Newsroom
The GoldBugg Report - September 30, 2008
September 30, 2008
-Bailout plan rejected. House leaders scramble for support for controversial Wall Street plan.
-"You can't afford to not own gold," Jim Cramer told viewers of his "Mad Money" TV show Monday. After advising viewers to sell 20% of their portfolios last Friday, Cramer said it's time to put that money into gold.
-Gold/Silver Market Updates from Clive Maund.
GOLD
-"You can't afford to not own gold," Jim Cramer told viewers of his "Mad Money" TV show Monday. After advising viewers to sell 20% of their portfolios last Friday, Cramer said it's time to put that money into gold.
Cramer told viewers that they simply "must own gold" in times of uncertainly. With the fate of Treasury Secretary Henry Paulson's financial bailout plan still uncertain in Congress, he said he cannot endorse a portfolio that does not include a gold stock.
Cramer said owning gold makes sense whether the Paulson plan succeeds or fails. If it fails, he said, the financial system will completely freeze up, leaving gold as the only safe harbor. In a market where treasuries and cash pay almost nothing, gold will be the only trustworthy place to store value, he said.
On the flip side, Cramer said if the Paulson plan does pass Congress, investors need to be concerned about inflation. With the government issuing so much new currency, inflation will be inevitable and gold will perform well. Either way, he said, gold is where investors will want to be.
Cramer said the fundamentals for gold are strong, with worldwide demand for gold still increasing across the globe. Cramer said even in the worst case situation, gold stocks will still make investors money although they may underperform the market. "Gold makes sense when nothing makes sense," said Cramer. Read and see more here-http://www.thestreet.com/story/10438718/1/cramers-mad-money-recap-finding-refuge-in-gold.html?puc=googlen&cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA
-Bailout will discredit all currencies, help gold, Tocqueville's Hathaway says. Gold will be the main beneficiary as concern about the U.S. government's Wall Street bailout triggers a plunge in the U.S. dollar, said Tocqueville Asset Management LP's John Hathaway.
"The dollar's crossed the Rubicon. It's the point of no return," Hathaway said Monday in an interview in New York, where the fund is based. "It's just loss of confidence in paper currency of whatever brand it is." Read more here-http://www.gata.org/node/6663
-Barrick Sees 'Large-Scale' Gold Buying on Bailout. Barrick Gold Corp. Chairman Peter Munk said bullion prices will go higher, driven by large-scale buying by ''major, major'' holders of dollars who fear the effects of the U.S. government's bailout plan on the currency.
Central banks or sovereign wealth funds are among those likely to buy gold to diversify their investments and hedge against the risk of a weaker dollar, given the government's $700 billion plan to support the banking system, Munk said today.
"That impact on holders of U.S. dollars in China or Russia or Abu Dhabi or Kuwait is that they're going to say, 'What is that going to mean for the U.S. dollar, and what alternative are we going to have?''' Munk said in an interview in New York. ''So gold is going to have very powerful support.'' Munk, 80, founded Toronto-based Barrick in 1983 and made it the world's largest gold producer. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=akxP2wBxQwK0&refer=canada
-Citigroup metals analysts ask why gold is not already at $2,000/oz. As the United States wades through a deep and murky morass of financial uncertainty and turmoil, Citigroup suggests that gold is entering a powerful new investment demand phase tied to safe-haven and monetization.
Citigroup asserts that gold will benefit from both the "gloom & doom" and "muddle-through & monetization" scenarios, possibly regaining $1,000 per ounce at year-end and even doubling or tripling in the long term. "Frankly, we're surprised, that gold is not already at $2,000 an ounce," declared Citigroup analysts John H. Hill and Graham Wark. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=62900&sn=Detail Read Citigroup report here-http://www.gata.org/files/CitigroupGoldReport-09-17-2008.pdf
-Eveillard Says Gold May Surge as Investors Seek 'Insurance.' Jean-Marie Eveillard says he has stashed $1 billion in gold in a vault near Times Square as insurance against ''extreme outcomes,'' like a market collapse or unintended consequences of the U.S. plan to avert one.
Eveillard keeps as much as 8 percent of his $22 billion First Eagle Global Fund in bullion or gold-mining stocks. He occasionally visits the vault in a building about 12 blocks from his Midtown Manhattan office, he said.
"Gold is insurance,'' Eveillard said in an interview yesterday. ''In most of those instances where things would get bad enough so you would get into equity bear markets, where economic and financial circumstances would be bad for a year or two or three,'' gold prices will rise. Read more here-
http://www.bloomberg.com/apps/news?pid=20601213&sid=a8L00oInO1YM&refer=home
-Dennis Gartman 'Joining the Gold Bugs' on Outlook for Inflation. Dennis Gartman is ''joining the gold bugs'' and betting on higher prices after the U.S. Federal Reserve and Treasury proposed plans to revive financial markets. "Gold tends to rally during inflationary cycles, and we see the Fed as embarking in precisely that sort of thing,'' Gartman wrote in his daily letter today.
"The Fed shall have to buy Treasury securities from the dealers to make certain that very high-powered money is made available to them, and in the process, it shall reflate the economy.'' "Selling is ill advised,'' Gartman wrote. He sold the metal in mid-July, according to the letter. Bloomberg
-Gold can still live above $1000. Analysts believe that the price of gold could shoot back above the $1,000 mark despite the price plunging today as governments unveiled a battery of measures restore confidence in the financial system. Read more here-http://www.telegraph.co.uk/finance/3054378/Gold-can-still-live-above-$1000.html
-Gold could hit $1,500 and Beyond. The current gold prices are amazingly cheap, presenting an outstanding opportunity for long-term investors, opines Aaron Smith, MD at Superfund Financial. He tells CNBC's Maura Fogarty & Sri Jegarajah that gold can hit $1,500/oz in the next 2 to 3 years. Read more here-
http://www.cnbc.com/id/15840232/site/14081545/?video=859511496&play=1
-Forget stocks, gold is back! Watch video here-http://edition.cnn.com/video/#/video/business/2008/09/19/boulden.uk.flight.safety.gold.oil.cnn?iref=videosearch
-Lusting for gold. As stocks plunge, more investors are moving their money to gold, causing its price to soar. Watch more here-
http://money.cnn.com/video/#/video/news/2008/09/18/news.091808.gold.cnnmoney
-U.S. Secretary of the Treasury & Free Lunches has done Gold investors an incredible favor. While not benefiting immediately as did those owning bank stocks, we will over time. With the U.S. government now assuming responsibility for financial assets of dubious value, it has committed itself to nearly unlimited funding of U.S. housing market, and every other industry with political clout. One consequence may be that the Federal Reserve loses control of monetary policy. Will the Federal Reserve now need to monetize U.S. government debt in unlimited fashion?
This week's chart is of the year-to-year change in Federal Reserve credit, essentially the asset side of Fed's balance sheet. When it buys securities or makes loans to banks, those claims become assets of the Federal Reserve. In recent years, the Federal Reserve has had the luxury of relying on foreign central banks to finance the U.S. economy. The Federal Reserve Credit grew slowly, as did core inflation.
With foreign investors now balking at financing doubtful U.S. financial assets, that financing burden will now belong to the Federal Reserve. The recent spike in that chart is the first round of the uncontrolled financing of the bank stock holder bailout plan. The Federal Reserve credit growth rate had already been on a rising trend as the Federal Reserve began financing the questionable assets of the U.S. financial system.
With the Federal Reserve now forced to monetize vast quantities of U.S. government debt, Federal Reserve credit will grow rapidly. As that is base from which money is created, the quantity of dollars will grow. As the quantity of dollars rises, the value, or price, of those dollars will decline. As that happens, the dollar value of Gold will rise. The U.S. financial bailout plan in essence puts a rising floor under the dollar price of Gold. Gold may indeed benefit more from the financial bailout plan! Ned W. Schmidt
-John Embry commentary, U.S. on cusp of its biggest bailout ever. Read more here-http://www.sprott.com/pdf/investorsdigest/digest.pdf
-Gold May Regain Luster for World's Central Banks. Turmoil, Weak Dollar. Raise Metal's Profile; Chinese 'Nibbling'? Read more here-
-China's Exposure to US Debt. They will start buying gold. Watch video here-http://www.cnbc.com/id/15840232?video=865880359
-India gold demand spike may make up for weak year. Read more here-http://in.reuters.com/article/businessNews/idINIndia-35591420080922
-Indian women know that gold will never cheat them. Read more here-http://www.gata.org/node/6650
-Vietnam discovers that there's gold and 'gold'. Read more here-http://www.gata.org/node/6660
-World Gold Council asserts gold is not a volatile asset. The World Gold Council suggests that, despite the increase in volatility associated with the rally of recent years, the perception that gold is a volatile asset is not correct. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=63245&sn=Detail
-Welcome to the World's Largest Gold Vault. Just a Few Blocks From the Bustle of Wall Street Sits $200 Billion in Gold. Read more here-http://abcnews.go.com/print?id=5835433
SILVER
-Ted Butler silver commentary, time out or about time? This week I received an e-mail from a Swiss money manager, a friend and trusted source. He informed me that a very large and conservative Swiss bank had informed a number of their clients that they would no longer be offered paper gold or silver certificates in the bank's name.
It seems the bank had previously granted the accounts because it was able to protect itself against an upside move with a derivatives contract with another financial institution. Due to the financial turmoil, the bank was no longer comfortable with the counterparty risk from the other financial institution. Instead, the Swiss bank informed its clients, all paper transactions had to be converted to physical or physical ETF positions (There are Swiss ETFs for gold and silver).
My friend informed me that other Swiss banks were likely to follow this bank's lead. As long-time readers know, the issue of bank silver certificates that were not backed by real metal is one I have written about frequently. Read more here-http://news.silverseek.com/TedButler/1222191582.php
-Gold/Silver Market Updates from Clive Maund. Read more here-http://www.321gold.com/editorials/maund/maund092208.html
-The Bailout Plan, what does it mean? Especially for gold and T Bonds from Clive Maund. Read more here-http://news.goldseek.com/CliveMaund/1222029052.php
-Got Gold Report, Gold, Silver ETFs Add Metal on Strong Buying. Investors flooded back into gold exchange traded funds and continued adding silver ETFs over the past week on heightened fears about the banking sector and inflationary government actions to save it. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=46334
-Buffett buys into Goldman, will he buy silver again? Read more here- http://news.goldseek.com/GoldSeek/1222260503.php
-Gift From the World's Central Banks By John Rubino & Michael Maloney.
DC: Your silver chapter was flat-out exciting. Why is silver such a great story?
MM: The exchange rate of gold and silver used to float, which maintained a supply/demand equilibrium to keep both in circulation. Gresham's Law says that when two currencies are fixed against each other, the lower value money will get spent into circulation and the higher value money will be hoarded. Bad money chases out good. There used to be about 12 times more silver than gold. But lately that's been changing.
This is the third time in history when the general public became buyers of silver. The first time it forced the U.S. government to abandon silver in its coinage because it failed to keep the price below $1.29 in the mid-1960s. In 1979, the government tried to suppress both gold and silver by selling the metals into the markets. It failed and both rocketed. Since then, governments around the world have continued selling, getting rid of what used to be enormous stockpiles.
This has depressed the price to the point that through the '90s I don't think there was a single primary silver producer that made a profit. They all survived by issuing stock. A few are starting to show a profit at this price, but the vast majority can't. The U.S. government has unintentionally made everyone think silver should be cheap when in fact it should have been in the $20 range all through the '90s and there would have been enough supply coming to the market to balance things out.
So we've come to this critical juncture where the above ground supplies of silver have dwindled to just a fraction of what they once were. There's about a tenth as much silver available for investors to buy as there was in 1980, and currently there's less silver than there is gold, all courtesy of the U.S. government manipulating the price, causing us to think silver should be cheap.
Now we're about to have a gold and silver rush, and for the first time in human history the amount of silver available for investors is less than the amount of available gold, probably about one-fifth the amount. Yet silver's price is currently 1/60th the price of gold. The markets will bring back an equilibrium, and that will require silver to outperform gold for an extended period of time. It's a buying opportunity, a gift from the world's central banks and the commercial banks that are manipulating these markets. As Jesse Livermore used to say, be right and sit tight. Read more here-http://news.goldseek.com/DollarCollapse/1222100841.php
-David Morgan: Investment Demand, Fundamentals Favorable For Silver. "For the remainder of the year, I think you're going to see a wide trading range, but mostly upward progress for both of the metals (gold and silver)," Morgan said. He looks for gold above $900 an ounce at the end of the year and silver back into the $15 region.
Morgan said he expects gold and silver to have an "extremely strong" first quarter in 2009, with gold climbing to the $1,200 to $1,300 area and silver to the $20 to $25 region. "Beyond that, I think the metals are going to go extremely high in paper terms, but it's going to be at the end of the cycle when we get into a panic or mania phase," he said.
This may not occur until 2010 to 2011. But whenever it happens, it may well be in the last six months of the cycle, when an "extreme move" may occur such as the recent real-estate bubble or dot-com stock bubble several years ago. Read more here-http://silverblogspot.blogspot.com/2008/09/morgan-investment-demand-fundamentals.html
-Silver prices might be well down from the 27-year highs hit in March, but executives of the mining companies themselves remain upbeat about the metal's longer-term prospects. Officials with companies either based in Coeur d'Alene, Idaho, or there for the annual Silver Summit late this past week, cited continually growing industrial uses plus investment demand for precious metals particularly amid the crisis in the country's financial sector as factors likely to prop up silver again during the coming months and years.
Mining executives cited a disconnect during recent weeks in which physical metal became hard to obtain despite a sharp slide in silver futures. "At some point, that will come back into line," with silver likely to move higher, said Phillips S. Baker Jr., president and chief executive of Hecla Mining Co. Silver fell with other commodities, and mining stocks also plummeted, late in the summer and into early September.
There was a "cascade effect" from a long-liquidation phase, said Bradford Cooke, chairman and chief executive with Endeavor Silver Corp. Most-active December silver futures on the Comex division of the New York Mercantile Exchange fell from $21.55 an ounce on March 14 and $19.705 on July 15 to low of $10.31 on September 11. But on September 18 as the summit opened December silver was up 27 percent from the recent low to a high of $13.065.
That elicited smiles from many of the mining executives and investors at the Summit hoping for higher prices. On Monday, silver was even higher, with December trading at $13.340 an ounce. Most CEOs appeared confident of further gains. While Cooke said his company was reworking longer-term business plans to deal with the possibility of $10 to $12 silver, he also expressed doubt they will be needed. "This is indeed a buying opportunity," he said.
"It's got a great future," said Ross J. Beaty, chairman of Pan American Silver Corp. the second-largest primary silver-producing company in the world. "Its price is dirt-cheap right now." Several of the CEOs said they looked for further investment demand due to the ongoing financial crisis. Investors often turn to gold and silver as a safe haven in times of uncertainty and worries about other markets. "We've had the huge success of the silver ETF, which remarkably this year hit 200 million ounces of silver," said Dennis E. Wheeler, chairman, president and CEO of Coeur d'Alene Mines Corp.
"So we've had strong growth in investor interest." The iShares Silver Trust launched by Barclays Capital nearly 2 1/2 years ago hit 200 million ounces for the first time in July. And it stood at 216.3 million ounces Friday, meaning buyers have stayed the course despite the retreat in prices. But the executives emphasized that silver has more going for it than just investment demand. They also cited industrial usage. At one time, photography accounted for roughly one-half of all silver demand, Baker explained.
But with the advent of digital cameras, this now only amounts to 15 percent. But the slack has been picked up by industrial/consumer demand that has been rising by 6 percent per annum over the last five years and now accounts for 54 percent of total demand, Baker explained. Much of this is due to constantly developing electronics technology. "Because [silver is] so good at conducting electricity, it doesn't create the heat load that other metals create," Baker said. "As a result, you can use less of it, and it takes up less room than other metals.
But more importantly, you don't have to cool it as much." Thus, silver demand is growing for products such as laptop computers and cell phones. "Silver is a whole new metal compared to what it was," Baker said. "If we had been talking five years ago, we would have been talking about how the outlook for silver is terrible because of this decline in photographic use. "What people didn't realize is there is going to be even more silver used in these electronic devices, including the digital camera."
Wheeler said he views silver as a "technology metal." Already, he said, silver has more applications than any other metal and is even used by the healthy-care industry for bandages and dressings due to its anti-bacterial qualities. "New uses are being found all of the time," Wheeler added. On top of this, jewelry and silverware also remain significant uses for silver. Above-ground silver stockpiles have been run down after years in which global demand exceeded mined output, Wheeler said.
And discoveries of new deposits are becoming more infrequent, he added. "Silver reserve bases are shrinking," Wheeler said. Robert A. Archer, president and chief executive of Great Panther Resources Ltd. described silver as a "very complex metal." It often tracks gold, yet tends to be more volatile since it is a much smaller market, he said.
Roughly three-quarters of silver is a byproduct of mining for other metals. While bought by many for investment purposes, it also has the many industrial uses. He suspects that as investment demand picks up, the market will become still tighter. And as investors see silver shortage, more will want to buy it. "We're bullish on the longer-term silver price," he said. Dow Jones
-CFTC relents and probes silver market. Read more here-http://www.gata.org/node/6672
DEFINITIONS-QUOTES-QUICK HITS
-Panic of 1907. Read more here-http://en.wikipedia.org/wiki/Panic_of_1907
-Savings and loan crisis. Read more here-http://en.wikipedia.org/wiki/Savings_and_Loan_crisis
-Subprime mortgage crisis. Read more here-http://en.wikipedia.org/wiki/Subprime_Crisis
-Short-Sale Rule. A Securities and Exchange Commission (SEC) trading regulation that restricted short sales of stock from being placed on a downtick in the market price of the shares. Short sales could only be permitted on upticks (last trade higher than the one before) or zero-plus ticks (last trade is the same as previous, which was an uptick).
The regulation was passed in 1938 to prevent selling shares short into a declining market; at the time market mechanisms and liquidity couldn't be guaranteed to prevent panic share declines or outright manipulation.
This regulation was rescinded in July 2007 by decree of the SEC; as a result short sales can occur (where eligible) on any price tick in the market, whether up or down. The short sale rule was also known as the "plus-tick rule", "tick-test rule", or "uptick rule". Investopedia.com
-"By some estimates, five hedge funds fail for every bank that goes under," said a report that came with a buy recommendation on BCE published last Friday by Scotia Capital telecom analyst John Henderson. Scotia Capital
-Greenspan was considered a master, now we must ask ourselves whether he is not, after (Osama) bin Laden, the man who hurt America the most. It is clear that what is happening is a disease. It is not the failure of a bank, but the failure of a system. Until a few days ago, very few were willing to realize the intensity and the dramatic nature of the crisis. Giulio Tremonti, Italian Finance Minister
-Longtime gold bugs have always pointed out that gold is the only asset that is not simultaneously someone else's liability, which entails "counterparty risk," i.e. the risk that the other guy will go broke, default, whatever. Counterparty risk is what is bringing down investment banks and the whole derivatives market.
Thus James Turk, of Goldmoney.com, can confidently predict that gold will reclaim its place as the ultimate safe harbor "as this financial crisis continues to deepen because people become reluctant to have their wealth dependent on counterparty risk." Casey Daily Resource
-.72, .62, and then .52 on the USDX. Gold is going to $1200 and then on to $1650. Jim Sinclair
-I have a feeling that right now we're putting in a double bottom and that by this time next year you'll see gold at $1,200 an ounce. Michael Maloney
-"As the U.S. dollar moves back to the receiving end of its own 'misdemeanors' and its July rally-leg teeters dangerously, it's less likely that global central banks, frantic to exit huge U.S. dollar reserves, will act with the same former restraint and co-ordination. In fact, we could see a mad dash for the U.S. dollar fire escape and potential "moon-shot" for gold!" Harry Schultz-Read more here-http://www.marketwatch.com/news/story/radical-gold-bugs-gloating-guarded/story.aspx?guid={8EAA71DF-6A83-4650-833B-DAB0730F9F3D}&print=true&dist=printMidSection
-I'm lowering my original target for the DJIA from 10,000 (it still will be a support level for a while before it breaks) and believe sometime in the next 12-24 months the DJIA can fall to 7,500-8,000. I now believe we will have one of the worst recessions in U.S. history in this time frame as well.
I see the U.S. Dollar Index hitting 60 and gold $1,300-$2,000 (depending how bad things get). Look for a super bull run in metal stocks sometime in this timeframe as well. Do all you can to get out of debt and lower your lifestyle as it's going to be greatly lowered for most Americans, anyway. Peter Grandich
-"A portion of everybody's portfolio should be gold. Every bank has tonnes and tonnes of gold in their vaults. Gold is finite. It's a safe haven asset. It's the reserve currency of central banks and, as proven throughout history, gold goes up when property and stocks go down,'' says Mark O'Byrne, director of Gold and Silver Investments in Dublin.
O'Byrne insists that investments could fall as well as rise and that no one should put all their eggs in one basket. "It is crucial that all investors and savers are diversified, now more than ever, and thus every portfolio should have a minimum allocation of 10% to 20% gold in order to protect and hedge against geopolitical, macroeconomic and systemic risk." Read more here-http://www.tribune.ie/business/news/article/2008/sep/21/crash-hails-a-golden-era-for-irish-investors-even-/
-U.S. Mint suspends sales of yet another coin, the American Buffalo 1-oz gold coin. A troubled U.S. economy has prompted such a surge in bullion coins and other gold products that the U.S. Mint is having a tough time keeping up with their production. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=63341&sn=Detail
-A run on the dollar is becoming less unthinkable especially in the light of the massive US trade and current account deficits and the prospect of a $1 trillion ($1,000 billion) federal deficit next year. Also, we have seen many retail, mortgage and investment banks be taken over, nationalised and go bankrupt and more are soon to follow.
And now even "safe haven" assets such as US money market funds are suffering from massive redemptions as investors grow increasingly fretful regarding paper assets, preferring finite, hard and tangible assets such as gold and the precious metals. Gold.ie
RARE COLORED DIAMONDS
-Nearly 500-carat flawless diamond found in Lesotho. Lesotho miners have discovered one of the world's largest diamonds at the Letseng mine, which has already yielded four of the world's 20 largest rough diamonds. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page37?oid=63012&sn=Detail
-Diamonds, Antiques Become Investor Haven. Forget the uncertainty of the stock exchange and the housing market would-be investors are being urged to consider putting their money into diamond jewelry and antiques, which is considered the nearest relation to a 'sure thing' in a downturn economy. Colin Weldon of Weldons Antiques in Dublin revealed that people have recently begun to put a lot of money into fine diamonds because their value is so solid. Diamonds.net
-Christie's auction, Jewels and Watches The Dubai Sale, takes place at the Jumeirah Emirates Towers Hotel on October 29, 2008 at 7 p.m. The sale will include jewelry from leading contemporary designers, natural pearls, rare vintage Cartier, and antique Indian jewels. The sale is expected to realize between $20 million and $25 million.
The Dubai sale includes 12 lots of fine diamond jewelry from an important private European collection with a combined estimate of $6 million to $8 million. The highlights from this collection include a yellow diamond necklace, earring and bracelet suite, divided into 3 lots, with a combined estimate of $1.25 million to $1.65 million. The largest diamond in the sale is a radiant-cut 57.02 carat fancy intense yellow diamond ring estimate: $2 million to $2.5 million. Diamonds.net
-De Beers Says Asia Will Compensate for Weaker U.S. Gem Demand. De Beers, the world's biggest diamond company, said gem sales in Asian markets will help compensate for stagnant or reduced U.S. demand caused by the credit crisis.
"If somebody said they weren't concerned about the States, they'd be smoking something,'' Jonathan Oppenheimer, head of the chairman's office at De Beers and a director of its Diamond Trading Co., said yesterday in an interview in New York. "There may be a balance in terms of the U.S. being similar to last year, maybe a little bit weaker, and China picking up some of the slack, India picking up some of the slack.'' Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTlEf0tAGdOY
COMMODITIES-OIL-GASOLINE
-Commodities Bottom as Speculators Vanish After Slump. The worst may be over for commodities after the steepest rout since at least 1956 drove out speculators and the U.S. government unveiled a plan to end the worst credit-market seizure since the Great Depression.
The Standard & Poor's GSCI Index of commodities had the biggest three-day gain in 18 years, surging 8.4 percent through Sept. 19, the day U.S. Treasury Secretary Henry Paulson said the government will spend ''hundreds of billions'' to cleanse banks of mortgage-related assets. Crude oil rose 6.8 percent that day, while wheat and copper gained 3.6 percent.
"What the government just did is the end game, and it's going to mean a good rally for commodities,'' said Michael Pento, a senior market strategist who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey. ''Six weeks ago, I thought it was prudent to exit most commodities. Now you want to own these things. I'm jumping in twice with both feet.''
Commodities, which had the best first half in 35 years, tumbled so far this quarter as the combination of slowing economic growth and the strengthening U.S. dollar popped the speculative bubble that drove prices to record highs. The Reuters/Jefferies CRB Index of 19 raw materials is down 22 percent since June 30, heading for the biggest quarterly loss since at least 1956, data compiled by Bloomberg show. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aCgKM.VHTfB0&refer=home
-Here comes $500 oil. If Matt Simmons is right, the recent drop in crude prices is an illusion and oil could be headed for the stratosphere. He's just hoping we can prevent civilization from imploding. Read more here-http://money.cnn.com/2008/09/15/news/economy/500dollaroil_okeefe.fortune/index.htm?postversion=2008092213
-The prospects for oil prices for the rest of the year remain uncertain. However, OPEC should be able to defend a price of $80 to $100 per barrel. Nevertheless, there is uncertainty over what the floor price is likely to be. For most OPEC members, $80 is too low. Oxford Analytica-Read more here-http://www.theglobeandmail.com/servlet/story/RTGAM.20080922.woxfoanalytica0922/BNStory/energy/home
-Exxon's Cash Hoard Fuels Worst Stock Drop in 27 Years. Exxon Mobil Corp., the world's most valuable company, has never been richer. Shareholders think its cash a sign of weakness. With petroleum output falling at the fastest pace in a decade and shares tumbling the most in 27 years, growth prospects are evaporating.
The world's biggest oil company is piling up cash faster than it can be spent, thanks to crude prices above $100 a barrel. Exxon Mobil's $39 billion in cash amounts to 15 percent of assets, almost six times the average of the company's 10 biggest peers, according to data compiled by Bloomberg.
That hasn't helped investors, as Exxon Mobil fell 14 percent in New York trading this year, heading for the worst drop since 1981. While Royal Dutch Shell Plc, BP Plc and ConocoPhillips boost spending to acquire reserves, Irving, Texas-based Exxon Mobil is shelling out more money to buy back stock than for drill bits, pipelines and related investments in its operations, said William Andrews of C.S. McKee & Co.
"They don't have much growth potential,'' said Andrews, who holds Shell shares among the $7.8 billion he helps manage at C.S. McKee in Pittsburgh. ''If you don't have enough growth opportunities, then you've got to do something else with the money, but buybacks don't necessarily add anything.''
Exxon Mobil, whose market value of $420 billion is larger than any other company, earned a record $40.6 billion last year. At the same time, the company's capital spending as a percentage of sales was the lowest in the industry. Its stock is dropping despite $80 billion in buybacks since December 2005. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid=aUTo2SySKkJ8
-Oil skyrockets, hits $130. Futures spike as much as $25 on the bailout plan, the falling dollar and as the October front-month contract expires. Read more here-
http://money.cnn.com/2008/09/22/markets/oil/index.htm?postversion=2008092215 or http://www.bloomberg.com/apps/news?pid=20601087&sid=aMSdh.rgPmx0&refer=home
-U.S. gasoline inventories lowest since 1967. U.S. gasoline inventories shrunk to the lowest level since 1967 after Hurricanes Gustav and Ike shut Gulf Coast oil refineries, but the Bush administration said there is still no need to ask for emergency fuel supplies from European allies.
The drop in fuel stocks has caused long lines at service stations in southern cities. Retail outlets, including those in Atlanta and Memphis and as far away as Ohio, have run out of fuel. Read more here-http://www.reuters.com/article/domesticNews/idUSTRE48N85320080924
-Scooter sales skyrocket 66%. With pain at the pump still real, Americans are jumping on those two-wheeled get-ups that Europeans have been riding for generations. Read more here-
http://money.cnn.com/2008/09/23/pf/scooter_popularity/index.htm?postversion=2008092314
-Gas mileage is higher priority. Study of why consumers reject cars finds record increase in those citing inadequate mileage; more considering Asian brands. Read more here-
http://money.cnn.com/2008/09/24/autos/gas_mileage.ap/index.htm
FINANCIAL CRISIS-BAILOUT
-Bailout plan rejected. House leaders scramble for support for controversial Wall Street plan. http://money.cnn.com/2008/09/29/news/economy/bailout/index.htm?postversion=2008092914
-Lawmakers Agree on 'Principles' of Economic Rescue. Congressional negotiators said they reached an agreement in principle on a $700 billion financial- rescue package to inject fresh capital into paralyzed credit markets.
The lawmakers agreed that a plan to let Treasury buy the troubled assets of financial firms should contain provisions strengthening oversight, limiting executive pay and preventing foreclosure, Senate Banking Committee Chairman Christopher Dodd said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=abBzxfFh5lM0&refer=home
-FDIC May Need $150 Billion Bailout as More Banks Fail. Read more here-http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=amZxIbcjZISU
-$5 Trillion Cash Pool Needed to Stop Rout, Ohmae Says. Treasury Secretary Henry Paulson's $700 billion plan to buy devalued assets from financial companies is ''a joke'' because it doesn't go far enough to calm markets, said Kenichi Ohmae, president of Business Breakthrough Inc.
Ohmae, nicknamed ''Mr. Strategy'' during his 23 years as a McKinsey & Co. partner, called for a $5 trillion ''international facility'' to be made available to financial institutions. The system could be modeled on one used by Sweden during its banking crisis in the early 1990s, he said.
"This is a liquidity crisis,'' Ohmae said at an investor forum hosted by CLSA Asia-Pacific Markets, the regional broking arm of Credit Agricole SA, in Hong Kong yesterday. ''The liquidity has to be so big that people won't get panicky.'' Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8DIq9yO0vzY
-Asia fears panic selling of U.S. debt, Chinese adviser says. Read more here-http://www.gata.org/node/6673
-Bailout: No cure for recession. If done right, the White House's plan can only limit the damage, not avoid it, according to one economist. Even if the Bush administration's $700 billion bailout works, the United States still faces the longest and most severe economic stretch since the Great Depression, according to one economist.
"The recession train has already left the station," said Nouriel Roubini, professor of economics at NYU's Stern School of Business during a conference call Wednesday. "What this plan can avoid is a Japan-like, L-shaped recession," where the economy sinks and stays sunk, "that could last a decade or more." Read more here-http://money.cnn.com/2008/09/24/news/economy/Roubini_on_bailout/index.htm?postversion=2008092412
-China banks told to halt lending to US banks-SCMP. Read more here-http://www.reuters.com/article/marketsNews/idUSPEK16693720080925
-Recapitalize Financial Institutions Rather than Bail Out Debt. Read more here-http://www.321gold.com/editorials/merk/merk092508.html
-Bailouts will lead to rough economic ride according to Ron Paul. Read more here-http://www.cnn.com/2008/POLITICS/09/23/paul.bailout/index.html
Ron Paul: Too much government meddling in economy caused crisis
Paul says the bailouts are another case of excessive intervention in economy
The government isn't letting the market adjust prices to lower levels, Paul says
Paul: Bailout will only increase financial instability in the long run
-Jim Rogers Calls Paulson's Plan 'Welfare for the Rich'. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T=Jim%20Rogers%20Calls%20Paulson%27s%20Plan%20%60Welfare%20for%20the%20Rich%27&clipSRC=mms://media2.bloomberg.com/cache/vbGb5KNYrBKo.asf
-The crisis: A timeline. A shocking series of events that forever changed the financial markets. Read more here-http://money.cnn.com/galleries/2008/news/0809/gallery.week_that_broke_wall_street/index.html
-Crisis will impact most Americans poll. CNN/Opinion Research survey shows most won't take action on stocks, money markets any time soon. Read more here-
http://money.cnn.com/2008/09/23/news/economy/poll_financial_crisis/index.htm
-Bailout rewards bad behavior poll. Eight out of ten say the economy could deteriorate further if government action is not taken, according to poll, but similar percent also worry bailout rewards bad behavior. Read more here-http://money.cnn.com/2008/09/22/news/economy/bailout_survey/index.htm?postversion=2008092307
-Goldman's O'Neill Says Brown Should Mull U.K. Mortgage Rescue. Prime Minister Gordon Brown should weigh whether to follow the U.S.'s lead and pursue a government- backed rescue of the U.K. mortgage market, Goldman Sachs Group Inc. chief economist Jim O'Neill said.
The British government should consider "doing something to take over the activities of all those institutions that are just not in a position to lend here any more, because it's going to end up causing significant economic weakness in the U.K.,'' O'Neill said in an interview on Bloomberg Television. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid=axzErERmpI.Y
-Chart of the Day. In an attempt to put the current financial crisis into perspective, today's chart illustrates the 10 largest Chapter 11 bankruptcies in US history. As the chart illustrates, the bankruptcy of Lehman Brothers earlier this week dwarfs all previous US bankruptcies.
The US government has taken the approach that some companies are 'too big to fail' as failure could have devastating systemic effects. In the case of Lehman Brothers, however, the bar as to what is too big has been raised considerably. Chartoftheday.com
U.S. MAY FIND PAINFUL PARALLELS IN NORDIC BAILOUT
-U.S. May Find Painful Parallels in Nordic Bailout. If Henry Paulson and Ben S. Bernanke want to know what happens when central banks and governments bail out financial institutions, they should be ''learning Swedish.'' That's the suggestion of Charles Dumas, a director at Lombard Street Research in London. He says the effort by Finland, Sweden and Norway to save troubled banks in the early 1990s is the closest parallel to the market-rescue plan being engineered by the U.S. Treasury secretary and Federal Reserve chairman.
The Nordic effort similar in speed and scope to what the U.S. is planning now, though smaller in size did manage to end the financial crisis. At the same time, it didn't prevent a deeper recession and surging unemployment in all three countries. "In the long term, there were benefits, but it took half a decade before they began to show in the economy,'' said Esko Ollila, a member of the Bank of Finland board from 1983 to 2000.
With the U.S. financial markets in tumult, Paulson is seeking to implement a $700 billion plan that will allow the U.S. to purchase illiquid assets such as mortgage-related securities from banks. Last week, the government and Fed pledged to insure money-market funds, seized control of New York-based insurer American International Group Inc. and intervened in the markets for commercial paper and short-term debt for Fannie Mae, Freddie Mac and other agencies. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid=au3.PKtIo9oM
JACK WELCH SAYS U.S. FACES DEEP DOWNTURN
-Former General Electric Co Chairman and Chief Executive Officer Jack Welch said the U.S. economy faces a deep downturn in coming quarters, and he supports a proposed $700 billion government rescue package for the financial sector. "I now believe we are in for one hell of a deep downturn," Welch told the World Business Forum in New York on Wednesday, adding that the first quarter of 2009 will likely be "brutal."
Until recently, Welch said, he had believed the U.S. economy could avoid recession, but he has changed his mind. "I am now caving," he said. "Get ready for real tough times. They're coming. There is no credit available." Welch said mortgage lenders, legislators, investment bankers and others are all to blame for the crisis, which stemmed from easy credit and investors' appetite for yield.
"The problem was money didn't cost anything," Welch said. "People took swings." He likened the crisis to Agatha Christie's "Murder on the Orient Express," in which all the suspects turn out to be guilty; but he singled out the role of investment banks in the crisis. "We have to look at the damn investment bankers," he said. "They're playing with other people's money. The only penalty was a cut in their bonus, not their head." Read more here-http://www.reuters.com/article/businessNews/idUSTRE48N74H20080924?feedType=RSS&feedName=businessNews&rpc=23&sp=true
U.S. TO LOSE FINANCIAL SUPERPOWER STATUS
-Germany blamed the United States on Thursday for spawning the global financial crisis with a blind drive for higher profits and said it would now have to accept greater market regulation and a loss of its financial superpower status.
In some of the toughest language since the crisis threw Wall Street banks into financial disarray earlier this month, German Finance Minister Peer Steinbrueck told parliament the turmoil would leave "deep marks" on both sides of the Atlantic, but called it primarily an American problem.
"The world will never be as it was before the crisis," Steinbrueck, a deputy leader of the centre-left Social Democrats (SPD), told the Bundestag lower house. "The United States will lose its superpower status in the world financial system. The world financial system will become more multi-polar," he said. Read more here-http://www.cnbc.com/id/26881273
BUFFETT BUYS INTO GOLDMAN SACHS
-Buffett Buys into Goldman Sachs Amid 'Economic Pearl Harbor'. Billionaire investor Warren Buffett, likening the market turmoil to an "economic Pearl Harbor,'' said his $5 billion investment in Goldman Sachs Group Inc. is a vote of confidence in the Treasury's $700 billion bank rescue plan.
"I am betting on the Congress doing the right thing for the American public and passing this bill,'' Buffett said on CNBC today. "I certainly have a vote of confidence in Goldman and vote of confidence in Congress.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aRhG15OZUpzE&refer=home
-Buffett's "time bomb" goes off on Wall Street. On Main Street, insurance protects people from the effects of catastrophes. But on Wall Street, specialized insurance known as a credit default swaps are turning a bad situation into a catastrophe. When historians write about the current crisis, much of the blame will go to the slump in the housing and mortgage markets, which triggered the losses, layoffs and liquidations sweeping the financial industry.
But credit default swaps complex derivatives originally designed to protect banks from deadbeat borrowers are adding to the turmoil. "This was supposedly a way to hedge risk," says Ellen Brown, the author of the book "Web of Debt." Read more here-http://www.reuters.com/article/newsOne/idUSN1837154020080918
-Goldman, Morgan Stanley Bring Down Curtain on an Era. The Wall Street that shaped the financial world for two decades ended last night, when Goldman Sachs Group Inc. and Morgan Stanley concluded there is no future in remaining investment banks now that investors have determined the model is broken.
The Federal Reserve's approval of their bid to become banks ends the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and caps weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp. "The decision marks the end of Wall Street as we have known it,'' said William Isaac, a former chairman of the Federal Deposit Insurance Corp. "It's too bad.'' Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=aoDmO_d0IJSU&refer=home
12th BANK FAILURE IN U.S.
-12th bank failure of the year announced. Regulators close down Ameribank Inc., a West Virginia-based-bank with total assets of $115 million. Read more here-
http://money.cnn.com/2008/09/19/news/companies/ameribank_closure/index.htm
RUN ON HONG KONG BANK
-Depositors line up as Hong Kong bank tries to quell panic. Hundreds of customers descended on branches of Hong Kong-based Bank of East Asia on Wednesday to demand their deposits back after the bank was hit by doubts about its stability.
In one of the first bank runs in Asia since the current international financial crisis began, customers lined up outside BEA offices across the territory. The mid-sized lender insisted that "malicious" rumours spread by cellphone text messages in recent days have no basis in fact.
"The Bank of East Asia is not suffering from financial difficulties. We have enough cash to handle the needs of depositors," deputy chief executive Joseph Pang told reporters. He declined to specify how much money customers have withdrawn, but said it was not a large amount and no major clients had pulled their money. Read more here-
http://www.cbc.ca/money/story/2008/09/24/hongkong.html or http://www.bloomberg.com/apps/news?pid=20601080&sid=aII1tgrPIB.s&refer=asia
-SocGen issues China alert as fears mount on banks. Société Générale has advised clients to dump shares of banks exposed to the Far East. Read more here-
500 TRADES AWAY FROM A MELTDOWN
-Almost Armageddon, markets were 500 trades from a meltdown. The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.
Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level a 22 percent decline! while the clang of the opening bell was still echoing around the cavernous exchange floor.
According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning. Read more here-http://www.nypost.com/seven/09212008/business/almost_armageddon_130110.htm
U.S. DOLLAR
-Dollar May Get 'Crushed' as Traders Weigh Up Bailout. Treasury Secretary Henry Paulson's plan to end the rout in U.S. financial markets may derail the dollar's three-month rally as investors weigh the costs of the rescue.
The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost U.S. borrowing as much as $1 trillion, according to Barclays Capital interest-rate strategist Michael Pond in New York. While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real U.S. interest rates.
"As we get to the other side of this, the dollar will get crushed,'' said John Taylor, chairman of New York-based International Foreign Exchange Concepts Inc., the world's biggest currency hedge-fund firm, which manages about $15 billion. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid=aGBXzUuCWbUE&refer=home
-US dollar set to be major casualty of Hank Paulson's bailout. "This may prove to be the dollar's epochal moment the moment historians look back at as its major turning point." Read more here-http://www.telegraph.co.uk/finance/economics/3062121/US-dollar-set-to-be-major-casualty-of-Hank-Paulsons-bailout.html
-Ambrose Evans-Pritchard: Does U.S. face a run on its currency?
AS THE US PRINTING PRESS STARTS
Taking Stock
* Treasury buying mortgage-related assets: $700 billion.
* Potential supplementary stimulus package favoured by Democrats: $100 billion.
* Insuring money market funds: $50 billion.
* Treasury fortifying the Fed's balance sheet: $100 billion.
* Expansion of temporary swap lines with central banks: $180 billion.
* Loan to AIG: $85 billion.
* Fed purchase of agency discount notes abd ABCP: amount not specified.
* Fed loans through the Primary Dealer Credit Facility: $20 billion through Sept. 17.
* Fed's discount window: $33 billion balance.
* Treasury purchase of GSE MBS this month: $10 billion.
* Potential cost of Fannie/Freddie bailout: $200-$300 billion.
* Financing the current account deficit: priceless.
Investment implications: Sell the U.S. dollar.
"The fiscal cost to the United States is likely to be enormous. Speculation will intensify on a possible US government paper downgrade. US policy-making and credibility have been put into question. The safety of US assets has been put into question.
We remain concerned with the repercussions that this crisis will have on the financial flows into the United States against the context of a still large current account deficit." Alex Patelis, global strategist at Merrill Lynch-Read more here-http://www.gata.org/node/6665
U.S. DEBT
-Paulson Plan May Push National Debt to Post-World War II Levels. Treasury Secretary Henry Paulson's $700 billion proposal to stabilize the banking system may push the national debt to the highest level since 1954, threatening an erosion of foreign appetite for U.S. bonds.
The plan, which asks Congress for funds to buy devalued securities from financial institutions, would drive the debt above 70 percent of gross domestic product and the annual budget gap to an all-time high, possibly exceeding $1 trillion next year, economists estimated.
"This is sobering, absolutely sobering, even to someone who doesn't drink,'' said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=anJ4Egj1nXS8&refer=home
-A default by the US government is no longer unthinkable. So, here we are the start of a new world order. After the tumultuous events of the last fortnight, the global economic landscape will never look the same again. Read more here-http://www.telegraph.co.uk/finance/comment/liamhalligan/3023967/A-default-by-the-US-government-is-no-longer-unthinkable.html
-Bailout can't hide it; the country is busted. Read more here-http://www.gata.org/node/6674
-House approves $630B spending bill. The Pentagon will receive a record $488B budget; automakers get $25B in loans; offshore drilling ban lifted. Read more here-
http://money.cnn.com/2008/09/24/news/economy/house_bill.ap/index.htm
U.S. JOBS
-Jobless claims soar near 7-year high. First economic report since financial meltdown shows initial unemployment claims rose by 7%, boosted by Hurricanes Gustav and Ike. Read more here-http://money.cnn.com/2008/09/25/news/economy/jobless_claims/index.htm
-Credit crunch freezes hiring, expansion. When small businesses can't get loans, job growth and economic expansion stall. Read more here-http://money.cnn.com/2008/09/24/smallbusiness/small_biz_credit_freeze.smb/index.htm
INTEREST RATES
-Bernanke Moves Closer to Rate Cut as Risks to Economy Intensify. Federal Reserve Chairman Ben S. Bernanke moved closer to cutting interest rates, signaling that risks to U.S. growth are greater than policy makers saw them just last week.
The "intensification'' of the financial crisis in recent weeks is curbing Americans' access to borrowing, making the outlook for consumer spending ''sluggish at best,'' Bernanke told lawmakers in Washington yesterday. While he noted that risks to inflation remain, the Fed chief's testimony focused on ''grave threats'' to the banking system.
"It opens the door a bit further for rate cuts, although it doesn't signal that the committee is at that point already,'' said former Fed researcher Brian Sack, now senior economist at Macroeconomic Advisers LLC in Washington. ''It still seems like it would take a further deterioration in financial conditions or in the data to prompt a rate cut.''
Bernanke's assessment reflected further disruptions to money markets since the central bank met Sept. 16, when the Federal Open Market Committee left the benchmark rate at 2 percent. The three-month London interbank offered rate, or Libor, a benchmark for confidence in the banking system, jumped the most in eight years today.
Traders increased bets on a quarter-point rate cut at or before the FOMC's Oct. 28-29 meeting, sending the probability implied in futures contracts to 80 percent yesterday from 58 percent the previous day. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=atrFxuL1keJ4&refer=home
INFLATION
-Canada Inflation Quickens to Fastest Since '03 on Gas. Canada's annual inflation rate rose to the highest in more than five years in August as prices for gasoline and food surged. Consumer prices rose 3.5 percent from a year earlier, the biggest jump since March 2003, Statistics Canada said today in Ottawa. That matched the median forecast of 19 economists in a Bloomberg survey. Prices fell 0.2 percent from July, also matching economists' predictions.
The Bank of Canada this month signaled borrowing costs would stay put for the foreseeable future, citing energy-driven inflation. Still, economists such as Sal Guatieri at BMO Capital Markets in Toronto say the bank may need to cut interest rates sooner than expected to kick start growth as a financial market crisis crimps the U.S. economy.
"The Bank of Canada is less worried about inflation than about the economy and its concerns about the economy can only have increased in light of growing distress in global credit markets,'' Guatieri said. ''The odds of a Bank of Canada rate cut are rising.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=aD4.xqXiuM.4&refer=canada
FBI PROBING SUBPRIME COLLAPSE
-FBI Probing Fannie, Freddie, AIG, Lehman in Subprime Collapse. The FBI is investigating Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc. and American International Group Inc. in its probe of the collapse of the subprime-mortgage market, according to a senior law-enforcement official.
Those companies are among 26 being reviewed by the Federal Bureau of Investigation for possible accounting misstatements, said the official, who asked to remain unidentified. The investigations are preliminary, the official said late yesterday.
The FBI has come under pressure to hold companies responsible as the loan crisis rocked Wall Street and led to the biggest housing slump since the Depression. Financial companies worldwide have reported more than $500 billion in losses and writedowns stemming from the subprime collapse.
Housing lenders Freddie Mac and Fannie Mae, as well as insurer AIG, were all taken over by the government earlier this month. Lehman filed for bankruptcy. The crisis has led the Bush administration to ask Congress to approve a $700 billion bailout for the financial industry. Read more here-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_oZZHsX.QIM
WEAK HOLIDAY SALES COMING
-Weakest holiday sales since '02 seen. Retail group expects just a 2.2% increase, about half the 2007 rate, which would be the slowest growth in six years. Read more here- http://money.cnn.com/2008/09/23/news/economy/retail_sales_forecast/index.htm
REAL ESTATE
-U.S. Housing Prices Tumble on Home Mortgage Scarcity. U.S. home prices tumbled in July as the credit crisis that led to this month's toppling of Lehman Brothers Holdings Inc. tightened mortgage standards and slashed real estate lending.
Home purchase prices dropped 5.3 percent, seasonally adjusted, from a year earlier, the Office of Federal Housing Enterprise Oversight said today in a report. The one-month decline from June was 0.6 percent, said Washington-based Ofheo. Eight out of nine U.S. regions showed declines for the year as lenders tightened requirements after banks posted $523 billion in mortgage-related losses and writedowns worldwide. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid=a2Qi1uG1DJIk&refer=home
-U.S. New-Home Sales Fell in August to 17-Year Low. Sales of new homes in the U.S. fell in August to a 17-year low, signaling the housing market suffered another setback even before the latest turmoil in financial markets.
Sales dropped 11.5 percent, more than forecast, to an annual rate of 460,000, the fewest since January 1991, the Commerce Department said today in Washington. The median sales price dropped to a four-year low. A financial meltdown that prompted the government this week to ask Congress for $700 billion in emergency funding to buy up troubled bank assets may continue to clog the flow of credit to homebuyers and businesses. Shrinking credit availability threatens to extend the three-year housing slump and deepen the economic downturn.
"The market is looking particularly depressing,'' said Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia, whose sales forecast was the closest. ''Construction activity has to fall further than it has, as do prices,'' to reduce a glut of unsold homes. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid=a_zAnYoBrQsg&refer=home
-Home Resales in U.S. Fall 2.2% to 4.91 Million Pace. Sales of previously owned U.S. homes fell more than forecast in August and prices dropped the most on record, a sign the market remained in a slump heading into the latest financial meltdown.
Sales of existing homes dropped 2.2 percent to an annual rate off 4.91 million units from 5.02 million the prior month, the National Association of Realtors said today in Washington. The median price declined 9.5 percent from August 2007 and the number of properties fell from a record.
The collapse in lending that brought down American International Group. Inc. and Lehman Brothers Holdings Inc. this month may also make mortgages more difficult to get. A lack of credit raises the odds sales will again slump after hovering around a 10-year low this year, even as borrowing costs drop.
"The headwinds facing housing have intensified,'' Peter Kretzmer, a senior economist at Bank of America Corp. in New York, said before the report. ''Delinquencies and foreclosures continue to rise while credit conditions remain tight.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=aqZOHUemgX8M&refer=home
-Home values plunge in Southern California. Median home price fell 34% in August from last year, sales up 10% during period but many driven by foreclosures. Read more here-
-U.K. Housing Market 'on Its Knees,' Rightmove Says. U.K. house prices fell for a fourth month in September as the global credit crisis intensified, locking out homebuyers and forcing the sale of the country's biggest mortgage lender, a report by Rightmove Plc showed.
"The housing market is on its knees and will remain so until financial institutions address the disastrous state of the mortgage funding markets,'' said Miles Shipside, commercial director at Rightmove. ''While this market provides a good opportunity to trade up, it requires a degree of bravery.'' The average asking price for a home fell 1 percent from August to 227,438 pounds ($414,000), Britain's most-used property Web site said today. From a year earlier, prices fell 3.3 percent.
The property market may face further weakness in coming months, provoking a ''painful'' adjustment for many families, Bank of England Chief Economist Spencer Dale said last week. HBOS Plc agreed to a takeover by Lloyds TSB Group Plc after plunging home values and the financial market crisis destroyed the value of the company and added to the threat of a recession. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid=azW3KAyxhvvw&refer=home
-Home buyers: On or off the fence? The government is bailing as fast as it can to try to stabilize foundering housing markets. How will home buyers respond? Read more here-
http://money.cnn.com/2008/09/22/real_estate/blood_on_Wall_Street/index.htm?postversion=2008092312
-Can't anyone afford my home? Prices have dropped. A lot, but it's still surprisingly hard to find buyers. Read more here-http://money.cnn.com/2008/09/19/real_estate/afford_myhome.moneymag/index.htm?postversion=2008092210
FORECLOSURES
-August foreclosures hit another high. There were 304,000 homes in some stage of default last month, and 91,000 families lost their homes. Read more here-
http://money.cnn.com/2008/09/12/real_estate/foreclosures/index.htm?postversion=2008091815
GEOPOLITICAL NEWS
-In video, Al Qaeda vows more U.S. attacks. Read more here-http://www.cnn.com/2008/WORLD/meast/09/19/alqaeda.sept11.tape/index.html
-Spies Warn That Al Qaeda Aims for October Surprise. Intercepted Messages Asking Local Cells To Be Prepared for Imminent Instructions. Read more here-
http://www.nysun.com/foreign/spies-warn-that-al-qaeda-aims-for-october-surprise/86326/
-Pakistan hunts Al-Qaeda cell after hotel blast: officials. Read more here-http://www.breitbart.com/article.php?id=080922071642.p3ngmby5&show_article=1
-What Is the U.S. 'Secret Weapon' in Iraq? Read more here-http://blog.wired.com/defense/2008/09/whats-the-milit.html
-Chief inspector: Iran may be hiding secret nukes. Read more here-http://news.yahoo.com/s/ap/20080922/ap_on_re_mi_ea/eu_nuclear_iran&printer=1;_ylt=Ao3s.v_M.aJyKZsX9C2WlfwUewgF
-Military intelligence: Iran halfway to first nuclear bomb. Read more here-http://www.jpost.com/servlet/Satellite?cid=1222017348428&pagename=JPost%2FJPArticle%2FShowFull
-Iran's Ahmadinejad: US 'empire' nears collapse. Read more here-http://apnews.myway.com/article/20080924/D93COK780.html
-Iran president blames Wall Street turmoil on U.S. 'military engagement'. Read more here-http://www.latimes.com/news/nationworld/world/la-fg-iran23-2008sep23,0,2913574.story
-Iran vows to block any attack, says sanctions failed. Read more here-http://asia.news.yahoo.com/080921/3/3pcjv.html
-North Korea Expels UN, to Re-Activate Nuclear Plant. North Korea expelled United Nations atomic inspectors from its Yongbyon nuclear plant and pledged to reintroduce nuclear material into the facility, which is capable of making plutonium for bombs. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aFEJKKcsVVCI
-Russia Offers Venezuela $1 Billion to Buy Arms as Chavez Visits. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=auPHMMVXYA80
-Russia may launch nuclear cooperation with Venezuela: Putin. Read more here-http://news.yahoo.com/s/afp/20080925/wl_afp/russiavenezueladiplomacynuclear_080925192759
© 2008, Worldwide Precious Metals.
www.wwpmc.com
The GoldBugg Report - September 30, 2008
Posted by Worldwide Precious Metals on Tuesday, September 30, 2008
The GoldBugg Report - September 23, 2008
September 23, 2008
-U.S. IN "ONCE IN A CENTURY FINANCIAL CRISIS"
-Why Wall Street Hates Gold and Silver?
-"Gold is acting like it is supposed to on a flight-to-safety move.
GOLD
-Update, Gold fundamentals still pointing towards $2000+. Read more here-http://news.goldseek.com/EricHommelberg/1221231600.php
-Gold Coins, Bullion Sales Go 'Gangbusters' as AIG, Lehman Fall. While TV camera crews staked out American International Group Inc.'s Wall Street headquarters following its takeover by the U.S. government, Jules Karp was quietly trading gold coins in "unbelievable'' numbers from his basement dealership across the street. Karp, 61, has traded physical gold, including one-ounce Canadian Maple Leafs, American Eagles and South African Krugerrands, since 1974. Demand has "hit a crescendo,'' he said this week while an assistant prepared
the special packages used to send gold coins to a growing list of mail-order customers. "People are panicking right now,'' said Karp, who also sources coins for the clients of Wall Street's largest banks. "They're afraid for their money.'' The interest in bullion appears widespread. Gold sales to new clients at Blanchard & Co., the largest U.S. precious-metal retailer have jumped more than sixfold in the past three days as investors responded to the financial turmoil. "People are looking for answers,'' said David Beahm, a vice president at New Orleans-based Blanchard.
"People want to protect their wealth and their assets, and gold is the best way for them to do that.'' Suppliers of coins and bullion have been struggling to keep pace with the surge in demand from investors. "We're having a hard time'' making enough coins, Michael White, a spokesman for the U.S. Mint in Washington, said yesterday in an interview. "There's very high demand across the market for gold.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid=awFy4i6wSdmg&refer=home
-John Embry: "When the gold's all gone, the market will go nuts." Read more here-http://www.theaureport.com/cs/user/print/na/1624
-Gold the innocent bystander to the hurricane. A leading US precious metals analyst predicts gold will jump back as fast as it has come down and reach $1,000 again this year or early next and perhaps $2,000 in the next few years. Jeffrey Nichols of American Precious Metals Advisors said, "Long-term price prospects remain as bright as ever and nothing in the recent market performance has changed our forecast of record high prices in the next few years.
We still expect to see gold back over $1,000, if not late this year, then almost certainly in the first quarter of 2009. With the right confluence of economic and geopolitical developments we could see gold as high as $1,500 or even $2,000 an ounce in the next few years and a buying frenzy, such as is often seen late in the price cycles of financial and commodity markets, could briefly take the metal much higher." Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=62705&sn=Detail
-Gold Will Recover from David Chapman. So with almost a crisis de jour more drastic action will be taken. Maybe another rate drop and more liquidity adding games. All of it does threaten the potential for hyper inflation. And all of that of course is positive for gold. Gold is currency. It has been for 3000 years.
The US Dollar has only been a reserve currency for 63 years and the past 37 years it hasn't even had gold backing it. It is just paper. Would you rather own US$ a possibly bankrupt piece of paper or Gold. Protect your assets and this sell off gives you the opportunity to pick it up cheaply. Of course many will deride this. The US debt is still not a problem.
One wag said it has lots of assets so you have to net it and once you net it the debt/GDP ratio is only around 40%. Reasonable. But without the netting it is now 115%. With Britain at the level in the early 1990's they pounded the British Pound almost into oblivion. So again would you rather own US$ or Gold. Over the past month they have been trying to tell us to own US$. Well we are not buying that dance. Read more here-http://news.goldseek.com/UnionSecurities/1221256555.php
-Gold, Sticking to a longer-term perspective buying and holding and, if resources allow, buying more on the dips is the way to go. David Galland-Read more here-
http://news.goldseek.com/GoldSeek/1221241539.php
-Gold May Rise to $950 an Ounce as Miners Lower Output. Gold may rise to $950 an ounce by the end of year as central banks and miners hold back sales and investors buy the metal as a haven against falling stock prices, London-based researcher GFMS Ltd. said.
Central bank sales will drop 46 percent in 2008, while mine supply will decline for a third year, a GFMS report showed today. Demand from investors worldwide will soar 38 percent to 778 metric tons, with purchases in east Asia more than doubling.
"We're expecting gold to stage a powerful rally in the fourth quarter,'' GFMS Chairman Philip Klapwijk said at a conference in London today. There will be ''significant declines in stocks, which compete with gold.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid=abv6J3EnBf7s&refer=commodities or http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=62744&sn=Detail
-Don't buy gold and silver ETF's. ETF Securities products plummet up to 50% on AIG fear. Shares in ETF Securities products, which are backed by AIG, were down as much as 50% this week after US insurer was downgraded by credit agencies S&P and Moody's. ETFS Precious Metals dropped 50.68%, ETFS All Commodities dropped 54.7%.
On its website ETF Securities says it has assets of $7.65bn under management in exchange traded commodities. These products track commodity prices using financial instruments mainly provided by AIG-FP which are backed by AIG. Read more here-http://www.investegate.co.uk/invarticle.aspx?id=58393
-India August ETF gold collections up at 5.712 tonnes. Read more here-http://in.reuters.com/article/domesticNews/idINBOM7216720080916?rpc=401
-Contrite Sprott blames U.S. actions. But country's best-known hedge fund manager isn't giving up on his belief that oil and gold are headed inexorably higher.
-In emirates, people are buying gold 'as if it's free.' Read more here-http://www.gata.org/node/6605
-Venezuela's central bank may buy 15 metric tons of gold a year to develop gold investment products including coins, said Eli Sanchez, head of the gold department at Venezuela's central bank. "Part of our function is to increase participation in the gold market," Sanchez said in an interview in London today. "The point is, in Venezuela you don't have the opportunity to invest in gold at this moment."
The coins would be similar to Krugerrands in South Africa and Eagle coins in the U.S., he said, adding that Venezuela also has about 10 tons of the metal that may be used. Gold is a "very important part" of Venezuela's monetary reserves and there are no plans to sell the metal, Sanchez said. "Gold is very correlated to the price of oil." Venezuela holds 356 tons of gold, or about 30 percent of reserves, he said. Bloomberg
-Dr. Martin Murenbeeld of Dundee Wealth Economics in Toronto supports a bright future for gold. Read more here-http://www.jsmineset.com/cwsimages/Miscfiles/6583_DrMartinMurenbeeld.pdf
-Listen to Las Vegas conference debate on gold price manipulation. Al Korelin of the Korelin Economics Report moderated the debate on gold price manipulation between GATA Chairman Bill Murphy and Resource Investor's Tim Wood at the Hard Assets Investment Conference in Las Vegas last Wednesday, and now audio of the debate has been posted at the GATA site here-http://www.gata.org/node/6607
SILVER
-Why Wall Street Hates Gold and Silver? There is no best-case or worst-case scenario in which I can conceive of gold and silver being losers. You can mortgage the kids and bet the farm!
Howard Ruff-Read more here-http://www.kitco.com/ind/Ruff/ruff_sep162008.html
-India's silver imports seen surging on lower prices. Read more here-http://in.reuters.com/article/businessNews/idINIndia-35478020080915
-Jeff Christian, managing director of metals research firm CPM Group, has produced a video, posted today at Kitco, to dispute complaints that the silver market is manipulated. These complaints, Christian says, are all just unsubstantiated conspiracy stuff, and what appear on the commodities exchange as incredibly concentrated short positions are just hedges of long positions taken in other markets. Read and watch more here-http://www.gata.org/node/6617
DEFINITIONS-QUOTES-QUICK HITS
-Derivative. In finance, a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.
Futures contracts, forward contracts, options and swaps are the most common types of derivatives. Because derivatives are just contracts, just about anything can be used as an underlying asset. There are even derivatives based on weather data, such as the amount of rain or the number of sunny days in a particular region.
Derivatives are generally used to hedge risk, but can also be used for speculative purposes. For example, a European investor purchasing shares of an American company off of an American exchange (using American dollars to do so) would be exposed to exchange-rate risk while holding that stock. To hedge this risk, the investor could purchase currency futures to lock in a specified exchange rate for the future stock sale and currency conversion back into euros. Investopedia.com
-Credit Default Swap (CDS). A swap designed to transfer the credit exposure of fixed income products between parties. The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product.
By doing this, the risk of default is transferred from the holder of the fixed income security to the seller of the swap. For example, the buyer of a credit swap will be entitled to the par value of the bond by the seller of the swap, should the bond default in its coupon payments. Investopedia.com
-Ted Spread. The price difference between three-month futures contracts for U.S. Treasuries and three-month contracts for Eurodollars having identical expiration months. The Ted spread can be used as an indicator of credit risk. This is because U.S. T-bills are considered risk free while the rate associated with the Eurodollar futures is thought to reflect the credit ratings of corporate borrowers.
As the Ted spread increases, default risk is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the default risk is considered to be decreasing. Investopedia.com-Money-Market Rate Jumps, TED Spread Soars on Credit Squeeze-Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid=aO1crPsEJ9MA
-"The government solution to a problem is usually as bad as the problem. In the case of nationalization, the government solution will only prolong the problem." Milton Friedman
-About $2.8 trillion of market value was erased from global stocks this week. Casey Daily Resource
-"Gold is acting like it is supposed to on a flight-to-safety move. We have a global financial crisis and nobody has a clear answer. Therefore stocks, currencies and debt are being questioned and nobody wants to own a 'paper' asset." Amaury Conti, of investment adviser Austin Calvert-Flavin
-"Physical demand is breaking records, mining supply continues to fall, and the economic environment is, of course, promoting safe-haven demand. The shorts are covering, the funds are buying back in, and everyone wants the safety of gold." Brien Lundin, editor of Gold Newsletter
-"I continue to believe gold is the real money for the 21st century and think by spring 2009 we can be back above $1,000 if not sooner." Peter Grandich
-"At this time more than any other," John Reade, of UBS in London points out, "investors should have a proportion of their assets in gold as an insurance policy against systemic risk or governments inflating their way out of trouble. This does not mean that the gold price will necessarily go up. Gold could fall and still be a good hedge if everything else falls by more." Casey Daily Resource
-"When you see financial contagion creeping through the system people are not confident and are going to gold,'' said Jonathan Barratt, managing director of Commodity Broking Services Ltd. in Sydney. Bloomberg
-"When you're perhaps facing a catastrophe in the U.S. financial market, investors are thinking: 'Screw it. I'm jumping back into the old faithful'," said Joel Crane, a metals strategist at Deutsche Bank in New York. And, "Gold's relative value is cheap compared with the dollar," he added. Casey Daily Resource
-"Gold after the fall may be tarnished but fundamentally nothing has changed about the metals increasingly supportive supply-demand situation," says Jeffrey Nichols, managing director of American Precious Metals Advisors. Suggesting shaken confidence in financials should benefit gold once the selling of financial assets and commodities has run its course. "Don't be surprised if gold's upward ascent is just as fast and furious as has been its recent decline." Nationalpost.com
-"There are going to be more banks that will fail,'' said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. "This is the time when people want to buy gold.'' London-based researcher GFMS Ltd. said gold may rise to $950 by the end of the year as central banks and mining companies hold back sales and investors buy the metal as a haven against falling equities.
Since the second quarter of 2007, banks worldwide have posted $515.5 billion in losses and writedowns related to investments in subprime mortgages. The Fed has also engineered $200 billion in takeovers for Fannie Mae and Freddie Mac, the biggest providers of financing for U.S. homes. Bloomberg
-Fund manager Charles Oliver is still bullish on gold. "I continue to think that if you go out a year from now, you'll see gold at a much higher price than where it is today," said the manager of the Sprott Gold & Precious Metals Fund. "I wouldn't be surprised to see it go through $1,000 an ounce within the next 12 months. My call still stands that, in four years, it will be at $2,000 an ounce," he said at a media briefing. Read more here-http://www.reportonbusiness.com/servlet/story/RTGAM.20080916.wrsprott16/BNStory/SpecialEvents2/home
-Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.
Hale, a Chicago-based economist for investment managers, hedge funds and multinational companies, paraphrased the Fed chairman's response. "We have lost control," said Hale, quoting Bernanke. "We cannot stabilize the dollar. We cannot control commodity prices." Read more here-http://www.chicagotribune.com/business/chi-wed_oilsep17,0,4833605.story
-The bailout of AIG has exposed more than just the collapse of Casino Capitalism. It exposes the governmental system to be as much a sham as our economy has been! How is it that $85 billion can just materialize to bail out this one insurance company (insuring for the most part, opaque, enormously complicated and risky investments) without so much as a session of Congress? Where is the appropriations committee in this matter? Where were they when the Bear, Stearns/JP Morgan deal went down on a Sunday? Read more here-
http://www.smirkingchimp.com/thread/17202
RARE COLORED DIAMONDS
-Christie's Jewels the New York Sale will offer diamonds, colored diamonds and gemstones, and together with a collection of signed jewels (Superb 20th Century Jewels from an American Collection) will include 273 lots and an expected sale of more than $35 million.
Colored diamonds rings in the sale are highlighted by a cut-cornered modified rectangular-cut fancy intense blue diamond, weighing approximately 7.02 carats, and set with a pavé-set pink diamond two-tiered surround (estimate: $3.5 million to $5 million) and a pear-shaped fancy intense purplish pink diamond, weighing approximately 5.60 carats, flanked on either side by a pear-shaped diamond (estimate: $2.6 million to $3 million.)
Jewelry from the Collection of Giselle Bündchen includes a diamond ring by Sabbadini set with a cut-cornered modified square-cut yellow diamond weighing approximately 3.35 carats, flanked on either side by a trillion-cut diamond (estimate: $15,000 to $20,000,) and a circular-cut diamond pendant weighing approximately 6.01 carats (estimate: $120,000 to $150,000.) Diamonds.net
-Add to Wedding Bill: Diamond Prices Up 9% in '08. Procrastinating on popping the question may turn into a more expensive proposition. The price of diamonds continues to rise as demand outpaces supply. Top-quality half-carat diamonds that's about the average size of a nice engagement-ring stone are up 9% year-to-date, according to a study by diamond-market specialist Martin Rapaport, founder and chief executive of Rapaport Group.
In dollar terms, that top rock will now have an asking price of about $2,500. But that's just the wholesale price. A would-be fiancé needs to head to a jewelry retailer to get it set in a ring. At the high end of the high end, the price increase is even sharper. Prices for five-carat diamonds are ahead more than 40% over the same period and have more than doubled since the beginning of last year.
Such a boulder can cost about $400,000. Again, that's without the ring. Mr. Rapaport has been studying the economics of the diamond market for three decades. What he sees coming is what can only be described as a surge in demand while the supply response will be weak.
Global demand for polished diamonds is expected to almost double by 2016 to more than $40 billion, vastly outstripping growth in mine production, which is forecast to grow about 50% to around 20 million carats, according to Mr. Rapaport's projections. "We have seen a historic shift in wealth oil wealth," says Mr. Rapaport. "We have more wealthy people than ever before." And they want diamonds, he says. Read more here-http://online.wsj.com/article/SB122126459968330631.html?mod=DMN
-Damien Hirst Bucks Financial Slump in Record Art Sale. Damien Hirst's ''The Golden Calf'' kept alive a 10-year bull run in the art market last night as collectors vied for the British artist's works at Sotheby's, even as global stock markets collapsed.
Hirst's "Beautiful Inside My Head For Ever'' auction in London took 70.5 million pounds ($126.6 million) with fees, led by the 10.3 million-pound preserved Charolais calf with 18-carat gold horns. The total was a record for a sale of works by one artist, said Sotheby's, which had estimated the evening would fetch as much as 62.4 million pounds. All but two of the 56 lots sold. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=a.RlnxYprUKQ
COMMODITIES-OIL-GASOLINE
-As commodities unwind, BMO says 'sustained commodity bust is unlikely'. Despite the current financial crisis, bulk commodity pricing continues to remain strong. In fact, BMO suggests that the correction of some metals commodities may be overdone. BMO Capital Market's Global Commodity Strategist Bart Melek said, "For many metals and bulk commodities, global
demand is expected to grow as much as 40-50% over the next decade. Since supply is constrained, the sector is projected to operate at very high utilization rates and in an elevated cost environment. As such, metals and bulk commodity prices are very well supported over the long term. In fact, BMO sees the risk to be tilted to the upside." Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=62701&sn=Detail
-Commodity stocks will become "even greater out-performers" after economic downturn BMO's Coxe. When financials roll over, "gold and gold mining stocks should move swiftly back into favor. Inflation remains above central bank target levels in the U.S. and in many other countries across the world. Any return to pronounced weakness among the bank stocks will be strongly bullish for gold." Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=62319&sn=Detail
-IEA warns high oil prices could trigger global recession. Read more here-http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/09/17/bcnoil117.xml
-Commodities and Oil from Adam Hamilton. Read more here-http://www.321energy.com/editorials/hamilton/hamilton091208.html?print=on
-Skills shortages could force up oil prices. Runaway costs and an acute shortage of skilled workers are putting future oil developments at risk and could keep upward pressure on the oil price, the chief executive of Total said yesterday.
Christophe de Margerie said that key projects planned by the French oil multinational could fall below acceptable rates of return if oil prices continued their sharp decline. The soaring cost of offshore contracting and materials and a desperate lack of engineers have forced up sharply the price per barrel at which an investment in deep-water oil and gas production becomes profitable.
In only four years the cost per barrel of big installations has tripled, according to the French company's figures, raising questions about the viability of future large investments in the event of a continuing decline in the oil price.
According to Total, the price at which oil achieves a return of 12.5 per cent has risen from less than $20 a barrel in 2004 to $70 a barrel today. "We need a price of $70 per barrel to make it work in Angola," Mr de Margerie said. "For heavy oil, it is not far off $90 per barrel." Read more here-
http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article4735902.ece
-Gas prices, voters' No. 1 concern. The high price of gasoline tops the list of economic concerns held by U.S. consumers, according to a CNN poll. Read more here-
http://money.cnn.com/2008/09/12/news/economy/econ_poll/index.htm
U.S. IN "ONCE IN A CENTURY FINANCIAL CRISIS"
-The United States is mired in a "once-in-a century" financial crisis which is now more than likely to spark a recession, former Federal Reserve chief Alan Greenspan said Sunday. The talismanic ex-central banker said that the crisis was the worst he had seen in his career, still had a long way to go and would continue to effect home prices in the United States.
"First of all, let's recognize that this is a once-in-a-half-century, probably once-in-a-century type of event," Greenspan said on ABC's "This Week." Asked whether the crisis, which has seen the US government step in to bail out mortgage giants Freddie Mac and Fannie Mae, was the worst of his career, Greenspan replied "Oh, by far." "There's no question that this is in the process of outstripping anything I've seen, and it still is not resolved and it still has a way to go," Greenspan said. Read more here-
http://www.breitbart.com/print.php?id=080914181841.fsmkqu8s&show_article=1 or http://www.bloomberg.com/apps/news?pid=20601110&sid=amVkrOCQNBQs
CENTRAL BANKERS SAW CRISIS COMING
-In his first interview since retiring from Bank of Canada, David Dodge says many central bankers recognized that trouble was afoot as early as 2003, but Wall Street and other regulators didn't listen. Read more here-http://www.theglobeandmail.com/servlet/story/RTGAM.20080912.wrdodge12/BNStory/Business/
WHO BAILS OUT THE U.S.A-FED PUMPS MORE MONEY INTO SYSTEM
-Who'll Bail Out Uncle Sam? The U.S. National Debt, And Who Picks Up the Tab. The federal government may seem like a financial knight on a white steed riding to the rescue of big companies in trouble. The irony is that Uncle Sam's got enormous money problems of his own.
The government is far deeper in debt than any of the companies it's bailing out. As of this morning, the national debt stands at over $9.634 trillion. That's trillion with a "T." And that's nearly $4 trillion more than it was on the day President Bush took office. This year alone, it's costing taxpayers more than $230 billion just to pay the interest on the national debt. Read more here-http://www.cbsnews.com/stories/2008/09/17/notebook/main4455247.shtml
-New York Mayor Michael Bloomberg warned Wednesday a "next wave" of financial pain may come from overseas if foreign entities stop buying U.S. debt. Read more here-
http://news.yahoo.com/s/ap/20080917/ap_on_bi_ge/economy_bloomberg
-The Federal Reserve almost quadrupled the amount of dollars central banks can auction around the world to $247 billion in a coordinated bid to ease the worst crisis facing financial markets since the aftermath of the 1929 Wall Street crash. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid=asIS6b3aIbDo&refer=home
U.S. HEADED FOR DEPRESSION
-US Heading for a Depression? The economic slowdown in the US could lead to national bankruptcy as the government can not afford all the bailouts, and the stock markets will not bail out the US government as they are already facing a funding crisis, Martin Hennecke from Tyche said last week. Watch video here-http://www.cnbc.com/id/15840232?video=851879191&play=1
AIG RESCUE
-Fed Takes Control of AIG With $85 Billion Bailout. The U.S. government took control of American International Group Inc. in an $85 billion bailout to prevent the bankruptcy of the nation's biggest insurer and the worst financial collapse in history.
The Federal Reserve will provide a two-year loan, take 79.9 percent of the New York-based company's stock and replace its management because "a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a statement by the central bank late Tuesday. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAkvusf5Ld7M&refer=home
-Cerberus' Snow Says Markets Almost 'Frozen,' AIG 'Huge Blowup'. Former U.S. Treasury Secretary John Snow said credit markets are almost ''frozen'' and called the government takeover of American International Group Inc. a ''huge'' failure of risk management and regulation.
Snow, chairman of private-equity firm Cerberus Capital Management LP, said today in a telephone interview that capital markets are on the verge of seizing up. "Our debt markets are close to frozen'' he said. ''Unless we get this fixed pretty soon, we're in for a big, big, deep slowdown.'' The economy faces a ''a tough year'' in 2009 followed by a "good upward swing'' in 2010, he said.
Snow said insurance companies such as AIG are so complicated and their businesses so expansive that state-by- state regulation is inadequate to oversee them. "This is a huge blowup of the risk management system,'' he said. ''How could a New York regulator possibly have a vision of all the systemic risk of that company?'' Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=axkBHAtF70vQ&refer=home
-Greenberg, His Firms Lost $5.8 Billion in AIG Shares This Month. American International Group Inc. former Chief Executive Officer Maurice "Hank'' Greenberg saw the value of the AIG stake he controls plunge by about $5.8 billion this month as the insurer struggled to survive. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid=abhhuiP.7wW4&refer=home
-Kraft replaces AIG in Dow. Read more here-http://www.reportonbusiness.com/servlet/story/RTGAM.20080918.wkraft/BNStory/SpecialEvents2/home?cid=al_gam_mostview
LEHMAN GOES BANKRUPT
-Lehman Creditors, Shareholders May Lose Billions. Lehman Brothers Holdings Inc.'s bankruptcy filing this week is as much as 15 times larger than any other Chapter 11 case in history and may leave creditors with tens of billions in losses, lawyers said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aX7xlKcjqYmM
-Lehman Employees Worldwide Clear Desks, Weep After Bankruptcy. Lehman Brothers Holdings Inc.'s employees worldwide are clearing their desks, waiting to hear if they'll be paid, and starting to look for work after the investment bank filed for the biggest bankruptcy in history.
"Everyone's talking on their cell phones, talking to headhunters,'' said Duo Ai, a bespectacled 26-year-old employee in fixed income quantitative research, as he stepped outside Lehman's Canary Wharf offices in London today. ''It's kind of chaotic. The only question remaining is whether we will get this month's pay check.'' Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid=aZFrkhKYGuzQ
BANK OF AMERICA TO BUY MERRILL
-Bank of America to Acquire Merrill as Crisis Deepens. Bank of America Corp., the biggest U.S. consumer bank, agreed to acquire Merrill Lynch & Co. for about $50 billion as the credit crisis claimed another of America's oldest financial companies.
Bank of America will pay $29 a share for New York-based Merrill in stock, 70 percent more than the Sept. 12 closing price, the company said in a statement this week. Merrill, battered by $52.2 billion in losses and writedowns from subprime-mortgage- contaminated securities, has plunged more than 80 percent from its peak of $97.53 at the start of last year.
The takeover ends 94 years of independence for Merrill and gives Charlotte, North Carolina-based Bank of America a sales force with 16,690 brokers who manage $1.6 trillion for customers. Merrill, led by Chief Executive Officer John Thain, was in danger of becoming the next subprime casualty after Lehman Brothers Holdings Inc. filed for bankruptcy court protection earlier this week. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid=a9O9JGOLdI_U&refer=canada
MONEY MARKET FUND STUNNER
-Reserve Primary Money Fund Falls Below $1. Reserve Primary Fund became the first money-market fund in 14 years to expose investors to losses after writing off $785 million of debt issued by bankrupt Lehman Brothers Holdings Inc. The fund, whose assets plunged more 60 percent to $23 billion in the past two days, said the Lehman losses forced the net value of its assets below $1 a share, known as breaking the buck.
Primary Reserve, the oldest money fund in the nation, fell to 97 cents a share and redemptions were suspended for as long as seven days. Money-market funds are considered the safest investments after cash and bank deposits, and Reserve Primary's losses come as confidence in financial markets has been shaken by the collapse of subprime mortgages, the failure of 11 U.S. commercial banks and Lehman's bankruptcy yesterday.
The only other money-market fund to break the buck was the $82.2 million Community Bankers Mutual Fund in Denver, which liquidated in 1994 because of investments in interest-rate derivatives. "This is uncharted territory,'' said Peter Crane, president of Crane Data LLC in Westborough, Massachusetts, which tracks money-market funds. "That's certainly a stunner.'' Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=aycQDd9pEdCA
-Putnam Investments LLC closed its $12.3 billion institutional Putnam Prime Money Market Fund yesterday and plans to return all cash to investors. The fund, which was valued yesterday at $1 a share, experienced "significant redemption pressure,'' the Boston based company said in a statement.
A drop below $1 a share, known as breaking the buck, would have exposed investors to losses. The fund had no exposure to securities issued by Lehman Brothers Holdings Inc., Washington Mutual Inc. or American International Group Inc., the company said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid=ayP4a6epihhU
-A money manager advises that the ultimate flight to quality is under way, and he cannot find Treasury bills to buy. He told me that he had to go out to December to find a T-bill that he could purchase with any yield at all, and that was well under one-tenth of a percentage point. The others, if they could be purchased at all, were available only for the amount they will be worth when they mature.
What is going on here? I suspect there is a run on money market funds, or at least the ones that do not own only super-safe assets. With the money going into Treasury funds, they must find very-short-term Treasuries to buy. Read more here-http://www.gata.org/node/6629
FED BANK INSURANCE FUND DWINDLING
-Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort. The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.
Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co. Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.
Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight. "We've got a retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics. Read more here-http://www.gata.org/node/6618
1,000 BANKS WILL CLOSE IN U.S.
-In an exclusive interview with CNBC.com, Wilbur Ross, chairman and CEO of WL Ross & Co., says he sees possibly as many as a thousand bank closures in the coming months. And this will create opportunities for investors. "I do think a lot of the regional ones will (close), just as they did in the last savings and loan crisis in the 1990s," Ross said. Read more here-
http://www.cnbc.com/id/26710362
IN 1932 THESE BIG BANKS DIDN'T GO BANKRUPT
-Economists and market players react to the crisis sweeping Wall Street, citing compensation for top bankers and the measures taken by policymakers.
I called this one, but I didn't think that all these banks, and the biggest insurance company and the largest mortgage companies would go bankrupt. Even in 1932, these big banks didn't go bankrupt. When you have about 15 years without a recession, thanks to Alan Greenspan, there's no brake on greed. Normally, if you have a four-year cycle, the fear reduces the amount of greed.
But if you don't have that, greed goes to an absolute excess, because everybody starts feeling there won't be any more recessions. I certainly don't see it getting much better unless there is inflation, because the only thing that can reinforce the values of real estate is inflation. But how do you get inflation into something everybody is selling and nobody wants to buy? The only way to do it is to print so much money that you just swamp the world with money. Stephen Jarislowsky, founder and chairman of money manager Jarislowsky Fraser Ltd., Montreal-Read more here-http://www.globeinvestor.com/servlet/story/RTGAM.20080915.wquotes0915/GIStory/
PRIVATE EQUITY NEXT TO GO?
-Private-equity boom from 2006 and 2007 is the real time bomb silently ticking away in the mind of every executive of a major bank. In those two years, inexperienced thirtysomethings with inflated egos and overblown salaries scoured the globe buying businesses about which they knew nothing, with borrowed money, at grossly inflated prices.
It was an unprecedented debt binge that drove global stock markets in those years