812
-House passes $15B anti-blight bill. Lawmakers say the funds will allow states to buy and repair foreclosed properties in an effort to prevent neighborhoods from deteriorating. Read more here-http://money.cnn.com/2008/05/08/real_estate/antiblight.ap/index.htm?postversion=2008050812
-New Price Drop Could Imperil Mortgage Agencies. Read more here-http://www.nytimes.com/2008/05/06/business/06fannie-web.html?_r=1%26oref=slogin%26partner=rssyahoo%26emc=rss%26pagewanted=print
-Countrywide Takes Away Home-Equity Credit Lines in Las Vegas. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=adSiHtVyQXmc&refer=home
-U.K. Buy-to-let mortgages fall by 85 per cent in the past year. Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/06/cmbuy06.xml
GEOPOLITICAL
-Israelis Mark Milestone Amid Prosperity They Struggle to Enjoy. By plenty of objective measures, Israelis have reason to celebrate as they observe the 60th anniversary of their nation's founding this week.
Their economy is growing at almost twice the pace of the world's developed countries, the average citizen can expect to live longer than a German or an American and Israeli millionaires are snapping up prestige properties like New York's Plaza Hotel. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aMvKlfd4_Oj8
-Israel: Iran could have nukes by '09. Read more here-http://www.jpost.com/servlet/Satellite?cid=1209627027461&pagename=JPost%2FJPArticle%2FPrinter
-Israel's Peres says nuclear Iran would be 'nightmare'. Read more here-http://www.breitbart.com/print.php?id=080505113728.56898vfs&show_article=1
-Ahmadinejad: Israel a 'stinking corpse'. Iranian President Mahmoud Ahmadinejad said on Thursday that the state of Israel is a "stinking corpse" that is destined to disappear, the French news agency AFP reported. "Those who think they can revive the stinking corpse of the usurping and fake Israeli regime by throwing a birthday party are seriously mistaken," the official IRNA news agency quoted Ahmadinejad as having said.
"Today the reason for the Zionist regime's existence is questioned, and this regime is on its way to annihilation." Ahmadinejad further stated that Israel "has reached the end like a dead rat after being slapped by the Lebanese" - referring to the Second Lebanon War in the summer of 2006. Jpost.com
-Iran vows not to halt its nuclear program despite pressure. Iran's top leader says his country will not bend to international pressure and give up its nuclear program, according to state television. Supreme Leader Ayatollah Ali Khamenei, who has the final say in all state matters, said Iran will continue its nuclear program despite Western efforts to thwart it with sanctions.
"No threat can hinder the Iranian nation from its path," he said Sunday. The U.N. Security Council has already imposed three sets of sanctions on Iran for its refusal to halt uranium enrichment. World powers agreed Friday to try again to lure Iran to the nuclear bargaining table with a repackaged set of incentives. Diplomats said the offer contained no major new enticements. AP
-John Bolton, America's ex-ambassador to the United Nations, has called for US air strikes on Iranian camps where insurgents are trained for war in Iraq. Read more here-
http://www.telegraph.co.uk/news/1931520/John-Bolton-US-should-bomb-Iranian-camps.html?service=print
© 2008, Worldwide Precious Metals.
www.wwpmc.com
The GoldBugg Report - May 13, 2008
Posted by Worldwide Precious Metals on Tuesday, May 13, 2008
US Economy No Recovery Whilst Housing Bust Continues- Gold $1200
May 8, 2008
By: Jim Willie CB
Once every several months, an opportunity is presented on a silver platter to purchase a spectacular investment in a strong uptrend, with loud indications of continued upward trend in price. Gold is heading well past $1200 and silver is heading well past $25 in the next several months, despite the orchestrated annihilation of honest valid reporting. How many times have the clowns on Wall Street and the financial subservient media networks claimed that the worst was over for the US Dollar, gold, the US Economy, the housing market, and bank bond losses?
My guess is about once per year for the last five years, all wrong, and still wrong, just louder wrong now in tone. Has anything been fixed on the economy, housing, mortgages, or banks? No! The flow of US Fed repo money to banks has improved, that is all. That is not a remedy, but a bandage tourniquet, grossly misinterpreted.
Some relief has come for the US Dollar My past article pointed out a pennant pattern and imminent breakdown that did not occur. Long-term corrections are difficult to call. Prospects for fundamental improvement are not visible, but the story has been sold, and sold vigorously. The embattled buck could easily see a couple months of reprieve, one month finished, one month more to come. The heavily oversold US$ condition needed to be cleansed in order to enable another powerful downleg. US bank dilution has provided needed cash, retail sales (especially cars) have been horrendous, housing prices and inventory have been miserable, foreclosures have more than doubled nationally versus last year, home builders are slashing prices amidst mammoth losses, business capital investment is on the wane, inventory levels are building, and gasoline prices (utility bills too) have put a major crimp on consumers.
Meanwhile, the US Dollar has rallied based upon hope, prayer, and marketing. If truth be known, the Plunge Protection Team has been busy doing what they usually do best, corrupting with crucial interference in certain markets. They have been propping up the bank stocks, the homebuilder stocks, Detroit carmaker stocks, the Fannie Mae stock, and more, enough to lead to moderate rallies in the S&P500 and Dow Jones Industrial stock indexes. If truth be known, a massive coordinated effort has followed the G7 Finance Meeting, as central banks have been conducting overnight operations to prop the US Dollar The crippled world reserve currency is inflicting damage on their domestic economies like an acid rain, as their floors fall out from higher consequent domestic currency exchange rates.
What has happened in the last few weeks, of real importance, which has made a difference? The US Federal Reserve has indeed plugged in their sizeable lending facilities. They have taken in some garbage AAA mortgage bonds, overpaid on refund prices, and had to rebalance their own bond portfolio. US banks do not face bankruptcy like several weeks ago, tied to insolvency plus illiquidity. The effect has been to improve the US bank portfolio mix, but their insolvent status remains on a non-borrowed basis. Banks in aggregate have a slightly better liquidity position, but still a negative overall condition. Big deal! The US banks have gone from minus $100 billion to minus $90 billion in non-borrowed reserves. Huh?!? The problem is fixed? Methinks not! Can banks proceed without further bond losses after housing prices have fallen during the last few months, and during the next few months? Methinks not! Another huge round of bank bond losses comes in just a few months. Be patient. The night of bond loss follows the foul day of continued home price declines.
What has happened in recent weeks seems clear. The US Govt and US Fed and US Treasury have made a deal with the devil. Primarily Arabs (much less so Asians) have been encouraged to add cash in order to keep US big banks solvent. In return, the agents from the not-so-hidden Plunge Protection Team led by the US Fed& Treasury have engineered a counter-trend rally in bank stocks and mainstream stocks. They have also solicited the cooperation of the Euro Central Bank and Band of Japan in order to engineer a counter-trend US Dollar rally, as feeble as it has been.
The smaller Bank of Canada has been very cooperative also. This all has occurred even though at the expense of UST Bonds, since something must give ground. They can corrupt most markets, but not all markets simultaneously. Lies offer cover to the portions they cannot control in concert. The BKX bank stock index has indeed risen in recent weeks. It faces some stern resistance here. It might make minor added gains. The reality of a profound wave of new bond losses will likely keep the bank stocks well chained to the mill posts. This too is covered in the upcoming May Hat Trick Letter.
The housing decline alone acts a powerful destructive force upon banks. The US Economic recession will be an equally powerful destructive force. Ordinary debts are defaulted outside the realm of housing. Vicious cycles with gripping feedback loops are at work. Bank loan portfolios on the household and commercial side are next to endure wreckage. Further monetary stimulus and federal stimulus are obvious next steps. Gold and silver will thrive. The US Dollar will be harmed much more. The only saving grace for the beleaguered buck is the triple faceted mess in England with housing, banks, and certain recession, and the imminent downturn in the European Union. Competitive currency devaluation soon will be far along. European leaders already consider the high euro to be a destructive influence. They have declared war on the US Dollar decline, and want it to recover.
USFED REBALANCE BACKFIRE
The US Federal Reserve has been forced to react to its massive underwriting of the insanity behind gutted US money center banks and investment banks, the latter of which function under different accounting rules and freedom to deceive. The effect has been to force the US Fed to issue more USTreasurys on the open market in their rebalance, since they gave away their more valuable UST Bonds in return for junk crapp bonds with AAA phony labels. The effect has been to lift US Treasury bond yields on both the 2-year and the 10-year maturity. The 2-yr TBill yield has risen from 1.50% in March to 2.40% here in May. The 10-yr TNote yield has risen from 3.40% in March to 3.90% here in May.
The rise in USTBond yields has helped the US Dollar, attracting foreign investment. The rise in the USTBond yields has led to the false notion that the US Economy is on the mend.
The US Dollar has not risen much, but it has risen. The fact that the buck has stopped falling has led many to conclude that the capital flows now favor the beleaguered buck. Foreigners still shun US Treasury auctions though. The signal of an end to US Fed official rate cuts has nothing to do with strength in the US Economy, nothing to do with restoring the fundamentals of national finances to health. It has to do with the US Fed recognizing that a falling US Dollar has been accompanied by a tragic rise in energy and food prices, along with all the carts attached. It has to do with recognizing they have used almost all their ammunition in rate cut capital.
The bull market in commodities is not over. At best it will take a breather. My contention is that major US banks are speculating in the energy market in order to repair their broken balance sheets. Certainly Goldman Sachs is. The entire story line of the worst over for the US Dollar and for the US Economy is patently false. Just one more chapter of plain propaganda by the Wall Street community, the US Federal Reserve, and the US Govt They are collectively worried to death, sweating bullets, even as precious capital blood has spilled in massive quantities. The entire US financial system has tragically turned insolvent. Inflation remains the only option left as an option, yet they cannot destroy the last standing asset group in US Treasury Bonds.
The most egregious backfire of banking flatulence has been the rise in long-term interest rates. This is precisely what the US Fed does not want, since it provides substantial headwinds for the housing & mortgage market, via higher mortgage rates. The bond market, via US Fed rebalancing, has properly priced the higher asset risk erosion from price inflation, as it should. Some have called this effect the next Bond Conundrum. Sure it is! In fact, the US Treasury complex is a maze of not just conundrums. It serves as a stark living breathing example of Goebbels (Nazi Information Minister) and Orwell (author of 1984 ) joined in a nightmarish marriage of deceit and fraud. The problem is that long-term bond yields should be over 10% since price inflation is even higher than that. Talk about an overvalued asset!!! The last bubble to burst is not crude oil and gold with the supporting cast of commodities. It is the USTBond complex. Its prices are way way way out of whack. Sure, the US Fed is trying to stimulate with lower rates. But why would any sane thinking person buy a US Treasury Bond when the real return is minus 7% to minus 8%?
GOLD OPPORTUNITY & SILVER PLATTER
The opportunities given today in gold & silver will be written about for another few years. The prices offered in early 2008 will be seen as tremendous bargains. Price bargains were last seen in August 2007, in September 2006, and in mid-2005. The breakout of gold past the elusive 700 mark foretold the rally not just to 1000 but to 2000 and higher. It unleashed a new era. Ditto for silver, which rose past the elusive 15.50 level. Doing so foretold a rally not just to 20 but to 50. Give it time. Things are unraveling. Systems are broken. Solutions are nowhere. All efforts have an inflation stench to them. Desperation has entered central banker offices.
The gold price has found support off the 200-day moving average in classic form. The triple leg correction off the 1020 high is also a classic long-term pattern. It guarantees a firm foundation for the assault on 1000 with stable success. Note how the 1000 mark was eclipsed, but from a base around 650 to 670. The next base will be 850 or so. The silver price movement and patterns are similar. However, silver is heading to the heavens in price, joining its platinum brother and palladium cousin. Gold will be stuck fighting political wars, but making strong gains. The gold/silver ratio will show pronounced improvement in favor of silver in the next two to three years. Silver is in default on a nearly global basis. COMEX delivery of silver is interfered with. Silver coin dealers have almost nothing to sell. Even the US Mint has halted production of silver eagles! So silver price has declined amidst profound shortages? The stage is set for huge up legs in the silver price. Gold will rise in concert.
The triggers for the US Dollar on the downside, and for gold & silver on the upside are more big bank bond losses. Nevermind the cause being the housing price declines. That has been ignored. When banks announce further big bond losses, the winds will change very rapidly, and with anger by the people. Rating agencies are cooperating in ways, but not offering ratings on debt securities in certain bond types. Yet they also are issuing huge downgrades of typically safe asset backed bonds. This summer will involve a very very rude awakening. The reality of recession, housing decline, and bank losses will undo the positive attitudes that are lifting the subprime US Dollar and stock prices broadly
WRONG CONCLUSION ON RECOVERY
So should we conclude that the US Economy has returned to health, evidence being a slight reversal of all that flight to safe haven into the US Treasury complex? The bond yields have risen, typical of what happens when the US Economy has recovered. In this case, if one reads the uptick in bond yields as a green light signal of economic vitality, then a totally wrong conclusion is reached. The USEconomy is slowing down noticeably, as seen below with retail sales. A repeat of the 2000-2001 slump is evident, but the current slump starts at a lower level.
The strange message is that US households can no longer burn home equity for purposes of consumption. Investment at the national level is insignificant at best, nonexistent at worst. Investment in financial engineering does not count!
Bond yields should rise for the basic reason of the climb in price inflation. The main debate now is how deep the recession will be. Only the obviously biased folks, like the diminutive president, the compromised Treasury Secy, the rookie USFed Chairman, the hack USGovt agency heads, and Wall Street felon executives debate whether a recession is in progress or not. Their combined track record of fraudulent behavior continues. Their false messages continue. Corporate welfare continues. Massive cost inflation without wage growth benefit continues. The destruction of the middle class continues. The insolvency of America continues. Further wreckage of US banks and households is a virtual certainty. The financial markets just cannot accept these facts yet. It will be a long hot summer, with Chinese Olympic Games as a climax.
Other key data indicates that the USEconomic recession is growing deeper. It is hard for me to write or speak the word ‘Recovery' without laughter. The only thing that has recovered is acceptance of falsehoods. Long recoveries (even if tainted) are followed by long painful recessions, especially with the credit abuse seen in recent years. This is the first leg in a powerful recession, the likes of which have not been seen in half a century. Even Sir Alan Greenspasm recognizes a recession when he sees one. "We are in a recession. But this is an awfully pale recession at the moment. The declines in employment have not been as big as you would expect to see." Gee, Alan! Check the Birth-Death Model corruption to the Jobs Report. A loss of 280 thousand jobs in March and another 280 thousand jobs in April qualify as hefty employment declines. My prism removes all B-D Model adjustments, in pursuit of reality, removing the garbage clutter.
The obvious recession with horrible job loss screams of addition USFed rate cuts, much more accommodation with monetary accommodation (easy money), wave after wave of further home foreclosures, wave after wave of further bank losses, and new waves of bank failures, all of which will send gold and silver to the stratosphere.
The truth hurts, so revise the truth. George Orwell is chuckling in his grave. Joseph Goebbels roars with laughter in the fire & brimstone of hell.
Details on bank & bond developments are covered in the upcoming May Hat Trick Letter. It also covers the housing market, whose decline is nowhere near at an end. In fact, the lingering glut of oversupply across the board guarantees another 10% to 20% in price declines. How will bank bonds react? Easy, they will lose perhaps 50% of their value, even the AAA-rated. Huge swaths of debt downgrades are in progress still. That news is kept quiet.
If you want a guaranteed howl, check out the Treasury Investment Protection Security, the infamous TIPS, another fraud. It pays out 0% now, claiming to protect from inflation. What a joke! It should pay out at least 5%, and perhaps 7% or more, since prevailing price inflation is running at almost 12% and long-term bond yields pay out less than a 5% yield.
MORE STENCH IN RECENT NEWS
The recent news is so horrible that it defies logic how Wall Street can keep a straight face on its deception and ongoing marketing program songs. Start with the USGovt carnival, as the April Jobs Report was trotted out last week. It immediately was met with derision, doubt, and double takes. The claims come that the USEconomy and US financial system are resilient and have weathered the storm. The economy has faltered, tipping badly from the storm, into a recession obvious to all except those in power on Wall Street and the USGovt circus rings. This gang must be swept out in November, for colossal incompetent and widespread corruption, as stewards to an era of unprecedented loss of national wealth. The financial system has been rendered insolvent, with negative core reserve assets. How is that weathering the storm? Households are increasingly insolvent, hardly geared for economic participation. The only resilience detectable is from the USGovt and Wall Street carnival barkers, whose contributions are trumpeted wrong messages. They want your money even now, for yet another shift of wealth from the plebeians to the elite.
The April Jobs Data has once again brought attention to the Birth-Death Model, whose deception has come much more into the open, exposed to harsh light of scrutiny. The adjustment was openly discussed on financial networks, on the NYSE trading floor, and elsewhere. The fraudulent three-legged mangy dog is running in the open, in full view. Be sure that the scrutiny by many folks is lost almost immediately by the mainstream. Their attention span toward rays of light from reality is short. They quickly revert to headlines of news stories in the propaganda, recited by strained faces by guests in interviews. The April contribution to job creation from the Birth-Death Model was +267k jobs!!! Included are +45k construction jobs and +72k professional & business services jobs. The hacks at the Bureau of Labor Statistics either forgot to check the reality of job cuts from major corporations, or they are given marching orders by even bigger klutzes in management. Anger at the complete gang encompassing the Mussolini Fascist Business Model is not only warranted, it is demanded. Lee Iacocca, of former Chrysler CEO fame, recently delivered a speech wondering why outrage is not common and prevalent among the American populace, since the economic fabric of the nation has been destroyed by incompetence, corruption, and preoccupation with war. Here, Here, Lee!!! Never is any need felt on my part to justify my anger. If people ask me why, then they are most likely a contributor to the problem itself, or deaf dumb blind.
The reality of 280k job losses in March and another 280k job losses in April would have rattled the financial markets. The USFed and Wall Street desperately want to sell the idea of recovery. They want suckers to buy the billion$ in stock shares they wish to sell here. Reality reported with massive job loss, in an obvious loud indication of economic recession, would have spoiled their mission of grand deception.
If more official interest rate cuts were expected, that being the prevailing opinion, then the USDollar would not bounce like it has, the bank stocks would not bounce like they have, and a deeper USEconomic recession would be anticipated.
Gold would have risen from the anticipated policy response. As reality enters the room in the next few weeks and few months, all deceptions will be laid bare. Gold will catapult past 1000 easily when reality strikes hard.
Other horrendous news centers upon UBS and another $10.9 billion in credit related losses, will axe 5500 jobs mostly in the United States and United Kingdom . That is only fitting, since these two nations operate as centers of the most reckless economic models and home loan lending in modern history. In other mortgage finance news, Fannie Mae announced a giant $2.2 billion quarterly loss, and warns of severe weakness in the housing market. Don't forget that Fannie and its equally fat partner Freddie Mac are expected to serve as acidic foundations in any Resolution Trust platform for mortgages.
The housing market absolutely will not stabilize, and certainly not rise, unless and until a New Resolution Trust platform is in full gear operation.
Its functions will be to provide secondary mortgage funds as it securitizes mortgages, to bury badly damaged and completely dead mortgage bonds in their acidic basements, and to provide desperate assistance in renegotiated mortgage loans when passing the loan writedowns to federal agencies who pick up the heavy lunch tab. Expect the New RTC to begin operations no sooner than early 2009, thus permitting additional housing price declines. Mortgage bonds follow. Bank losses follow. The key is housing. It served as the phony cockeyed foundation to the USEconomy from 2002 to 2006. Now it is an albatross.
GOLDMAN SEEKS BUYERS OF ITS CRUDE OIL CONTRACTS
True to form, in yet another chapter in their corruption, Goldman Sachs has announced the likelihood of a future $200 crude oil price. Conclude quickly that they are eager to find buyers of their long crude oil positions, as its price heads down. GSax has standing profits in need of liquidation, but they need more dumb demand. In 2005 they shorted the mortgage bonds profitably, even as they sold mortgage securities laced with fraud. In November 2007, they heralded a flat year for gold, just before its price vaulted from 800 to over 1000. Now these criminal geniuses are touting a strong year for crude oil. Doesn't anyone ever question the clear biased motives of these guys? Simple conclusion is that crude oil is soon coming down. Watch gold rise as the pendulum swings from energy to precious metals.
JPMorgan might act as the chief corruption player behind the curtains, but without a doubt, Goldman Sachs acts as the chief corruption player on the open stage. JPMorgan was pulled onto the stage last month in its bold Bear Stearns raid. GSux continues to ply its trade. At least JPMorgan offered a straight interview in Germany , where CEO Jamie Dimon admitted the bank crisis in the Untied States is nowhere near at an end. He essentially denied that he would ever be really honest and forthright with his shareholders, especially if they were indeed broke. By the way, don't trust anyone who goes by the nickname Jamie. My name is James, and you can call me an expert on the name.
Jim Willie CB is a statistical analyst in marketing research and retaicl forecasting. He holds a PhD in Statistics. His career has stretched over 24 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com . For personal questions about subscriptions, contact him at JimWillieCB@aol.com
© 2008, Worldwide Precious Metals.
www.wwpmc.com
US Economy No Recovery Whilst Housing Bust Continues- Gold $1200
Posted by Worldwide Precious Metals on Thursday, May 08, 2008
The GoldBugg Report - May 06, 2008
May 6, 2008
-While the recent short term movements in the dollar and oil have led to weakness in gold, it is important to stay focused on the long term fundamentals. Oil and most other commodities remain near all time inflation adjusted record highs and this will lead to increasing inflation in the coming months which will see gold continue to outperform other markets and likely surpass the $1,000 per ounce mark in the coming weeks. We remain confident that given the increasing likelihood of stagflation, gold should reach $1,200 per ounce before year end. Gold.ie
-Bull market has more years to run. Some worry that the March peak was THE peak for gold. This is very unlikely considering the world situation and the economic imbalances today. Plus, demand for gold is growing strongly. It truly is an international, expanding market and it's easy for people to buy. Last month, for instance, Chinese banks began trading gold futures.
The gold market is currently more powerful compared to the 1970s. There is much more money behind the move. Whether it be China, India, the Middle East, Russia or elsewhere, the world has mega wealth and its acquiring gold. Aden Sister-Read more here-http://news.goldseek.com/AdenResearch/1209411888.php
-The Iranian naval incident is a reminder if one were needed that geopolitical risk has not gone away, remains as prevalent as ever and should remain to the forefront of investors' minds. Read more here-http://www.reuters.com/article/topNews/idUSWAT00939920080425?feedType=RSS&feedName=topNews&rpc=22&sp=true or http://www.breitbart.com/print.php?id=D90907000&show_article=1
Gold futures rise as crude oil hits record high
-Physical gold should never be sold or traded but rather accumulated steadily on a monthly savings plan and squirreled away. Big traders are always ready to buy on the dips and normally never sell their gold and silver. You would be amazed how quickly your physical gold and silver will accumulate using this strategy. Roger Wiegand-Read more here-
http://www.kitco.com/ind/Wiegand/printerfriendly/apr302008.html
-Admiral Mike Mullen, the Chairman of the Joint Chiefs of Staff, made a very profound statement at Monday night's Atlantic Council awards dinner that has received virtually no press notice: That we "will have to deal with Iran in the very near future." Read more here-http://www.outsidethebeltway.com/archives/2008/04/mullen_we_will_have_to_deal_with_iran_in_the_very_near_future/
-The huge global increases in money supply are of course highly inflationary and should continue to fuel a robust bull market in commodities, including gold and silver, even if they get put on the back burner and continue to correct for a while as the focus shifts to the broad stockmarket. Clive Maund-Read more here-http://news.goldseek.com/CliveMaund/1209327170.php
-The following is what has pressured gold and caused short covering in the dollar/euro. Media has convinced the public that the Fed will go hawkish, first by decelerating the drop in interest rates. The deceleration has been attributed to the Fed having done the right thing. Media has convinced the public that the ECB will reduce interest rates now faster than the Fed, thereby boosting the dollar versus the euro.
Although the business statistics are negative, the media has held out the carrot that it takes six months for the Fed's action to materialize in the economy so all will be well in six to nine months. The idea that the credit crisis is over is the message that firming financials are communicating as media supports that position. Media has declared gold as DEAD. 90% of the above is raving BS.
There is no way the Fed can go hawkish without causing, via the equity market, the revelation that nothing has changed for the better. There is no mention of the impact lower Federal Tax revenues will have on the US Federal Budget deficit and its negative weight on the dollar. There is no mention of the desire of many central banks to diversify out of the dollar when a short covering rally presents itself. I feel whatever gold has to do on the downside will be covered by the end of the first week of May. Jim Sinclair
-"Good-bye Kiss": Typically when markets breakout of large bases to higher levels, the tendency is for the price level to retract to the breakout level, giving that level a "good-bye kiss" before heading higher. In January 1980 the gold price reached $850 in the cash markets and $887 in the Futures markets.
The breakout above the $850/$887 level recently, followed by the rise to a new all time high of $1033, required a price retraction to the $850/$887 level to give it a "good-bye kiss." That has now occurred and we can probably look forward to a rise to new all time highs. Alf Field-Read more here-http://www.321gold.com/editorials/field/field050108.html
-Contrary to some analysis which claims silver is overvalued we continue to believe silver is very undervalued and will at least reach it's nominal high of $50 per ounce in the coming years. Gold.ie
-Market Sages Warn that Severe Recession Looms. Warren Buffett said yesterday that the U.S. economy is in a recession that will be more severe than most people expect. Somewhat modestly, Buffett said "this is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow."
Two other Wall Street legends, Jeremy Grantham and Peter Bernstein have made similar warnings. GMO founder Grantham predicts the U.S. market won't hit bottom until sometime in 2010, citing the painful experience of past post-bubble economies. "The unraveling of the 2000 bubble is a tale still being told," he writes.
Author, financial analyst, and market historian Bernstein, meanwhile, poured cold water over hopes for a V-shaped recovery in an interview with The Wall Street Journal. "You don't have a high-growth exit from this, as you've had from other kinds of crises," he says. "Here, the shape of the business cycle is like an L, where it goes down and doesn't turn up. Or like a U, a flat U." Wall Street's increasing optimism is misplaced and risk aversion continues to be warranted as does demand for real safe haven assets. Gold.ie
-Investors Pull Out of Mutual Funds. Early signs of how the financial crisis and turmoil in markets is affecting the investment industry was seen in the fact that all but one of the 25 largest U.S. mutual fund managers saw their long-term assets fall in the first quarter, as returns dived and investors pulled out of funds. In the worst start to a year for more than a decade, most money managers had retail outflows. The FT concluded that the trend suggests the credit turmoil is unnerving mainstream investors and could dampen consumer spending in coming months. Gold.ie
GOLD
-Gold Prices May Move From $1,000 to $2,000 in a Matter of Six to Eight Months. I don't like the way the US markets are looking. And I'm increasingly fearful about what we're seeing.
When you consider liquidity problems in the market, derivatives, the adjustable rate mortgage dilemma on the heels of all of this subprime mess just to name a few it's clear that we've got some major problems to deal with. And the outlook for gold is stronger than ever.
We have the US dollar hitting a all-time lows against many other currencies. At last look the US Dollar Index was just over 72. And we're getting to that critical 70 benchmark, which, once broken, I believe gold will start having $100 up days instead of $20 up days. I predict the metals market will be in a bull market for at least 10 to 15 years. The outlook for gold, other metals, and commodities as a whole are still very strong. Don't drop out yet. Stay long on gold and precious metals. Greg McCoach-Read more here-
http://www.goldworld.com/articles/outlook-for-gold/260
-Our conclusion is clear. While we are going through a correction with a real risk of a fall towards the $800-$825 level it is just that a correction within the context of bull market. That correction should end over the next few months. We should then embark on another up leg that could prove to be the most spectacular part of this bull market in gold that got underway back in March 2001.
So to answer our question "What Bubble?" it is simple we are not in nor have we been in a gold bubble. In fact the best may be yet to come. Investors should use this opportunity to re-balance their gold positions and also ensure that they are long bullion as well because past history has shown that bullion in these cases usually outperforms the stocks. David Chapman-Read more here-http://www.321gold.com/editorials/chapman_d/chapman_d_042808.html
-A few things to ponder as the battle for $900 gold rages. Current Correction Not Yet Exceptional. Since the current bull market began in earnest in 2001, there have been 9 corrections in excess of 8%. During the three worst pullbacks, gold fell 15.98%, 18.27%, and 27.7%, respectively. And the average of those corrections is 13.6%, so the latest, which touched 13.9% at its worst (so far), is only fractionally worse than average.
Put another way, for the current pullback to match the sharpest correction to date, a drop of 27.7%, gold would have to fall to about $730. Could it happen, again? Sure, why not? And if it does, rest assured that, just as they did when gold moved down by that percentage in May of 2006 falling from $725 to $567 analysts will line up to say that the back of the gold bull has been broken.
But if you had listened to the naysayers back then and bailed out at the bottom of that correction, you would have subsequently missed a rebound of close to 100%. I mention this to stress that the fits and starts we are currently experiencing are nothing unusual. Quite the opposite, they're the norm for any sustained bull market. In the 1970s' sustained gold bull market, a very similar pattern occurred.
The bottom line is that if you are going to invest in the resource sector, you need to take a long view. And, I would stress once again, you have to be invested with money that you can afford to lose a substantial portion of and not be overly concerned. Otherwise you'll invariably become shell shocked during periods of volatility and be prone to breaking ranks and selling at the worst possible time. David Galland Managing Director Casey Research, LLC.
-The golden years are back. With dark clouds looming in the horizon in the form of slowing economic growth and rising commodity prices, advisers and wealth managers should consider gold bullion, which can offer a decent hedge against adverse inflation and interest rates. Did you ever think you would see a run on a bank in your life time?
The answer for the vast majority of IFAs and wealth managers would have to be a resounding no. Yet Northern Rock happened and as Alan Greenspan, Paul Volcker, George Soros, Warren Buffet and others have warned we are now facing the greatest financial and economic crisis since the Great Depression. Read more here-
-Gold is confidence evaporating? Factors which have taken gold to a fourfold increase over the past few years remain very much in place. I remain resolutely bullish for gold and see no reason for changing my view at this time. The fly in the ointment for gold is the manner by which it is currently behaving a bit like ‘old gold' steady constructive rise then big smack down. Unfortunately, this price action can weigh heavily upon the confidence of those that might otherwise view gold positively. Ross Norman-Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=52040&sn=Detail
-As for gold, an offbeat opinion was offered by Mark Hulbert, writing on MarketWatch. Hulbert notes that there has been a big shift in sentiment among gold newsletter writers over the past two weeks. Back then, Hulbert writes, "the editor of the average gold timing newsletter was short the market, which from a contrarian point of view was a good omen. Gold bullion did jump nearly $30 per ounce over the next week or so, but in the last few days it has plunged.
"That would be disturbing enough to contrarian analysts. But there's more: The editor of the average gold timer is now markedly more bullish than he was two weeks ago, despite gold's weakness. This suggests that the prevailing mood among gold timers has shifted away from scepticism that the bull market is alive and well, and towards one of belief." And that, Hulbert concludes, is "not a good sign." When the average gold timer is "ready to throw in the towel on gold's bull market," that's when "contrarians would return to the bullish camp on gold." Kitco Daily Resource
-$200 Oil, $2,000 Gold. Read more here-http://www.321energy.com/editorials/west/west042508.html?print=on
-China, Gold and The Coming Flood of Wealth. Read more here-http://www.321gold.com/editorials/phillips/phillips042508.html
SILVER
-Silver Wheaton chief sees $30/oz silver in 'next couple of years'. Vancouver-based silver reseller Silver Wheaton's president and CEO, Peter Barnes, expects the spot price for the precious metal will continue to rise, in the medium term, underpinned by both physical and investment demand, he said on Tuesday. "My view is that silver is going through $30/oz in the next couple of years," he said on a conference call with investors.
The supply and demand outlook was "pretty robust", and the combined effects of geopolitical risk and a weaker US dollar would continue to support higher prices. "My strong feeling is that, in the long term, the US dollar still has a long way to go [downwards]," Barnes said. Silver Wheaton buys silver from producers on a long-term basis, at predetermined prices, and then sells the metal at the current spot price.
The spot price for silver reached a 27-year high above $21/oz last month, but has since slipped back to around $17/oz. "It takes a bit of consolidation, whenever it hits new levels it consolidates for a while and then it takes another run," Barnes commented. Miningweekly.com
-From January to March, silver prices surged 40% to hit a 27-year high of $21.44 on March 17, more than doubling gold's return during that time. This followed gains of about 15% in 2007. Although silver prices have fallen back to below $17, CPM Group maintains that investor buying will continue to support prices in 2008. "Thus far in 2008 political, economic and financial uncertainties have continued to lead investors to buy silver," said the New York-based commodities consultancy and research firm.
"Higher prices are expected later in 2008 and early 2009." In its 185-page 2008 Silver Yearbook released on Tuesday, CPM Group forecasts that net investor buying will keep silver prices strong this year, but expects a period of price weakness during the second and third quarters as other commodity prices ease. The sell-off in silver in the middle of March has carried over in April with seasonally week months approaching. According to CPM Group, the March sell-off was part of a wide sell-off in commodities by shorter term traders and speculative oriented investors.
Many banks and brokerages had taken short-term long positions and were taking profits out of those positions. Even still, CPM noted that investors are buying silver for all the same reasons they are buying gold: As a safe haven during times of financial distress, as an inflationary hedge and as a hedge against a falling dollar. And this will continue so long as economic and financial problems remain in the U.S. and abroad. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42353 or http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=51978&sn=Detail
-What is the most important silver news in the last month?" asked David Morgan as we sat in his office in the beautiful countryside just outside of Spokane, Washington. "The Mexican ‘Bill'!" promptly answered this writer, referring to the communiqué sent by the governors of all 31 states of the Mexican Republic to the Ways and Means Committee of the Mexican House of Representatives, in which they expressed their unanimous support for the monetization of silver and urged the Committee to approve a bill which aims to achieve precisely this objective.
(See original article by Hugo Salinas Price) "What is the most important silver news in the last year?" continued Mr. Morgan, nodding in agreement with my reply. "The Mexican ‘Bill' . . . ?" responded yours truly, this time with less confidence. "What is the most important silver news in the last decade?" further inquired Mr. Morgan, again nodding with approval.
"The Mexican ‘Bill'!" blurted out Mr. Morgan seeing that I had paused, trying to remember all that has happened to silver in the past ten years. There you have it from Mr. Silver himself: The most important silver news in the last decade is the ‘Bill' on monetization of silver submitted unanimously by the governors of the Mexican states to their House of Representatives. Read more here-http://www.gold-eagle.com/editorials_04/rakhimov123004pv.html
-Another Sick New Record By: Theodore Butler
http://news.silverseek.com/TedButler/1210018234.php
-Hugo Salinas Price: Dorothy's silver slippers. Hugo Salinas Price, president of the Mexican Civic Association for Silver and the world's foremost advocate of restoring silver's role as a circulating currency, addressed GATA's recent conference in Washington by video.
His address, "Dorothy's Silver Slippers," detailed his proposal for the issuance of a circulating silver ounce coin for Mexico a coin that, not being imprinted with any particular peso value, would never be at risk of withdrawal from circulation because its melt value had come to exceed its face value. Salinas Price's address to the GATA conference is 23 minutes long and you can find it in three parts at YouTube here:
http://www.youtube.com/watch?v=k7DHz6O1xPo
http://www.youtube.com/watch?v=mb_6pruXOU0
http://www.youtube.com/watch?v=PBw56tE-0gw
Chris Powell, Secretary/Treasurer-Gold Anti-Trust Action Committee Inc.
-Normally during a long-term bull market, it would be completely natural for gold and silver to be correcting after a run up like we just experienced. With the technical picture having been damaged to the extent we discussed, gold could go as lower and this would not worry me, I have been through this type of market sentiment before.
My point is that we may experience a tough summer once again, but in a bull market most surprises are to the upside not the downside. As more and more former gold bugs abandon ship, and the sentiment gets very poor you can rest assured the bottom has arrived. Then the precious metals continue to ascend the wall of worry. David Morgan-Read more here-
http://www.kitco.com/ind/morgan/printerfriendly/apr252008.html
-I will be waiting to jump back on board the silver train at some point because this bull market in a wider sense is not over. People think that we are somewhere akin to 1978 or 1979 in this bull market. I think they are too pessimistic. I think it is more like the mid 1960s when silver began its inexorable rise from $1.29 to peak first in 1967 before resting and taking off again. That means another 15 years or more rising silver prices, but don't forget the big corrections on the way! Roland Watson-Read more here-
http://www.321gold.com/editorials/watson/watson042808.html
-Silver prices hit 28-year highs in March and then pulled back sharply as the dollar strengthened and prices on a range of commodities weakened. Still, many analysts are bullish on silver, with some predicting prices of $30 per ounce before the year's end. If inflation continues to loom as a threat to economies around the world and industrial demand for silver remains high, the rally for this metal might just be getting started. Don Dion-Read more here-http://seekingalpha.com/article/74059-silver-etf-starts-off-the-year-strong-can-it-continue-to-shine
-Silver could be low-cost substitute for platinum in autocatalysts. If Mitsui Mining & Smelting new technology is proven effective, silver, not palladium, may prove to be the most cost-effective substitute for platinum in autocatalysts. Tokyo-based Mitsui Mining & Smelting announced Wednesday that it has developed a new catalyst to clean exhaust gases from diesel engines using silver, rather than the much more pricey platinum.
In a news release, Mitsui claimed that the new catalyst, which has particle matter purification efficiency that currently equals that of platinum now used in autocatalysts, can reduce precious metal costs by 90 percent or more.
A company spokesman told Reuters that Japan, Europe and the United States are all planning to impose tighter regulations on exhaust emissions for heavy equipment, such as that used in construction and farming, beginning in 2012. "We hope this catalyst will be used in these vehicles, and this is the market we are targeting."
Platinum demand from automakers for catalytic converters is increasing due to strong sales of light-duty diesel vehicles in Europe. Platinum and increasingly palladium are used in autocatalysts to reduce carbon monoxide and particulate emissions.
Previously, silver has not been used in autocatalysts because of its poor heat resistance. But Mitsui Mining said it has succeeded in making silver withstand heat of up to 800 degree centigrade by adding metal composite oxide. The company said the catalyst is now undergoing performance evaluation tests. Mineweb.com
-Mitsui Mining's silver-based autocatalyst. Read more here-http://www.platinum.matthey.com/media_room/120946909411112.html
-HK researchers prove silver nano-particles can battle hepatitis B virus. Hong Kong University researchers said Monday they believe that silver may hold a solution to one of China's worst health concerns, the spread of hepatitis B, which can cause liver cancer and liver failure. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=51895&sn=Detail
-Metals: Precious Little Supply. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42265
-Not Enough Silver. Read more here-http://www.silver-investor.com/davidmorgan/NotEnoughSilver.html
-Silver's "Poor Fundamentals" Refuted! The Guardian just wrote a hatchet job on silver, to try to kill the market. Somebody must be very desperate. I will refute this article point by point. My rebuttal will be in italics. Jason Hommel-Read more here-http://news.silverseek.com/GoldIsMoney/1209470633.php
PLATINUM-PALLADIUM
-Platinum to crest a new record high this year. GFMS reckons that Platinum demand is nowhere near as flexible as it was; palladium demand to continue to improve. The 2008 Platinum and Palladium survey from GFMS Ltd released last week shows that the group remains positive towards both metals for 2008 and does not expect platinum prices to fall below $1,700 over the remainder of this year.
The risk in the platinum price lies to the upside, with every possibility of moving to a new high of $2,400 before year-end. The palladium price is forecast to trade between $400 and $550, with a promising outlook for demand in both autocatalysts and jewellery. Furthermore, although above-ground stocks are large, GFMS believes that there is a growing appreciation of palladium's underlying fundamentals. GFMS notes that with supply and demand tightly balanced, any supply disruptions will have noticeable consequences for the platinum market "let alone those [already] witnessed in 2007 and 2008".
The South African mining industry had been set to deliver further growth in 2007, but continuing mine-site fatalities and a prevailing shortage of skilled personnel have combined to derail these plans and South African mine production contracted by almost 7% last year. With another contraction in production from Russia and a fall in nickel by-product output in Canada plus shortfalls at Stillwater, overall mine production in 2007 was down by more than 400,000 ounces. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page35?oid=51824&sn=Detail
-Supply Shocks, Electric Shocks, Low Stocks and the Platinum Price. Precious metals consultancy GFMS was broadly positive about the outlook for both platinum and palladium at the launch of its Platinum and Palladium Survey 2008 in London today.
Both metals are expected to trade at levels considerably above 2007 levels, but both are also expected to be highly volatile. Indeed it was clear that GFMS felt that it was putting its neck on the block even with the wide range of its forecasts for the remainder of the year.
Platinum, which averaged $1303/oz in 2007 is expected to trade for the rest of 2008 in the range $1700-2400 per ounce, while palladium, which averaged $355/oz last year, is expected to range from $400-550/oz. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42213
A 4 MONTH REVIEW FROM JAMES TURK
-A 4-Month Review. It makes sense at the end of every month to review the gain or loss in various markets, but now is a particular opportune time for a review given that we are one-third of the way through 2008. It also makes sense to look at recent results given the growing chorus that the US dollar has bottomed and is therefore due to strengthen. The following table presents the gains/losses for the precious metals and major currencies for the past month, year-to-date and 12-month periods.
There is nothing in this table to suggest that the US dollar has turned the corner to reverse its bearish downtrend. Note particularly the 3.8% gain in commodity prices this past month. Rising commodity prices have been one of the strongest indications that the flight out of the dollar into tangible assets is a real phenomenon. Rising commodity prices last month provide strong evidence that any dollar 'strength' was illusory. Though the dollar may have risen against other national currencies, all of them were sinking against real things. Gold and silver were the exception.
Both gold and silver declined last month, but both have respectable year-to-date and 12-month gains. Though up 26.8% over the past twelve months, gold only rose in seven of those months. Silver achieved its 22.7% 12-month gain even though it rose in only six months. These results are evidence that it's always a bumpy ride with markets - like the one we are experiencing at the moment. But use these bumps wisely by continuing to accumulate precious metal. Here's how I explained it recently in an email responding to a question about the gold cartel and their ongoing effort to cap the gold price:
"I am not adverse to setbacks like the current one, or indeed, the ongoing capping by the gold cartel. They have in fact done us a favour. Their action is keeping gold at prices lower than they would be if the gold cartel were not in there intervening to cap gold. This has enabled me and everyone else who has been buying gold to acquire it at prices lower than the gold price would otherwise be without the price capping. In short, the gold cartel is keeping dollars and other fiat currency overvalued and gold undervalued, thus enabling me and others to accumulate gold month after month with available new earnings generated each month. That's a good thing in my view. Think back to the 1960s. The gold cartel was active then too, trying to keep gold at $35 per ounce when it was worth much more than that. We all know what happened to gold in the 1970s after the gold cartel was eventually overwhelmed back then by their foolish price capping activity. The same thing is happening this time around, except that the gold cartel is allowing the gold price to rise somewhat each time they recognize that they are losing a battle -- they retreat to fight another day. So in conclusion, the gold cartel may be able to keep gold under $1,000 for a few weeks, or perhaps even months. That just gives us more time to accumulate it with new earnings we generate each month. But eventually, values will be realized (like happened in the 1970s) and gold will soar over $1,000."
When asked about the gold cartel, its activity and its motivation, I often refer to an interesting observation by former Federal Reserve chairman Paul Volcker. It is from the Nikkei Weekly, which in 2004 published excerpts from his memoirs commenting on monetary policy and the rising gold price in the 1970s: "Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake." It was a 'mistake' in his view because the gold price did something the government didn't like. It laid bare for all to see the government's empty rhetoric that it would fight inflation.
The parallel to today is simply too obvious to ignore, given the government's so-called 'strong' dollar policy, but the government is not making the same 'mistake' again. There is today "joint intervention" by central banks to interfere with the normal supply/demand activity in the gold market. These efforts are aimed at preventing gold from doing what it has always done throughout history. Gold is a monetary barometer because its rising price signals the mismanagement of a national currency.
So rather than take those steps needed to actually implement a strong dollar policy and thereby fight inflation, the government-directed gold cartel instead intervenes in the gold market "to prevent a steep rise in the price of gold", which was Volcker's lament. Central bank intervention in the gold market which to me has been particularly obvious in recent weeks is a bald attempt to make us believe that the dollar is worthy of being the world's reserve currency when in fact it is not. James Turk
GLOBAL FOOD CRISIS
-Food Crisis Starts Eclipsing Climate Change Worries. Gore Ducks, as a Backlash Builds Against Biofuels. Read more here-
http://www.nysun.com/news/food-crisis-eclipsing-climate-change
-Q&A: Food crisis. Read more here-http://www.guardian.co.uk/environment/2008/apr/29/food.qna
-World food crisis alarms media. Read more here-http://news.bbc.co.uk/2/hi/in_depth/7373485.stm
-UN sets up task force on food crisis. Read more here-http://www.theglobeandmail.com/servlet/story/RTGAM.20080429.wunfood0429/BNStory/International/?cid=al_gam_nletter_newsUp
INFLATION
-How inflation changes saving rules. If prices keep rising, you may need to rethink how to take care of your money and where to put it. If prices keep rising, you may need to think differently about a few things. Have you seen the price of milk lately? It's up 13% since last year. The pain isn't only at the supermarket, however. Read more here-
http://money.cnn.com/2008/04/25/pf/life_inflation.moneymag/index.htm?postversion=2008042905
-Food price rise could last another two years. Experts say there won't be a food shortage in the U.S., but more consumers will trade down in their grocery shopping. Read more here-
http://money.cnn.com/2008/04/30/news/economy/food_prices/index.htm?postversion=2008043011
-Why grocery bills are set to soar. Read more here-http://www.globeinvestor.com/servlet/story/RTGAM.20080424.wfood25/GIStory/
-Food inflation the 'monster' around Canada's corner, experts warn. Read more here-http://canadianpress.google.com/article/ALeqM5gPdx7XEUzZW7lyIOQw-lSAhHLHFg
-Inflation's real cost-As the price of flour, milk and rice increases, Americans find that inflation forces them to dig deeper into their wallets. Watch video here-
http://money.cnn.com/video/#/video/news/2008/04/28/velshi.chernoff.inflation.cnnmoney
-Farmers blamed for rising cost of food. Read more here-http://money.cnn.com/2008/05/01/news/economy/congress_foodprice/index.htm?postversion=2008050111
-Federal Reserve may want Inflation. Read more here-http://www.merkfund.com/merk-perspective/insights/2008-04-30.html
-Bank of England's dilemma: A house price crash or soaring inflation. Which would you rather face: a recession and house price crash or years of soaring seventies-style inflation? Read more here-http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/04/24/ccmpc124.xml
-The Federal Reserve's rescue of Bear Stearns Cos. will come to be seen as its "worst policy mistake in a generation," a former top Fed staffer said. Read more here-http://www.gata.org/node/6265
-Hyperinflationary Depression. Howard Ruff-Read more here-http://www.kitco.com/ind/ruff/ruff.html
-Inflation Fears & Food Shortages. James Turk-Read more here-http://www.kitco.com/ind/Turk/turk_apr282008.html
COMMODITIES
-Commodity price surge could match increase of 1970s. Read more here-http://www.canada.com/vancouversun/news/business/story.html?id=ff4e0406-0340-412e-8e7b-f27ed67a0657
OIL-GASOLINE
-Report Says Crude Oil Will Hit $225 a Barrel in 2012. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=42212
-OPEC president sees $200 oil possible: report. Read more here-http://www.reuters.com/article/idUSL289112520080428
-Oil Rises to Record on U.K. Pipeline Shutdown, Nigeria Attack this week. Crude oil rose to a record, trading near $120 a barrel in New York, after BP Plc shut a North Sea pipeline and gunmen attacked police guarding Nigeria's largest oil and gas terminal. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=a72zporve.4E&refer=home
-Gas prices top economic worries survey. About 44% of survey participants say that the pinch at the pump is a 'serious problem.' Read more here-
http://money.cnn.com/2008/04/29/news/economy/gas_concerns.ap/index.htm
-Gouging myth out of gas. When you're paying more at the pump, don't blame the station owner. He feels your pain. Read more here-
http://money.cnn.com/2008/04/24/news/economy/gas_gouge/index.htm?postversion=2008042513
-Gasoline May Soon Cost a Sawbuck. Big New Shock at the Pump Forecast by Two Analysts. Read more at-http://www2.nysun.com/article/75363
U.S.-EURO DOLLAR
-Mobius Says Fed May Lower Rates to 1%, Dollar Is `Bombed Out'. The Federal Reserve may cut interest rates to 1 percent as U.S. housing foreclosures worsen, said Mark Mobius, who oversees $47 billion in emerging-market equities at Templeton Asset Management Ltd. The Fed yesterday reduced the target rate for overnight loans between banks by a quarter point to 2 percent and said the economy remains weak amid the worst housing contraction in a quarter-century.
Mobius added that the dollar's slide, down more than 7 percent against the euro and yen this year, is likely to slow because its ``completely bombed out'' and has overshot. ``I was looking at 1 percent a few months back. I still adhere to that,'' Mobius, executive chairman at Templeton Asset Management, said in an interview with Bloomberg Television today. ``I don't think the fear is over. You're going to continue to get more pressure on them to lower and lower.''
Fed policy makers have cut the benchmark rate by 2.25 percentage points in 2008, including two three-quarter point cuts. In addition, the Fed invoked emergency authority in March to start lending directly to investment banks and provided $29 billion of financing to secure JPMorgan Chase & Co.'s takeover of Bear Stearns Cos. Even with continuing U.S. interest rate cuts, the dollar's slide against other currencies may slow and its ``devaluation'' may end, said Mobius.
``The dollar is completely bombed out,'' said Mobius. ``So the dollar may stabilize at this level or it may go a little lower.'' Asian currencies, including the yuan and India's rupee are still undervalued against the dollar, said Mobius, who said the China's foreign-exchange rate may rise another 5 percent. The Chinese currency has risen 10.3 percent against the dollar in the past year, according to data compiled by Bloomberg. Bloomberg
-Iran, OPEC's second-largest producer, has stopped conducting oil transactions in U.S. dollars, a top Oil Ministry official said Wednesday, a concerted attempt to reduce reliance on Washington at a time of tension over Tehran's nuclear program and suspected involvement in Iraq. Iran has dramatically reduced dependence on the dollar over the past year in the face of increasing U.S. pressure on its financial system and the fall in the value of the American currency. Read more here-http://www.iht.com/articles/ap/2008/04/30/business/ME-FIN-Iran-Oil.php
-Gulf States May End Dollar Pegs, Kuwait Minister Says. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=agTk6w61fGt4&refer=home
-Long-term cost of the dollar peg. Read more here-http://us.ft.com/ftgateway/superpage.ft?news_id=fto042720081708381018
-Another Record Low in the Dollar. James Turk-Read more here-http://goldmoney.com/en/commentary/2008-04-27.html
-A rising euro threatens American dominance. Read more here-http://www.tehrantimes.com/index_View.asp?code=167016
GLOBAL-U.S. RECESSION
-Warren Buffett: I think we're in a Recession. Read and watch more here-http://www.huffingtonpost.com/2008/04/28/buffett-i-think-were-in-a_n_98989.html
-U.S. Economy Expanded at 0.6% Pace in First Quarter. The U.S. economy expanded at a 0.6 percent annual pace in the first quarter as an increase in inventories compensated for weaker consumer spending and a drop in business investment. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFZ5qPxNMywA&refer=home
-Canada's Economy Unexpectedly Shrank in February. Read more here-http://www.bloomberg.com/apps/news?pid=20601082