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The GoldBugg Report – October 28, 2008

October 28, 2008

The GoldBugg Report October 28, 2008

-”When Inflation Erupts, Gold Will Take Off”

-The Silver Rush Is On. Theodore Butler and Israel Friedman

- Peter D. Schiff, an extreme bear who correctly foresaw the U.S. stock-market slide, the home mortgage meltdown and the credit crunch, still sees plenty of doom and gloom ahead. As president of Euro-Pacific Capital, a Connecticut-based brokerage, the 43-year old financial advisor has long been urging his clients to get their money out of U.S. stock and bond markets and look for safer investments outside of America or put their nest eggs into silver and gold.

GOLD

-US Dollar Death Dance By Jim Willie CB -http://www.kitco.com/ind/willie/oct242008.html

-Frank Holmes: “When Inflation Erupts, Gold Will Take Off”. Expect short-term hesitancy in the upward movement of the gold price until liquidity returns to the markets, says Frank Holmes, CEO and chief investment officer at U. S. Global Investors and co-author of the new book “The Goldwatcher: Demystifying Gold Investing”. In this exclusive interview with The Gold Report, he predicts gold will go to $1,000, even $2,000, over the next two years. Read more here-http://news.goldseek.com/GoldSeek/1224655500.php

-Metal keeps drying up as Comex pretends otherwise. “There’s an old saying: ‘Don’t fight City Hall.’ I have a new one: ‘Don’t fight the bandits on the Comex.’ “There’s no rational explanation for the incredible disconnection between gold’s physical demand and the paper trading of it on the Comex. Whatever doubt anyone had about GATA being right in its cause would be gone in my humble opinion if you watched Comex trading every day.

A very good friend of mine says he doesn’t mind losing in gold and his mining stocks, but when you can see criminals stealing it from you on the Comex, you just want to die. “I love GATA but I’m now wondering: Can we ever fully expose this den of thieves called the Comex? Peter Grandich-GATA-Read more here-http://www.gata.org/node/6798

-Will the IMF & Co. let gold crash? A personal viewpoint from a Swiss fund co-manager on the immediate and long term future for the gold price vis-à-vis Central Banks and the IMF in particular. Right now, I believe we are very close to a significant short and long term event happening in the gold market.

For the short term, in my view, there are two possibilities: one is very bullish for gold (such as the breakdown of the systematically applied suppressing schema followed by massive safe heaven buying and a huge spike in the price of gold) and the other is very bearish for gold (such as significant gold sales from supranational organizations like the IMF or the ECB). But the long term implications will nevertheless be on both ways bullish. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=71248&sn;=Detail

-Economist Mundell says China should buy all IMF gold. Mundell had a couple of notable things to say about gold. First, that China, with its huge dollar surplus, has a great interest in buying gold to hedge its dollar exposure but is unlikely to do anything disruptive to the world economic order.

Second, that if the International Monetary Fund really does sell its gold, as is occasionally proposed, China should purchase all of it. Since Mundell is officially an adviser to the Chinese government, presumably it already has heard this suggestion from him. If the IMF really does have any gold and China is prepared to buy it all, of course this would prevent that gold from depressing what passes for the gold “market.” GATA-Read more here-http://www.gata.org/node/6792

-Jim Sinclair: The bullion market vs. the paper gold market. Read more here-http://www.gata.org/node/6794

-Central bank gold sales and leasing of gold have artificially suppressed the price of gold in recent years but with lease rates surging and central banks concerned about financial, economic and systemic contagion, this source of supply is set to dwindle in the coming months. Indeed many South American, Middle Eastern, Asian and the Russian central bank have already stated their intentions to add to their gold reserves. The German Bundesbank has clearly stated how they view gold as an essential monetary asset.

“National gold reserves have a confidence and stability-building function for the single currency in a monetary union,” the Bundesbank said. However, rumours of central bank gold sales could continue to depress prices in the short term. After the sell off last Friday, UBS noted that “we have no explanation behind the sell-off in gold and silver seen late on Friday’s trading although. Some more fundamentally based traders may have been concerned by the talk of central bank selling that we heard earlier in the day.

One large central bank, not a signatory to the Central Bank Gold Agreement, was rumoured to have sold gold earlier in the day. UBS said that the rumours were without substance and said that “certainly we saw no signs of this and the rumoured central bank is considered unable to sell gold the story in itself may have been enough to trigger some profit taking.” Gold.ie

-Demise of Hedge Funds and Falling Commodity Indices Creates Short Term Weakness in Gold. Many hedge fund managers are under severe pressure to liquidate positions as banks request more collateral to back funds’ borrowing. Many hedge funds, including some of the largest, have gone to the wall in recent months and Credit Suisse estimates that 30% of roughly 8,000 hedge funds will close over the next few years.

Wealthy investors are turning their backs on high risk hedge funds as there is a reevaluation of the sensibility of massive leverage and banks are no longer willing to fund the hedge funds’ speculations. While COMEX futures gold prices have fallen, the real price for actual physical bullion continues to surge as there are little or no sellers and nearly all are buyers. Shortages of small and midsized bullion coins and bars appear to spreading to the large bar market with reports of London Good Delivery Bars becoming harder and harder to buy, get hold of and take delivery of (especially in New York).

Futures prices are falling while gold prices for physical bullion are increasing with a surge in price of premiums for all coin and bar products. Investors do not want promissory notes or futures contracts rather the safety of physical bullion. Barclays analysts note that “There has been a swing from investors investing in gold in any form to investors specifically choosing to invest in physical gold.” Gold.ie

-Reuters Wealth Management Summit Wealthy Favor Cash, Government Bonds and Gold. Gold has continued to tread water and not made expected gains as the process of massive deleveraging of the entire international financial system is resulting in unprecedented selling in nearly all markets including the huge commodity index funds.

These index funds such as the Goldman Sachs Commodities Index, Reuters/Jefferies CRB index, the Dow Jones Commodity Index and the Dow Jones-AIG Commodity Index have been the recipients of billions of dollars of funds in recent months often from massive corporate, state and national pension funds (such as the Irish National Pension Reserve Fund which invested in the Goldman Sachs Commodities Index).

The Reuters Wealth Management Summit heard that wealthy investors are seeking the safety of cash, government bonds and gold. World’s super-rich focus on safe investments. The credit crunch has scared even the world’s richest people into sticking their assets in safe havens. Private bankers and asset managers at the Reuters Wealth Management Summit said gold, cash and government bonds were again in favour.

Real tangible assets such as gold were in favour again as wealth accumulation is shunned for wealth preservation. As the deleveraging of the global financial system continues and government and central banks internationally adopt the ”inflate or die” motto, soon these investors will realize that cash and bonds are not the safe havens they thought they were and gold will become the asset class of choice as it was in the stagflation of the 1970s and the deflation of the 1930s. Gold.ie

-In a very interesting video about the gold market, Stephen Flood of Gold and Silver Investments is interviewed by Javier Blas of the Financial Times. In ‘Time for the Midas touch?’ the commodities correspondent of the FT, Javier Blas looks at the issues surrounding gold investments in the current economic climate. Javier Blas is right to warn that the party is normally over for an asset class when the retail investor arrives to the party.

Meaning that when an asset class is being invested in by the mainstream public in a very significant way as seen in the Nasdaq bubble and recent property bubbles internationally, it may be time to be wary and either sell or reduce weighting to that asset class. At the same time, it is important to remember that gold remains a fringe investment at best with a tiny, tiny fraction of the western investment public having invested in physical gold bullion.

We are a long way from mass mania and the mass participation associated with market tops (as seen in stock and property markets in recent months). Most investors do not know what gold bullion is or how to invest in gold. Gold is featured in the mainstream media extremely infrequently and even then it is often featured in a biased and sometimes inaccurate and unfair way.

When gold is featured on a daily and even weekly basis in the daily newspapers in a very positive light and there are supplements dedicated to investing in gold and precious metals and there is a mainstream opinion that “you cannot lose with gold” or “gold always goes up in the long term” then it will be time to sell or at least go underweight gold and silver.

Joe Kennedy’s shoe shine boy and the man in the street and most in the financial services industry itself are barely aware of the importance of diversifying into gold – when they are and we do have mass participation in the gold market it will be time to go underweight gold. Watch video here-http://www.ft.com/cms/93ece7c0-07af-11dd-a922-0000779fd2ac.html?_i_referralObject=893727079&fromSearch;=n

-Have you heard the following statements from your financial planner, mutual fund advisor, or stock broker? In the long term the market rises 8% per year. Investors cannot time the market. The best strategy for investing is to buy and hold for the long term. How many decades does the “buy and hold” investor have to wait to get their 8% per year return from the Dow Jones Industrial Average? This is what a chart of the Dow Jones looks like for nearly the past nine years.

In this chart we can see how much the Dow Jones has fallen in value relative to gold, and conversely how much gold has risen relative to the Dow Jones. In the year 2000 it took roughly 40 ounces of gold to buy one share of the Dow Jones industrial average. Today it takes roughly 10 ounces of gold to buy one share of the Dow Jones. In other words, relative to gold, the Dow Jones has lost roughly 75.5% of its value.

We are not suggesting that the average investor try to time the market on a day to day basis. Instead we are trying to illustrate why we attempt to time the “big picture” of large shifts of capital from overvalued asset classes to undervalued asset classes. We believe that timing these large, multi decade cycles may be the most important investing strategy an investor could follow. These long term “mega trends” are where significant profit is made as the rising tide of the bull market raises all boats.

A good example of these shifts of capital is seen from the 1960’s to 1980 when investors fled paper assets such as stocks and bonds in favor of hard assets such as gold and silver, but because markets are cyclical and not linear that same money flew out of hard assets and into paper assets from 1980 to 2000. In our opinion the large cyclical transfer from paper assets to hard assets started once again in 2000 until present.

We believe investors are losing faith in paper assets and are once again in the process of transferring their money into the security of hard assets. Markets are cyclical and one day the sun will shine brightly on financial stocks, technology stocks and the like again. But in our opinion this recent drop in the paper markets is not a simple pull back and “buying opportunity”. Instead we believe this “correction” is a full blown “crash” that will take many years to recover from.

Make no mistake that when the news of falling massive, financial corporation’s no longer shocks the average investor because it has become so common place, a significant consequence is likely hiding around the corner. It is during times like this that we look for assets the world “needs” instead of assets the world “wants”. Read more here-http://news.goldseek.com/GoldSeek/1224227160.php

-Why the fall in the gold price when physical gold remains in huge demand? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=70932&sn;=Detail or

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=71224&sn;=Detail

-Spending on gold nears $3bn as investors flee shares.Investors spent $2.8bn (£1.6bn) on gold on world stock exchanges in the third quarter this year, as individuals and companies fled volatile share markets. According to the World Gold Council (WGC), 145 tons of gold were bought on stock exchanges in the three months to September.

This meant that gold held by investors on the exchanges hit 1,000 tons for the first time since the metal was introduced on the US bourse in 2004. Natalie Dempster, the WGC’s head of investment, said: “The question we get from high net worth individuals and funds is no longer ‘why should we invest in gold?’, but ‘where can we go to buy it?’” Gold offers a product with a more stable price in the current market than company shares.

James Turk, founder of Gold Money, the Jersey-based company that stores precious metals for investors, said he had seen his customer base triple in September. He added that at the end of the third quarter, the company was looking after gold and silver deposits worth $400m, more than double the value a year earlier. Mr. Turk said: “Gold is seen as a natural safe haven given the uncertainty in the banking system and the volatility in the stock market.” Independent.co.uk

-The Big Picture: This vast vault of gold under the Bank of England should weather the credit crunch. Read more here-http://www.dailymail.co.uk/news/article-1079518/The-Big-Picture-This-vast-vault-gold-Bank-England-weather-credit-crunch.html

-Now is the best time to invest in yellow metal. Read more here-http://www.business24-7.ae/articles/2008/10/pages/10202008_bacfe3aa016e4b4c880b85d853d484f8.aspx

-Gold sales shine in dark economic times. Read more here-http://news.cnet.com/8301-13578_3-10069856-38.html?part=rss&subj;=news&tag;=2547-1_3-0-20

-Gold closed last week and made new record highs this week against the Australian dollar, Canadian dollar, Indian rupee, South African rand and British pound. Here are gold’s long-term charts against these currencies. James Turk-Read more here-http://goldmoney.com/en/commentary.php

-Richard Russell-Erratic action in gold. Read more here-http://www.321gold.com/editorials/russell/russell102108.html

-Even Mark Hulbert now admits possibility of gold manipulation. Read more here-http://www.gata.org/node/6790

-Naturally we believe that the beneficiary of this next bubble will be gold (and by extension silver and even platinum). Despite the recent 20 per cent plus drop in gold prices they remain above their recent lows and have generally outperformed the stock market. Silver and platinum prices, however, have been devastated, falling over well over 50 per cent from the highs. But we are reminded that silver has virtually no above ground supplies in storage despite production of over 600 million ounces annually.

Platinum is even more scarce then gold as all the platinum in the world would fill an average living room. All the gold ever produced would fill an average house. We also have a huge detachment between the official reported market and what we call the “black market” for gold and silver. First, on the official side we did have the report of a European gold sale recently, but even so that was within the realm of planned announced sales.

Secondly, the European central banks have ceased leasing and lease rates have soared. Many central banks including Russia and other Asian and Mid Eastern banks have stated their intentions to add to gold reserves. The Bundesbank has stated they view gold as an essential base of their reserves. The collapse we believe is largely paper-related as hedge funds and other commodity funds have been facing forced liquidation.

The “black market” for bullion coins has seen a huge surge in price premiums, with shortages developing. Mints are reporting shortages and an inability to keep up with demand. Even the commitment of traders (COT) rose to 29 per cent in the recent report, up from 28 per cent the previous week. This was down from the 38 per cent seen in early September. All this is telling us that we should soon see a rise in gold prices (and that will also take silver and platinum prices higher).

Silver has been particularly hard hit; it broke a trend line up from the 2005 lows and is currently testing a trend line up from the 2003 lows. We have for silver corrected just over 61.8 per cent of the entire move from the lows of 2001. If there is a danger to the downside it is the highs of 2004 (just over $8) that could be tested in a wash out panic.

Gold prices have been testing an uptrend line from the 2005 lows. They are well above the trend line from the 2001 lows. In inflation terms both gold and silver remain bargains. They are also holding their uptrend lines in inflation adjusted terms. David Chapman-Read more here-http://news.goldseek.com/UnionSecurities/1224482700.php

SILVER

-The Silver Rush Is On. Theodore Butler and Israel Friedman-Read more here-http://news.silverseek.com/TedButler/1224532979.php

-Silver and gold market update with Clive Maund. Read more here-http://www.321gold.com/editorials/maund/maund102008.html

-As the price of silver pulled back under $10 an ounce recently, I started loading up on the white metal. Or, I should say, I tried to load up. While I was easily able to buy silver coins with numismatic value, my first attempts to buy silver bullion coins met with frustration.

I think this says a lot about the silver market right now. On paper, it’s cheap. But in the real, physical market, silver is getting very precious indeed. In fact, if you can buy silver bullion for under $10 an ounce, I recommend you grab it and run! Sean Brodrick-Read more here-http://news.silverseek.com/SilverSeek/1224691707.php

-David Morgan silver commentary. Read more here-http://news.silverseek.com/SilverInvestor/1224247960.php

-High Silver Premiums Explained. Read more here-http://news.silverseek.com/GoldIsMoney/1224591832.php

-Indians scramble for silver as prices slump. Read more here-http://in.reuters.com/article/domesticNews/idINBOM36918620081020

-Indian brides replace gold jewellery with silver, brass as prices hit record. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a06hi8J26jak&refer;=home

-Silver could be pointing the way higher for gold? Speculators often take advantage of silver’s volatility to gear up their gold exposure when looking for a move in the sector. Is such a move underway again? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=71199&sn;=Detail

-Polymetal cuts 2008 silver forecast to between 16.5m and 17m ounces. The drop in silver prices has convinced Russia’s largest silver miner, Polymetal, to cut its production this year, along with revising its proposed capital expenditures for 2009.

Silver prices have dropped from above $20 an ounce in March to trade below $10 now. “If the price falls roughly below $8.50, with all other costs being equal, we will probably take out some high-cost parts of both the Lunnoye and Dukat underground projects from our mining plan,” Chief Executive Vitaly Nesis said.

“Then, our production (in 2008) would be closer to 14 million ounces,” he told a conference call. “In order to keep output at 20 million ounces, we will need (a silver price of) around $13.50 per ounce,” he added. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=71052&sn;=Detail

-Barclays predicts dollar to weaken, jewellery demand to improve in long run. In a recent Barclays Capital report, London-based precious metals analyst Suki Cooper writes to clients that supply of gold, silver and palladium again will outpace demand in 2009 while platinum will remain tight.

“Fundamentals are proving, as they always do, to be the best predictor of price dynamics in precious metals markets,” she notes. “Supply-side problems have characterized these metals markets in 2008 so far.” Indeed, production losses have been on a massive scale spanning several continents and have affected every metal. But, it’s also true that investment demand has played a role in the 2007-2008 spike in prices.

Now, heading into 2009, where purchases of these materials for investment and buying for fabrication are headed remains unclear. Purchasing recently interviewed Cooper about the 2009 outlook for the various major precious metals. Here’s an edited version of the question-and-answer session. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23783

DEFINITIONS-QUOTES-QUICK HITS

-Deleverage. A company’s attempt to decrease its financial leverage. The best way for a company to delever is to immediately pay off any existing debt on its balance sheet. If it is unable to do this, the company will be in significant risk of defaulting. Companies will often take on excessive amounts of debt to initiate growth.

However, using leverage substantially increases the riskiness of the firm. If leverage does not further growth as planned, the risk can become too much for the company to bear. In these situations, all the firm can do is delever by paying off debt. Any sign of deleverage shown by a company is a red flag to investors who require growth in their companies. Investopedia.com

-Warren Buffett using Harold Seigel’s favorite quote! Warren Buffett knows his money and knows his hockey, too. When one of the richest men in the world was asked about the stock market, he said it was best to dive in now rather than try to time when the turnaround would be. He used Wayne Gretzky as an example.

“In waiting for the comfort of good news,” he wrote on MSN.com, “they’re ignoring Wayne Gretzky’s advice: ‘I skate to where the puck is going to be, not where it’s been.” Who knew he’d been a closet No. 99 fan all these years? Edmonton Journal

-The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery. Winston Churchill

-All that is necessary for evil to triumph is that good men do nothing. Edmund Burke

-Quote on stock market turmoil. “This is worse than a divorce. I’ve lost half my net worth and I still have my wife.” Anonymous

-”Funds who would like to keep their asset of last resort are being forced to sell,” said Peter Spina, president of GoldSeek.com. “There will be more victims of the fund collapse and more forced liquidations even if it requires you to sell your most desired assets such as precious metals,” he added. Casey Daily Resource

-Right now every asset on the planet is being sold except the U.S. dollar. To me this rally looks like the last gasp of a dying currency. Just like a toy rocket ship, once the dollar runs out of fuel it will crash back down to earth. Peter Schiff-Read more here-http://www.merkfund.com/money/authors/schiff/2009-09-12.html

-On BNN, Embry warns of failure of December gold contract. Sprott Asset Management’s chief investment strategist, John Embry, went on Business News Network in Canada this morning and, interviewed by Amanda Lang, discussed, among other things, the suppression of the gold price on the New York Commodities Exchange.

Embry speculated that long contract holders may call for delivery of enough December contracts as to prompt a claim of force majeure when the exchange cannot delivery enough real metal. The interview with Embry begins at the 11-minute mark and continues for about 6 1/2 minutes at the BNN Internet site here-http://watch.bnn.ca/tuesday/#clip104603

-Large investors and bullion dealers are now looking to take delivery of the December gold contract and there is likely to be a significant number of longs who stand for delivery leading to COMEX warehouses being depleted and the increasingly ridiculous COMEX price then surging in value.

The possible default of COMEX is even being considered by some astute observers. It is estimated that COMEX only have enough gold to deliver on some 10% of the outstanding contracts. October is not a delivery month so the December contract is being targeted. Some large money interests also realise the potential for sizeable profits from taking delivery of large gold and silver bars and melting them down into smaller bullion products for sale at far higher premiums.

The COMEX December Gold option expiry is November 20 and there may be fireworks in the gold market soon after the election on November 4th in anticipation of far higher prices due to the incredibly strong supply and demand fundamentals. Gold.ie

-COMEX gold’s recent sharp selloff has continued and even the most ardent gold bulls are getting nervous. Bearish sentiment is very prominent and the level of fear in the precious metal markets suggests that a low is likely in the coming days. Leveraged players in the futures market are dumping paper positions wholesale while astute contrarians are using this as an opportunity to buy physical bullion at firesale prices. Gold.ie

-Gold may jump to $1,000 an ounce as investors who have sold copper, platinum and other commodities seek a haven, Paul Walker, chief executive officer of London-based research company GFMS Ltd., said. Gold’s decline is ”collateral damage” as a drop other commodities prompted investors to sell holdings in indexes comprised partly of gold, he said.

“In the past three to four weeks, a decoupling of gold and commodities such as platinum, copper and others has been under way,” Walker said at a Gold Week seminar in Tokyo. ”In the next six to 18 months, volatility in gold markets will be very high and it may try $1,000.” Central banks have been selling less gold this year, Walker said. Net sales by central banks will probably plunge about 46 percent to 269 tons this year from 501 tons in 2007, he said.

Jake Klein, chief executive officer of Sino Gold Mining Ltd., also expects gold to climb above $1,000. “This environment is good for gold in the longer term,” he said in a television interview from Sydney. “On the supply side, you’re seeing a significant reduction of gold production globally.” Bloomberg

-John Reade of UBS in London suggests, “The lack of jewelry demand and ongoing deleveraging is likely to keep gold and other precious metals under pressure in the near term.” Far from turning him bearish, though, “Deleveraging may present some fantastic opportunities for long-term value investors that can live with negative short-term marks on their portfolio,” Reade wrote. Good for buyers, not so good for sellers, of course. Casey Daily Resource

-The dollar/gold tie is evident when one considers that against a weighted basket of six major currencies, the dollar is up 9.6% this year, while gold has dropped 8.4%. No mistaking how that plays out. “The dollar is in demand around the world,” said Leonard Kaplan, of Prospector Asset Management in Evanston, Illinois. “That means everything comes down, including gold.” Casey Daily Resource

-Frank Lesh, a trader at FuturePath Trading in Chicago, reminds us that, “Gold is about the only commodity that has held its value.” Whereas the Reuters/Jefferies CRB Index of 19 commodities has dropped 21% this year, gold is off only 6%. “Does that mean gold has more to come down, or that it has some inherent value?” Lesh asked. We’re inclined to the latter explanation, of course. Casey Daily Resource

-Mark O’Byrne, of Gold & Silver Investments, sees the recent selloff as misguided, writing that, “Gold was wrongly being treated as just another commodity akin to pork bellies or lead as the ‘dash for cash’ gathered pace.” In the longer view of things, “Many realize that the U.S. and global economy is on the verge of a sharp recession and thus realize the importance of staying diversified,” O’Byrne added. Casey Daily Resource

-Central banks and hedge funds have been continuing liquidations of gold, choosing to sell into upward rallies and therefore keeping the breaks on short term upswings in price. This is evidenced by a 120,000 oz Gold Sale by J.P. Morgan Chase Wednesday morning for one of its, undisclosed hedge fund accounts. The same is true for the remaining hedge funds relative to silver. Precious Metals International

-The driving force behind the downward price movement on all commodities is 1) massive de-leveraging, 2) withdrawal of credit facilities and 3) redemption requests relative to hedge funds and their mass exodus from their long futures contract positions. It is interesting to note relative to Gold and Silver, that the demand for Physical Product is approaching epic proportions.

What this really means is that as these products are put into the possession of private investors, it is unlikely that that physical product will be available to come back into the market for years to come. This will put even more upward price pressure on these products as the economic fundamentals of supply and demand and inflation will finally win over the current synthetic prices being created by the hedge funds.

We also believe that hedge funds, as we know them to-day, and which are closing their doors by the hundreds, will not re-open. Those few that manage to survive will be subjected to severe regulatory requirements and lower credit facilities which will inhibit the type of activity we have seen in the past and prevent them for attempting to control any market.

Precious Metals International

-For our Canadian friends, with your dollar at $1.20 against the US Dollar current prices for gold and silver are still very attractive. More simply put, your Canadian dollar at $1.20 buys more gold or silver today then it did ten months ago when your dollar was at par to the US Dollar. We therefore continue our long term bullish sentiment for gold and especially Silver and that current price levels appear very attractive for long term appreciation. Continue to be conservative, pro-active and do not overextend. Precious Metals International

-In gold news last Thursday, the following report came in from UBS which was “remarking that mindless liquidation characterized many commodity markets” to which they added the following comments on gold. “Safe haven buying of gold continues with our own sales desk reporting buy/sell ratios of about 85/15 Wednesday. Yet gold was sold aggressively on the electronic futures markets, with two clips of about 6,000 lots swept lower.

Gold sold off down from about $835 to $820 and then took another leg lower as the second load was dumped.” And lastly both the GLD and SLV were unchanged, Comex silver warehouse stocks were down 211,000 ounces and the Comex also raised the margin requirement on a silver contract by $540 now up to $8,640. Ed Steer-Casey Daily Resource Plus

-In tough times, consumers are looking to stretch their dollars further. Here are six simple ways to save thousands. Read more here-

http://money.cnn.com/galleries/2008/pf/0810/gallery.save_money/index.html

-Top Iran officials recommend pre-emptive strike against Israel. Read more here-http://www.haaretz.com/hasen/spages/1030279.html

RARE COLORED DIAMONDS

-Diamonds as an investment. Watch video here-http://www.executiveinterviews.com/3106-debe-bluk/

-Spain: Economic Crisis Improves Investment Demand for Diamonds. Spain’s economic crisis has spurred the demand for precious stones, especially large diamonds, gemologist Adolfo de Basilio said Friday. “The price of diamonds and gold is going up, probably because people are worried about the fluctuations of the stock market and prefer to invest in tangible goods,”

said de Basilio, who heads a new Gemological Institute in Madrid. People interested in investing in diamonds should find out their real rather than current market value, because “the losses can be enormous if you later try to sell” a diamond that had been bought above its value, he advised. Deutsche Presse-Agentur

-Diamonds Pay Dividends. As the economic picture continues to worsen, the results of a late-September auction of fine jewelry in Chicago begs the casual observer to conclude that collectors are turning to tangible goods as a store of wealth in these uncertain times.

The sale at Leslie Hindman Auctioneers in Chicago, which attracted buyers from Singapore, Hong Kong, Italy, Mexico, Hungary and Australia, saw multiple pieces of jewelry selling around the $100,000 mark. This yellow diamond ring and a blue sapphire ring were two of the glittering stars of the show. The yellow diamond ring was bought by a jewelry dealer from New York who had flown in especially for this auction and paid $144,400, four times the expected price.

The ring was sold by a Chicago-area family that had inherited the sparkler from their mother, who had worn it as her wedding ring. The 5.44-carat stone, described as an “intense yellow fancy diamond,” sits in an 18-karat white gold setting created in the 1960s. The family was aware of the ring’s value but didn’t expect the 12-person bidding war among buyers from Bulgaria, New York and Los Angeles.

Colored diamonds are becoming increasingly popular. To fill the growing demand, several yellow diamond rings have recently been offered, but none have surpassed the price for the Leslie Hindman ring. Two comparable rings sold comfortably above their pre-auction prices recently at Sotheby’s.

The appeal of colored diamonds isn’t limited to their striking shades; colored diamonds are exponentially more rare than colorless diamonds and thus more desirable. For every 100,000 carats of white or colorless diamonds mined, just one carat of colored diamonds are found. Therefore, these gems tend to rise more quickly in value. Some jewelry experts claim that premium-quality colored diamonds double in value roughly every three to five years.

At Sotheby’s September jewelry auction, the top-selling lots were a sapphire-and-diamond ring, made by Van Cleef & Arpels in Paris, which sold for $656,500–more than double its pre-sale estimate of $250,000 to $350,000; and a colorless diamond ring from Harry Winston, which easily fetched twice its pre-sale estimate of $200,000 to $250,000, when it sold for $470,500.

The all-time high auction price for a stone or piece of jewelry is $16.5 million, a record held by the Sotheby’s in Geneva for a 100.1-carat diamond sold in 1995. For perspective, the average price for a diamond engagement ring sold in the U.S. is around $3,000.

Despite the economic downturn, quality will win out, and the robust prices these pieces continue to fetch are a sign that the highest end of the jewelry market will remain healthy for the foreseeable future. Full story here-http://www.forbes.com/2008/10/10/collecting-auctions-jewelry-forbeslife-cx_nw_1010diamond_print.html

-How Rare is Rare? Colored diamonds are among the rarest and costliest of gems, but which are the rarest and why? Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=21152

-Argyle Pride. Each year, the Argyle Pink Diamond Tender is eagerly anticipated. Here’s a look at what goes on behind the scenes. Read more here-

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=21151

PLATINUM-PALLADIUM

-”A complete collapse in platinum sector profitability.” Analysts at RBCCM slash front end platinum group metal forecasts, but maintain long term numbers. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=70892&sn;=Detail

-Mines and plants hurt by low prices, high costs. The global financial crisis and sharp falls in metals prices have forced several companies to abandon or put on hold their plans to bring new mines on-stream. Some existing producers have also shut down or curtailed their output at mines and plants as high costs and low prices bite. Below are details of the major projects and facilities which have been affected in recent months, as well as other related news. Read more here-http://www.reuters.com/article/idUSLF15379720081022

-Low metal prices force miners to cut hundreds of jobs. Junior mining companies are cutting hundreds of jobs in northern Ontario due to plunging metal prices, and analysts say some miners will go out of business before the global financial crisis is over. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=47241

COMMODITIES-OIL-GAS

-In Times of ‘Zombie Banks,’ Buy Commodities: Jim Rogers. The fundamentals for commodities were not affected by government policies that are propagating inflation, Jim Rogers, CEO of Rogers Holdings, told CNBC Wednesday. Read more here-http://www.cnbc.com/id/27317048 Watch video here-http://www.youtube.com/watch?v=wI7ySujGqjk&eurl;=http://goldismoney.info/forums/showthread.php?t=315235

-BHP says fall in China demand ’short-lived’. ‘We remain confident that the ongoing industrialisation and urbanisation of China and other developing economies will continue to drive strong longer-term demand for our products,’ it said. Read more here-http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=455957∈_page_id=3

-Widespread commodity forecast cut, but healthy rebound expected post-recession. Read more here-http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/10/17/widespread-commodity-forecast-cut-but-healthy-rebound-expected-post-recession.aspx

-Standard Chartered Bank forecasts dark days for commodity demand. Standard Chartered Bank says the commodity demand picture looks bleak, but demand growth remains intact in the longer term. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=70975&sn;=Detail

-Russia may divert oil to affect price. One of the world’s largest oil producing countries is considering storing crude to gain more influence over global prices. Read more here-

http://money.cnn.com/2008/10/22/news/international/russian_oil_reserves.ap/index.htm

-Trouble with oil down the road. Read more here-http://321energy.com/editorials/cohen/cohen102208.html

-How to Survive and Thrive In A Post-Peak Oil World. Watch slide show here-http://www.321energy.com/editorials/simmons/simmons101808/simmons101808.html

-Mexican Senate Passes Bills to Reform Oil Industry. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a79wy49uikmg

-OPEC cartel for Iran, Russia, Qatar? Countries will seriously pursue an organization for gas exporting. Read more here-

http://money.cnn.com/2008/10/21/news/international/iranopec.ap/index.htm

FINANCIAL CRISIS-RECESSION

-U.N. agency says crisis to cost 20 million jobs. Read more here-http://news.yahoo.com/s/nm/20081020/bs_nm/us_financial_jobs_1

-Wachovia suffers nearly $24 billion loss. Massive loss driven by charge related to planned merger with Wells Fargo and ongoing issues related to credit. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a6lGfVSSPvbM or http://money.cnn.com/2008/10/22/news/companies/wachovia_results/index.htm

-U.S. Insurer of Pensions Has Lost $2 Billion. Read more here-http://www.nytimes.com/2008/10/23/business/23pension.html?partner=rssyahoo&emc;=rss&pagewanted;=print

-IMF: No U.S. growth ’til mid-2009. International Monetary Fund predicts close-to-zero growth for most advanced economies, Canada to fare slightly better. Read more here-

http://money.cnn.com/2008/10/22/news/economy/IMF_report/index.htm

-The winner of the 2008 Nobel Prize for economics said the U.S. is plunging into a “nasty recession” with a “lot of suffering” to come, even if policy makers succeed in unfreezing the credit markets. “That’s baked in,” Princeton University professor and New York Times columnist Paul Krugman said in an interview on “Night Talk” with Mike Schneider to be broadcast later today on Bloomberg Television. “There is a lot of downward momentum.”

He said a rise in the unemployment rate to 7 percent ‘’seems almost certain” and he put the odds of an increase to 8 percent at “better than even.” The jobless rate in September stood at a five-year high of 6.1 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=anjzwBa0007g

-Turmoil may make Americans savers, worsening nasty recession. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=axsUMrc.liiE&refer;=home

-The European economy may be headed for a recession that could last two to three years, Finland’s Finance Minister Jyrki Katainen said. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid;=aEBHCkmGqHt0&refer;=economy

-Monthly job losses cut across 41 states. More than 80% of states reported jobs disappearing in September, with Michigan suffering the highest losses, according to a government report. Read more here-http://money.cnn.com/2008/10/21/news/economy/state_unemployment/index.htm

-Mass layoffs highest since 9/11. Government report says job cuts of 50 or more up significantly last month. Read more here-

http://money.cnn.com/2008/10/22/news/economy/mass_layoffs/index.htm?postversion=2008102211

GREENSPAN FINALLY FINDS FLAW

-Former Federal Reserve Chairman Alan Greenspan said a “once-in-a-century credit tsunami” has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed. “Yes, I found a flaw,” Greenspan said in response to a grilling from the House Committee on Oversight and Government Reform.

“That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.” Greenspan said he was “partially” wrong in opposing regulation of derivatives and acknowledged that financial institutions didn’t protect shareholders and investments as well as he expected.

Forecasting is an inexact science, he said. “If we are right 60 percent of the time in forecasting, we are doing exceptionally well; that means we are wrong 40 percent of the time,” Greenspan said. ”Forecasting never gets to the point where it is 100 percent accurate.” In May 2005 speech, Greenspan said that ”private regulation generally has proved far better at constraining excessive risk-taking than has government regulation.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ah5qh9Up4rIg&refer;=home

ARGENTINA NATIONALIZES $30 BILLION IN PRIVATE PENSIONS

-Argentina’s government said Tuesday that it would seek to nationalize nearly $30 billion in private pension funds to protect retirees from falling stock and bond prices as the global financial crisis continues. The measure, confirmed in a speech in Buenos Aires late Tuesday by Cristina Fernández de Kirchner, Argentina’s president, was criticized by political opponents and analysts as a move to shore up government coffers to try to head off a fiscal crisis in 2009, when Argentina might be struggling to make billions of dollars in debt payments. Read more here-http://www.nytimes.com/2008/10/22/business/worldbusiness/22argentina.html?_r=1&oref;=slogin&ref;=business&pagewanted;=print

-Argentine Lawmakers Plan Curbs on Use of Pensions. Argentine lawmakers will try to block the government’s use of $29 billion in nationalized pension assets to repay debt when they consider President Cristina Fernandez de Kirchner’s plan to seize the funds from private money managers.

Opposition deputies said the legislation is likely to pass and debate will focus on limiting how the government can use and invest the money. Adrian Perez, head of the opposition Civic Coalition party in the lower house, said Fernandez is trying to rush a vote on a bill that should be discussed into next year.

“There isn’t a serious country in the world that has spent less than seven or eight months or a year trying to reform its pension system,” Perez told reporters today in Buenos Aires. “Their hidden objective has to do with the financing needs of the government.”

Speculation that Fernandez intends to finance the government with the now-private funds has roiled Argentina’s markets. The benchmark bond is trading at 25 cents on the dollar while the Merval index remained near a four-year low on concern the takeover is a last-ditch attempt to avert the second default this decade.

“The government isn’t really thinking about the consequences of this, especially in terms of investment and its credibility,” former Economy Minister Roberto Lavagna said in an interview with Bloomberg Television. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJgyaPspo8zQ

U.S.-U.K. DEFICIT

-Spending surge pushing deficit toward $1 trillion. Congressional leaders and both presidential candidates are proposing billions of dollars in tax breaks and other measures to stoke economic growth, a surge in spending that could send the federal deficit soaring toward $1 trillion this year, creating the deepest well of red ink since the end of World War II.

The government already has embarked on an unprecedented spending spree to halt the implosion of the U.S. financial system and is borrowing money at levels that some economists fear could undermine the nation’s economic security for years to come. Congress could consider additional spending as soon as next month, potentially digging the nation’s hole even deeper.

“We’re going to make Ronald Reagan look like a piker in terms of deficit creation, I think,” said Rudolph Penner, a senior fellow at the Urban Institute who served as director of the Congressional Budget Office during the Reagan administration. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/10/17/AR2008101703368_pf.html

-Deficit Rises, and Consensus Is to Let It Grow. Read more here-http://www.nytimes.com/2008/10/20/business/economy/20cost.html?_r=1&adxnnl;=1&partner;=rssyahoo&emc;=rss&pagewanted;=print&adxnnlx;=1224568966-nDGHRFJMPAfbzfh3zt9xhg&oref;=slogin

-Spend baby spend: U.S. budget deficit to soar again. Read more here-http://www.time.com/time/printout/0,8816,1851949,00.html

-$2 billion shortfall possible for N.C. Read more here-http://www.charlotteobserver.com/breaking/story/271619.html

-U.K. Public borrowing soars to highest level since 1946 after Darling pledges: ‘I’ll spend my way out of the recession’. Read more here-http://www.dailymail.co.uk/news/article-1078832/Will-5p-tax-rise-black-hole-Families-feel-pain-Darling-spends-way-recession.html

U.S. DOLLAR

-US dollar collapse, the next big leg down for the US dollar. It’s almost like something out of the Twilight Zone. The American economy is breaking down. But the US dollar is one of the strongest currencies in the world right now. U.S. investment vehicles are crashing. Retirement funds have lost trillions. America has significant unemployment and the Federal Reserve continues to inflate the US dollar.

Yet the greenback has outperformed almost every major world currency since the middle of summer. How can this be? The reeling finance and banking sectors currently has investors running and screaming from the speculative equity markets. Of the three major U.S. indices, the Dow Jones has performed the best, losing 21.8% since July 15th. The NASDAQ and S&P; 500 are down 26.5% and 25.3% respectively over the same period of time.

With such significant risk in the American economy we should expect investors to be dumping their U.S. dollars. But this just isn’t the case. And believe it or not: People are actually running toward the U.S. dollar for safety. These investors will eventually get burned and a U.S. dollar collapse is inevitable. Read more here-http://www.goldworld.com/articles/us-dollar-collapse/322

-ECB council member foresees ‘tri-polar’ currency system. European Central Bank council member Ewald Nowotny said a “tri-polar” global currency system is developing between Asia, Europe, and the United States and that he’s skeptical the U.S. dollar’s centrality can be revived. Read more here-http://www.gata.org/node/6796

INTEREST RATES

-Bernanke May Seek New Tactics as Fed Rate Nears 1%. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=a0dn5p1E9ilY&refer;=economy

-Bank of Canada Cuts Rate to 2.25%, Signals More Moves. The Bank of Canada reduced its main interest rate by a quarter of a point, less than economists predicted, saying it will probably need to act again to fend off the effects of a credit crisis and global recession. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3FiXpkW8xJ0&refer;=home

-Sweden cut its key lending rate by a half-point for the second time in two weeks and forecast another similar reduction within six months to cushion the economic slowdown. It also lowered forecasts for growth and inflation. The Riksbank cut the repo rate to 3.75 percent, according to a statement today on its Web site in Stockholm. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid;=avn0v1KJtOYI&refer;=home

-New Zealand’s central bank cut its benchmark interest rate by a record 1 percentage point to 6.5 percent and foreshadowed further reductions to limit damage from the worldwide financial crisis and a slump in the global economy.

“Economic activity will be further constrained by these international developments,” Reserve Bank Governor Alan Bollard said in a statement in Wellington today. “Should the outlook for inflation evolve as projected, we would expect to lower the rate further.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aImskfxLGbss&refer;=home

-U.K. Financial crisis: Interest rates to hit lowest level since 1694. Interest rates may have to be slashed to the lowest level in more than 300 years, experts have warned. Read more here-http://www.telegraph.co.uk/finance/economics/interestrates/3211785/Financial-crisis-Interest-rates-to-hit-lowest-level-since-1694.html

HEDGE FUND PANIC

-Roubini Says ‘Panic’ May Force Market Shutdown. Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said.

“We’ve reached a situation of sheer panic,” Roubini, who predicted the financial crisis in 2006, said at a conference in London today. “There will be massive dumping of assets,” and “hundreds of hedge funds are going to go bust,” he said.

Group of Seven policy makers have stopped short of market suspensions to stem the crisis after the U.S. pledged on Oct. 14 to invest about $125 billion in nine banks and the Federal Reserve led a global coordinated move to cut interest rates on Oct. 8. Emmanuel Roman, co-chief executive officer at GLG Partners Inc., said today that as many as 30 percent of hedge funds will close.

“Systemic risk has become bigger and bigger,” Roubini said at the Hedge 2008 conference. “We’re seeing the beginning of a run on a big chunk of the hedge funds,” and “don’t be surprised if policy makers need to close down markets for a week or two in coming days,” he said.

Roubini predicted in July 2006 that the U.S. would enter an economic recession. In February this year, he forecast a “catastrophic” financial meltdown that central bankers would fail to prevent, leading to the bankruptcy of large banks exposed to mortgages and a ‘’sharp drop” in equities. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=ayHUWEWFBGoM

-Emmanuel Roman, the co-chief executive officer at GLG Partners Inc., said as many as 30 percent of hedge funds will close and the U.S. will regulate the $1.7 trillion industry. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=apJdFBGrv6FY&refer;=home

-Record declines in hedge funds. Industry report shows third quarter saw all-time highs in investor redemptions and asset shrinkage. Read more here-

http://money.cnn.com/2008/10/17/markets/hedge_funds/index.htm

-Andrew Lahde, the hedge-fund manager who quit after posting an 870 percent gain last year, said farewell to clients in a letter that thanks stupid traders for making him rich and ends with a plea to legalize marijuana. Lahde, head of Santa Monica, California-based Lahde Capital Management LLC, told investors last month he was returning their cash because the risk of using credit derivatives his means of betting on the falling value of bonds and loans, including subprime mortgages was too risky given the weakness of the banks he was trading with.

“I was in this game for money,” Lahde, 37, wrote in a two-page letter today in which he said he had come to hate the hedge-fund business. “The low-hanging fruit, i.e. idiots whose parents paid for prep school, Yale and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. “All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other sides of my trades.

God Bless America.” Lahde, who managed about $80 million, told clients he’ll be content to invest his own money, rather than taking cash from wealthy individuals and institutions and trying to amass a fortune worth hundreds of millions or even billions of dollars. “I do not understand the legacy thing,” he wrote. “Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVUE96d.HKyw&refer;=home

STOCK MARKET-DOW 5700

-One can make a case that sometime in 2010 our stock markets will “bottom out”. In this scenario, the DOW will decline below 5700 and the NASDAQ will fall under 430, after 33 to 35 months of highly volatile trading. Read more here-http://www.321gold.com/editorials/cooke_r/cooke_r102008.html

-U.S. regulators are investigating whether investors manipulated end-of-day stock prices to avoid being forced by their brokers to sell holdings. These gaps, which caused the Dow Jones Industrial Average to swing as much as 104 points this month in the final minute of trading, suggest investment firms faced with client redemptions and plunging markets may be gaming

the closing-auction system. The discrepancies spurred the Financial Industry Regulatory Authority, which oversees 5,000 brokerages, to look for evidence that investors are improperly swaying prices. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=awNTCeBbW6wI

-Dividend payments by companies in the Standard & Poor’s 500 Index may plunge 10 percent this quarter, the biggest decline since 1958, as bank failures and slowing economic growth stifle payouts, S&P; said. The firm also cut its estimated 2008 dividend from all S&P; 500 companies to $28.05 from $28.85, representing the slowest annual growth since 2001, according to a statement. Financial companies in the index reduced their payouts 35 times in 2008, almost triple the past five years combined, said Howard Silverblatt, the senior index analyst at S&P.;

“We’re seeing an enormous amount of cuts,” New York-based Silverblatt said. “There is a lot of pressure on dividends, and a lot of people are concerned about their cash flow.” The S&P; 500 tumbled 35 percent this year as global mortgage- related losses topped $660 billion and central banks were forced to pump more than $2 trillion into rescuing financial markets from collapse. Bank of America Corp., Lennar Corp. and Principal Financial Group Inc. cut their dividends by 50 percent or more this month. Bloomberg

REAL ESTATE-MORTGAGES

-U.K. house prices posted the biggest annual decline in at least six years in October as the British economy stared “into the abyss,” Rightmove Plc said. The average asking price for a home fell 4.9 percent from a year earlier, the most since records began in 2002, to 229,691 pounds ($398,000), Britain’s most-used property Web site said today. In London, prices dropped 2 percent from a year ago. “Certainly from an economic point of view, we’ve stared into the abyss,” Miles Shipside, commercial director at Rightmove, said in a Bloomberg Television interview.

“With unemployment growing, we can see a lot of repossessions about to happen. The situation is going to get more severe.” Britain is in a recession and will contract for the next three quarters, according to a report published today by Ernst & Young’s ITEM Club, which uses the same forecasting model as the U.K. Treasury. The financial crisis forced the government to rescue banks and has left a dearth of loans for potential homebuyers.

The government last week announced an unprecedented 37 billion-pound bailout for Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group Plc. Bradford & Bingley Plc was seized last month, and Northern Rock Plc was nationalized earlier this year after the first U.K. bank run in more than century. The intervention in the banking sector is the biggest since the nationalization wave by the socialist government of Clement Attlee after World War II. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aMzcktRWjUuw

-London’s Housing Slump Discourages First-Time Buyers. Read more here-http://www.bloomberg.com/apps/news?pid=20601214&sid;=aGcKKdVWwR.Y&refer;=invest

-Self-employed forecaster tops big banks with U.S. housing call. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=ammB5sriS.A0&refer;=economy

-Housing starts hit another 17-year low. Home construction and building permits both fall sharply in September to levels not seen since January 1991. Read more here-

http://money.cnn.com/2008/10/17/real_estate/new_mortgage_fraud/index.htm

-U.S. home prices tumbled during the 12 months ended in August as foreclosures reduced property values and a global credit crisis cut lending. Home prices dropped 5.9 percent from a year earlier, the Federal Housing Finance Agency said today in a report. The one- month decline from July was a seasonally adjusted 0.6 percent, according to the Washington-based federal agency.

A surge of home foreclosures is reducing the value of U.S. neighborhoods because real estate prices are determined by so- called comparable sales, or similar properties nearby. Every foreclosure cuts the value of surrounding homes by about $220,000 as it stigmatizes the block and sells at a discounted price, according to the Federal Deposit Insurance Corp.

At the end of June, U.S. banks held $9.9 billion of foreclosed properties, up from $8.5 billion worth three months earlier, according to an FDIC report. Every three months, another 250,000 homes enter foreclosure, the report said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aEt_1UtHNP.g

-Long Island house prices fell the most in at least four years in the third quarter as the national housing slump extended its grip on New York City’s suburbs. The median price of a one- to three-family house dropped 6.9 percent to $427,388 from a year ago, New York-based appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today in a report. The median for all properties, including condominiums, dropped 6.2 percent to $415,000. The report excludes the Hamptons resort towns. Read more here-

http://www.bloomberg.com/apps/news?pid=20601213&sid;=aQ3RHvhmmcxo&refer;=home

-Key to the Crisis: It’s the Housing Market, Stupid. Read more here-http://www.time.com/time/printout/0,8816,1852261,00.html

FORECLOSURES-MORTGAGES

-Foreclosure Filings Rose 71% in Third Quarter as Prices Fell. U.S. foreclosure filings increased 71 percent in the third quarter from a year earlier to the highest on record as home prices fell and stricter mortgage standards made it harder for homeowners to sell or refinance, RealtyTrac said.

A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the quarter, the most since records began in January 2005, the Irvine, California-based seller of default data said in a statement today. Filings rose 3 percent from the second quarter and fell 12 percent in September from August as state laws created to keep people in homes slowed the pace of defaults.

“I wouldn’t be surprised to see foreclosures increase as the economy slows down,” Rick Sharga, executive vice president for marketing at RealtyTrac, said in an interview. ”The people living paycheck to paycheck are at risk if they lose their jobs. It will cause more people to lose their homes.”

The worst U.S. housing slump since the 1930s is being compounded by a recession that began in the third quarter and may last a year or more, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association. Home prices in 20 U.S. metropolitan areas fell in July at the fastest pace on record, and sales of previously owned homes in August were 32 percent below the peak reached in September 2005. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aR9OGpC4jjao&refer;=home

-U.K. home repossession must be last resort, Treasury warns banks, as Docklands development has 82 of 84 flats seized. Read more here-http://www.dailymail.co.uk/news/article-1078934/Home-repossession-resort-Treasury-warns-banks-Docklands-development-82-84-flats-seized.html

-Mortgage fraud: New and improved. Lenders have tightened standards, but scam artists have found new ways to beat the system. Read more here-

http://money.cnn.com/2008/10/17/real_estate/new_mortgage_fraud/index.htm

MAJOR SPORTS FEELING FINANCIAL CRUNCH

-Nascar Hits Wall as Financial Crisis Dents Sponsorships Demand. Sponsors of Nascar, the No. 2 sport on U.S. television after professional football, are slamming on the brakes because of the world’s financial crisis.

General Motors Corp., Chrysler Corp., Sears Holdings Corp. and Chevron Corp. will cut or drop sponsorships next season. Dario Franchitti, the 2007 Indianapolis 500 winner was forced out of the stock-car series by a lack of sponsors. Teams with family names revered in stock-car racing like Petty, Waltrip and Earnhardt may enter 2009 with unfunded cars. The circuit might even have trouble filling 43-car fields.

“There’s maybe 26 teams that have sponsorship for next year, and five or six that have partial,” said Michael Waltrip, an owner and driver who shored up his finances by selling a stake to Fortress Investment Group LLC founder Robert Kauffman a year ago. Waltrip, 45, faces 2009 with only one of three cars fully sponsored. He said he might have to shut down one team.

Waltrip, two-time winner of the Daytona 500, isn’t alone. Dale Earnhardt Inc., founded by the seven-time Nascar champion and now run by his widow, has secured a backer next season for only one of four cars. Financial, automotive and consumer goods companies are balking at paying as much as $25 million to support a top team amid job cuts, seized credit markets and slow spending. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aAivN03d0_mk

-Baseball is counting pennies on everything from seats to sponsorships as it prepares to play next season in an economic slowdown. Read more here-

http://www.bloomberg.com/apps/news?pid=20601079&sid;=aYHWv9mueaA4&refer;=home

-Season Ticket Wait Lists Tell NFL Owners ‘We Could Charge More’. Read more here-http://www.bloomberg.com/apps/news?pid=20601079&sid;=aj_h7u5um9us&refer;=amsports

The GoldBugg Report – October 28, 2008
Posted by Worldwide Precious Metals on Tuesday, October 28, 2008

Peter Schiff with Bullish comments on Precious Metals this morning on CNBC

October 23, 2008

http://www.cnbc.com/id/15840232?video=901271420&play;=1

Gold is now back to the levels we experienced on Sept 10^th($750) and Silver is under the circumstances showing signs of strength and holding in the $9.70 to $10 Price Range. The Silver to Gold Ratio is down from its October 10^th High of 88 to 1, to 75 to 1 and we expect this trend to continue.

Central Banks and Hedge Funds have been continuing liquidations of Gold, choosing to sell into upward rallies and therefore keeping the Breaks on short term upswings in Price. This is evidenced by a 120,000 oz Gold Sale by J.P. Morgan Chase this morning for one of its, undisclosed Hedge Fund Accounts. The same is true for the remaining Hedge Funds relative to Silver.

Meanwhile Equity Markets world wide continue to show weakness as fears of a Global Recession and concern over the potential success of Government Bail Out packages continue. Oil is now trading below $70.00 as a result of the concerns of Economic Slow Down and continued Hedge Fund liquidation.

With the exception of the Japanese Yen, which is currently at 98, the US Dollar is continuing its strength against the BP @ $1.62 the Euro @ $1.28 and the Canadian @ $1.20 as investors and institutions continue to seek US Cash and US Treasures over Equities. We do not expect this trend to last much longer.

The Credit Markets are showing some signs of easing as the Libor rates have come down, but they still have a long way to go.

Here we go again with more US Government nonsense. Bernanke has already “let the cat out of the bag” in his testimony before Government yesterday, suggesting that an additional package will be put before Congress for an additional 150 to 300 Billion, as they now recognize their EESA of 700 Billion will not get the job done.

Our 3 and 4 year old children could have told them that 3 months ago.

We have not heard much from Mr. Paulson this week. Perhaps he is monitoring the printing presses and helping with the decisions of what denominations should be printed. (Ones, Fives, Tens, or Twentys) Perhaps we should tell him it’s less expensive if they print a New “Billion Dollar Bill”.

The driving force behind the Downward Price Movement on ALL commodities is 1) Massive De-leveraging, 2) withdrawal of Credit Facilities and 3) Redemption Requests relative to Hedge Funds and their Mass Exodus from their long Futures Contract Positions.

It is interesting to note relative to Gold and Silver, that the demand for Physical Product is approaching epic proportions. What this really means is that as these products are put into the possession of private investors, it is unlikely that that physical product will be available to come back into the market for years to come. This will put even more upward price pressure on these products as the Economic Fundamentals of Supply and Demand and Inflation will finally win over the current synthetic prices being created by the Hedge Funds.

We also believe that Hedge Funds, as we know them to-day, and which are closing their doors by the Hundreds, will not re-open. Those few that manage to survive will be subjected to severe regulatory requirements and lower Credit Facilities which will inhibit the type of activity we have seen in the past and prevent them for attempting to control any market.

It seems fair to say “that unlike a pigeon, Hedge Fund managers no longer have the ability to leave a deposit on a Ferrari.”

Lastly, for our Canadian friends, with your dollar at $1.20 against the US Dollar – current Prices for Gold and Silver are still very attractive. More simply put, your Canadian dollar at $1.20 buys more Gold or Silver today then it did ten months ago when your dollar was at par to the US Dollar.

We therefore continue our Long Term Bullish Sentiment for Gold and especially Silver and that current price levels appear very attractive for Long Term Appreciation.

Continue to be conservative, pro-active and do not overextend.

Trading Department
Precious Metals International

Peter Schiff with Bullish comments on Precious Metals this morning on CNBC
Posted by Worldwide Precious Metals on Thursday, October 23, 2008

The GoldBugg Report – October 21, 2008

October 21, 2008

The GoldBugg Report October 21 2008

-Gold could hit $1,500, say Merrill analysts. Gold prices could hit $1,500 as global plans to rescue the financial industry are set to increase inflation pressures, according to analysts led by Francisco Blanch at Merrill Lynch.

-Richard Russell says hold your gold.

-Is it time to play the silver to gold ratio again?

GOLD

“The unintended consequence of the ongoing financial bailout will be a return of inflationary pressures to the commodity markets,” wrote the analysts in a note released Monday. The analysts didn’t say when gold would hit the price target. They also predicted oil prices will rise to $150 a barrel. Marketwatch.com

-Why should gold stop at $1,500? Commentary: There are plenty more shoes to drop. Read more here-http://www.marketwatch.com/news/story/why-should-gold-stop-1500/story.aspx?guid={E5BCCF40-BA86-4025-8EC2-A4FC25E93BF0}&dist;=msr_1

-John Embry-Rescue will send gold to surreal price level. Read more here-http://www.sprott.com/pdf/investorsdigest/digest.pdf

-Richard Russell says hold your gold. Read more here-http://www.321gold.com/editorials/russell/russell101608.html

-Where is the value? Gold seems to be the answer. With the financial markets responding well to the actions of the major central banks and looking for a thaw in the recent freeze, how have the metals behaved in a wider context, and what is the outlook now? Gold seems to be the answer whichever way we look. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page67?oid=70770&sn;=Detail

-Golden Opportunity. Nothing looks as good as gold in this financial-market mess. Some believe the yellow metal is heading toward $2,500, after hitting $859 an ounce last week. But buy the metal, not the miners. Gold “showed its stripes as something investors will turn to,” says Leanne Baker, founder of Investor Resources, a metals and mining advisory based in Mill Valley, Calif.

There may be plenty of upside left. The yellow metal, which breached $1,000 an ounce in March during the Bear Stearns debacle, could well return to that level and head toward $2,500 as investors scramble for safety, according to many fans of the yellow metal.

“It is premature to declare an end to the bull market in gold and the bear market in paper,” John Hathaway, portfolio manager of Tocqueville Asset Management, pronounced in a missive last week. “It is more likely that this massive shakeout has set the stage for a dynamic advance.” Barron’s Roundtable member Mark Faber puts it more succinctly: “Gold will go up because everything else is in deep s–t.”

James Turk, founder of Goldmoney.com, sees gold at $1,100 or $1,200 an ounce by year-end. “In a time like now, with markets melting down, uncertainty about the safety of assets and growing concern about counterparty risk, people look to assets with safe-haven status,” Turk says. A longtime gold bug, Turk sees gold eventually hitting a dizzying $7,000 an ounce.

Charles Oliver, manager of the Sprott Gold and Precious Minerals Fund in Toronto, has a more restrained target of $2,000 within four years. But even that would be more than double the current price. Read more here-http://online.barrons.com/article_print/SB122369643017225623.html?mod=googlenews_barrons

-Gold options point to $1,200 in rocky ride. Read more here-http://www.guardian.co.uk/business/feedarticle/7851571

-Banking on gold. Four years ago, fearful of a property crash, David and Maureen Somers sold their house and bought gold. It’s a tactic suddenly popular with those seeking a safe haven for their money. As safe as houses. This piece of perceived wisdom no longer seems quite so wise as property prices fall and stocks stutter. But there is one area of the global financial machine that is revving up gold.

When times are bad, investors have traditionally sought refuge in this precious metal. With bullion dealers reporting a surge in business, it seems history is repeating itself. Prices are strong and David Somers is delighted, because he effectively bet his house on it. The retired croupier sold his house in 2004 and invested the proceeds in gold. “I was worried about the health of the financial markets at that time, I was worried that something like this credit crunch could be on the way,” he says.

“The fact that at the time, only £35,000 of savings in a bank or building society were secure worried me, and I spent a lot of time doing research into what to do. Gold seemed to the best place.” The 56-year-old had seen his friends suffer badly in the last recession through negative equity, punishing repayments, bankruptcy and repossession. “I looked at my friends and saw that their prime capital earning years were effectively taken away from them because of the way the system had been working.”

Mr. Somers and his wife Maureen claim it would be “vulgar” to say how much they invested in gold. However, he does say they sold their three-bedroom, detached house in Poole for a significant profit, and the couple have since almost doubled their money again in gold. “Over thousands of years gold has never reached zero.

The price is a risk, but at the end of the day I will still have the same amount of gold,” he says. “There are people who probably hold bank shares that would have been seen as conservative investments and you could question what they are going to be left with.” Read more here-http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/uk_news/magazine/7657178.stm

-Barclays Capital analysts see gold price reaching $1,000 again this year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=70605&sn;=Detail

-Gold price forecasts raised by JP Morgan as investors seek safety. JP Morgan is raising its gold price forecasts for 2008 and 2009 as it anticipates investors seeking risk aversion investment options. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=70836&sn;=Detail

-BMO’s Coxe predicts gold and commodity stocks will reach new peaks during next global recovery. Once the global downturn bottoms out, BMO Global Portfolio Strategist Don Coxe forecasts “gold should move to new records,” also insisting the commodity story is not dead.

Coxe stressed that “gold and gold mining shares remain the best way to reduce endogenous risk within an equity portfolio. Although inflation is bound to recede for at least a few months, the amount of stimulus being injected into the global system will prove highly intoxicated once the downturn bottoms out, and gold should move to new records.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=70607&sn;=Detail

-Austria sees new gold rush as its mint struggles to keep up. There’s a new gold rush. The financial crisis is prompting people to look for safer forms of investment than stocks and shares.

The interest in gold coins is so great that many of the world’s major mints are struggling to keep up with demand, including the Austrian Mint, which produces the Vienna Philharmonic one of the best-selling bullion coins worldwide.

Sales of Vienna Philharmonic gold coins have gone up by more than 230% since last year. Kerry Tattersall, the director of marketing at the mint, says production has gone into overdrive: “We are running at present something like three shifts on all of the machines, on the presses, producing both gold and the silver bullion coins. We’ve actually got delays in delivering orders in silver. With gold, we are just about keeping pace, but it is a bit of a struggle.”

In September alone, the mint sold 100,000 ounces in gold coins in normal times it would take three to four months to sell that much. Mr Tattersall says people are looking for security. “We are seeing a lot of panic buying at the moment. People are losing confidence in the economy whether that is justified or unjustified is a matter of opinion. But we are seeing a lot of people looking for a safe haven.” Read more here-http://www.gata.org/node/6759

-Since 2001, gold has risen as the dollar index has fallen, but it has risen more sharply because the other currencies have also fallen in terms of gold. This appreciation in gold coincides with a world-wide inflation of paper currencies. Gold caught up to the inflation, so to speak.

As long as these central bank currencies continue to be manufactured without solid backing, either gold or tax revenues, gold will continue to have a long-term upward trend. The volatility in gold prices will, in all likelihood, also continue, and that makes it hard to forecast the shorter-term movements with a factor like money supply.

Note that the big increases of recent days have not pushed gold to new highs. In the longer run, however, we can be quite sure that gold will move higher if nothing is done to improve the backing of the world’s central bank currencies. Read more here-http://news.goldseek.com/LewRockwell/1223833680.php

-Zurich Bank’s Vault ‘Full to the Top’ With Gold on Fund Demand. Zuercher Kantonalbank, the Swiss lender that manages about $107 billion, said its gold vault is full after a surge in demand from investors seeking a haven during the credit crunch. Assets in the Zurich-based bank’s ZKB Gold ETF, backed by about 2.66 million ounces of the metal, have risen to a record for seven consecutive weeks.

That amount of gold is worth about $2.25 billion at today’s prices and equal to about 12 days of global production. “Demand is so strong,” Susanne Toren, a metals analyst at the bank, said by telephone from Zurich today. ”Our vaults are full right up to the top.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aKeM8QTqC_a8

-Demand For Gold Coins A Bonanza For Rand Refinery. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=47020

-Perth Mint Doubles Gold Output on Haven Buying. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=asmvRlbfitV8&refer;=commodities or

http://www.gata.org/node/6752

-New Zealanders join rush for gold. Read more here-http://english.people.com.cn/90001/90778/90858/90863/6514941.html

-Germans Stockpiling Gold Amid Market Panic. Read more here-http://www.dw-world.de/dw/article/0,2144,3698865,00.html

-’Unprecedented demand’ for U.S. gold coins? Hardly. While the U.S. Mint attributes to “unprecedented demand” its suspension of the production of gold coins, coin market reporter Michael Zielinski shows that it’s not true. Zielinski, a White Plains, N.Y., resident who publishes the Mint News Blog http://mintnewsblog.blogspot.com and Coin Update http://coinupdate.com, lists the Mint’s Gold Eagle coin sales for each year back to 1986 and finds 14 years when the Mint produced more Gold Eagles than it has produced so far this year.

This is more evidence that the U.S. government, like other governments, is trying to deny people the chance to escape from the mismanagement of their paper and electronic currencies and financial systems. Read more here-http://www.gata.org/node/6753

-Bullion Shortage and Spot Prices Tell Two Different Gold Stories. Read more here-http://seekingalpha.com/article/99680-bullion-shortage-and-spot-prices-tell-two-different-gold-stories

-GoldMoney’s James Turk reports on getting real metal. Read more here-http://www.gata.org/node/6756

-Got Gold Report-Market mayhem continues, silver crushed. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=46957

-Dominic Lawson: It all went wrong when we left gold standard. Read more here-http://www.gata.org/node/6775

-India Post to offer gold coins through post offices. Read more here-http://www.commodityonline.com/news/India-post-to-offer-gold-coins-through-post-offices-12210-3-1.html

-Two Methods for Estimating the Price of Gold. Read more here-http://dollardaze.org/blog/?post_id=00479

-CFTC ‘looking into’ gold market as well as silver. Read more here-http://www.gata.org/node/6778

-Somehow Martin Hennecke, senior manager of private clients at Tyche Group in Hong Kong, got invited back on CNBC today to talk about gold even though he mentioned manipulation of the gold price by central banks when CNBC last had him on the air a month ago http://www.gata.org/node/6580. GATA-Watch video here-http://www.cnbc.com/id/27159117

-The Countdown of a Manipulated Gold Price Is Running Out. Read more here-http://seekingalpha.com/article/99959-the-countdown-of-a-manipulated-gold-price-is-running-out

-Gold, Silver and Currency Converter. Calculator is here-http://www.24hgold.com/tools/gold_silver_currency_calculator.aspx

SILVER

-Gold / Silver Ratio Tops 80 to 1. Read more here-http://seekingalpha.com/article/99720-gold-silver-ratio-tops-80-to-1?source=feed

-Is it time to play the silver to gold ratio again? Historically (1808-2008), the ratio between gold and silver has been 33 ounces of silver equals one ounce of gold. More recently, say 1978 -2008, the ratio has widened to on average, 60 ounces of silver buys one ounce of gold. At the extremes the ratio fell to 17:1 in 1980 as both metals peaked; and rose to 100:1 in 1991 during the depth of the recession.

The latest bull market in silver began in 2003, and from then until mid 2008, the ratio dropped from 80:1 to 45:1. A few months ago, as more and more people began to suspect that the world was heading for a recession, the ratio rose again, from 50:1 to the current 80:1. Read more here-http://news.silverseek.com/SilverSeek/1223955057.php

-Silver: Gap Between Paper and Physical Prices Widening Daily. Read more here-http://seekingalpha.com/article/100141-silver-gap-between-paper-and-physical-prices-widening-daily?source=feed

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1223916524.php

-Numerous haven-seekers bought gold in the past month, but many more investors can be expected to seek silver. “When gold takes off, people will look for a cheap alternative,” says Gijsbert Groenewegen, managing partner of Gold Arrow Capital Management. “That’s why silver is called poor-man’s gold.” Coin and bar sales have been so robust the U.S. Mint now is rationing American Eagle coins that dealers say they can’t meet small-investor demand.

“That’s going to continue, because the economic problems the world is facing are probably going to get worse,” says Jeffrey Christian, managing director of commodities researcher CPM Group. “Sooner or later, physical trumps paper markets and the price of silver goes back up sharply.”

Analysts look for the price of the white metal to rise to between $14.50 and $24 by the end of next year’s first quarter. December gold has rallied already from a 2008 low last month of $739.80 to Oct. 10 peak of $936.30. Silver could soon follow that trend. This is especially the case since above-ground silver inventories are less than in gold, Even though we didn’t have a significant gain in the last two weeks of total chaos, it could still happen and silver historically was viewed as currency before gold.

Silver lagged in the past month, since it relies on demand, unlike a monetary asset, says Bart Melek, BMO Capital Markets commodity strategist. Uses include jewelry, dentistry, electronics and more. “Those will be impacted by the slowdown globally in manufacturing and consumer spending,” Melek adds.

When the economy turns around, it should add luster to silver by increasing industrial demand, analysts say. Furthermore, newer uses for silver are replacing lost photography demand. Silver conducts electricity at lower heat loads than other metals, and is used in laptops, cell phones and iPhones.

One sign of investment is that holdings in iShares Silver Trust (ticker: SLV), an exchange-traded fund, hit 200 million ounces for the first time in July, and were up to 220 million last Thursday. Since many types of coins and bars are hard to obtain, Christian says, some haven-seekers “buy the ETF instead.” Full story here-http://www.commodityonline.com/news/Silver-may-outshine-gold-12188-3-1.html or http://online.barrons.com/article_print/SB122367840872424447.html?mod=BOLFeed

-Fortis/VM Group predict solar energy will boost silver demand. The Fortis/VM Group’s Silver Book says silver demand in solar energy is expected to almost triple by 2012. The solar industry is expected to be a major consumer of silver in ten years. The solar energy sector is expected to become a robust driver of the silver market in future as silver demand in solar energy is forecast to increase to about 1,270t by 2012.

The Fortis/VM Group’s latest Silver Book says silver demand from the solar panel sector was only 432t in 2007 based on the assumptions of maximum silver loadings per installed wattage of 0.12g/W, 4GW production (2007) and a 10% market share of non-silver containing thin film PV units. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=70524&sn;=Detail

-ZPower Sees Gold in Silver-Zinc Batteries. Read more here-http://homeoffice.consumerelectronicsnet.com/articles/viewarticle.jsp?id=547503

PLATINUM

-Platinum may still be in deficit despite car sales drop. Edison Investment Research says ahead of the Platinum Congress in London that it expects the platinum market to still have a deficit of 1m ounces from 2009-2014. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=70720&sn;=Detail

-Platinum group metal price forecasts slashed by Investec. A slowdown in global activity and anticipated drop in auto demand has led investment bank Investec to cut its platinum group metals forecasts for 2008 and 2009. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=70903&sn;=Detail

DEFINITIONS-QUOTES-QUICK HITS

-Bailout. A situation in which a business, individual or government offers money to a failing business in order to prevent the consequences that arise from a business’s downfall. Bailouts can take the form of loans, bonds, stocks or cash. They may or may not require reimbursement.

Bailouts have traditionally occurred in industries or businesses that may be perceived as no longer being viable, or are just sustaining huge losses. Typically, these companies employ a large number of people, leading some people to believe that the economy would be unable to sustain such a huge jump in unemployment if the business folded.

For example, Chrysler, a large U.S. automaker was in need of a bailout in the early 1980s. The U.S. government stepped in and offered roughly $1.2 billion to the failing company. Chrysler was able to pay the entire bailout back, and is currently a profitable firm.

One of the biggest bailouts is the one proposed by the U.S. government in 2008 that will see $700 billion put toward bailing out various financial organizations and those affected by the credit crisis. Investopedia.com

-Troubled Asset Relief Program-TARP. A government program created for the establishment and management of a Treasury fund, in an attempt to curb the ongoing financial crisis of 2007-2008. The Troubled Asset Relief Program gives the U.S. Treasury purchasing power of $700 billion to buy up mortgage backed securities (MBS) from institutions across the country, in an attempt to create liquidity and un-seize the money markets.

The fund was created by a bill that was made law on the 3rd of October 2008 with the passage of H.R. 1424 enacting the Emergency Economic Stabilization Act of 2008. The Treasury will be given $250 billion immediately, and the President must certify additional funds as they are needed. The additional funds will be distributed as $100 billion, and then as the final $350 billion, and Congress has the right to disapprove the additional amounts.

Global credit markets came to a near stand still in September 2008, as several major financial institutions such as Lehman Brothers, Fannie Mae, Freddie Mac, and American International Group, went under. In a few surprising moves, heavyweights Golman Sachs and Morgans Stanley even changed their charter to become commercial banks, in an attempt to stabilize their capital situation.

The proposed bailout will attempt to increase the liquidity of the secondary mortgage markets by purchasing the illiquid MBS, and through that, reducing the potential losses that could be felt by the institutions who currently own them. Investopedia.com

-”The reason Wall Street is in trouble is that Main Street is broke.” Peter Schiff-Euro Pacific Capital Inc

-In the beginning of a change, the patriot is a scarce and brave man, hated and scorned. When his cause succeeds however, the timid join him, for then it costs nothing to be a patriot. Mark Twain

-There is no question that gold will trade at or above $1650 by January 14th, 2011. Jim Sinclair

-”Investors worldwide are selling everything, including the kitchen sink, and gold is no exception,” said Peter Grandich, chief commentator at Agoracom, an online marketplace for the small-cap investment community. Marketwatch.com

-Morgan Stanley’s chief economist estimates that the U.S. budget deficit is $2-trillion so, on the basis that the U.S. economy is $16-trillion, this is a huge 12.5% of GDP. Economists have estimated losses across the entire U.S. financial system at $3-trillion. ResourceInvestor.com

-”A weaker dollar should help support gold prices as the two markets have been closely linked in the past year,” Merrill Lynch & Co. analysts led by Francisco Blanch wrote in a report published this week. Gold will average $1,108 an ounce next year and $1,375 an ounce in 2010, according to Merrill Lynch. Increased energy prices will help push the metal higher as investors buy gold as a hedge against inflation, the report said.

Silver will average $17.63 an ounce in 2009 and $22.25 in 2010, Merrill Lynch said in its report. “A combination of strong growth in investor demand and its strong link to gold should see silver remain well supported over the coming year,” Merrill said, adding that slowing economic growth could curb industrial demand for silver. Bloomberg

-In silver the premium paid for bullion bars is up to 50% above the spot price as dealers are running low and demand remains very strong. Why are silver premiums higher than gold: simply because silver stocks are tighter. This is the classic case of tugging on a piece of elastic fixed to a brick. The pull of the retail price is suddenly going to increase the silver spot price. It just has to as bullion dealers replace their stocks. Read more here-http://www.ameinfo.com/171121.html

-We feel that all of the actions taken and to be taken by the various Governments to rescue all of us from this financial crisis will have a huge price tag over the upcoming years. That price tag will be double digit inflation with much higher Commodity Prices and Severely Higher Prices for Gold and Silver. We therefore continue our Bullish Sentiment for Gold and especially Silver (as the Gold to Silver ratio should head back to the 50 to 1 Ratio from the High we saw October 10/08 of 88 to 1). Precious Metals International

-There is increasing surprise that gold has not surged to its recent record highs especially as there are deepening shortages of retail bullion internationally and the gold holdings of gold ETFs continue to surge. The election is just 4 weeks away and we are likely to see gold surge soon after. The fundamentals, particularly of supply and demand, are looking extremely good and prices are set to surge in the coming months.

There are likely to be huge daily and weekly up moves in the gold market and a price surge akin to that seen in the late 1970s. In the four years after the election of Jimmy Carter, gold surged by more than 700% (from near $100/oz to over $850/oz) and given the confluence of even more bullish factors in this election year, we are likely to see a similar price surge in the coming months.

Gold may not have surged as much as some had expected in recent weeks due to massive liquidation in other all markets because of leveraged losses and a flight to cash. This is particularly the case with hedge funds and other traders and speculators with short term horizons.

But gold increasingly resembles a submerged beach ball a submerged beach ball can only be pushed only so far under water prior to leaping out of the water and this is what will happen to gold prices in the coming weeks when the extremely bullish supply/demand fundamentals eventually kick in.

Premiums continue to surge on a daily basis on bullion coins and bars making the COMEX price less relevant all the time. There is the unprecedented situation whereby some large bullion dealers in the UK, Europe and the US have been cleared out of absolutely all of their bullion stocks of small coins and bars and also larger bars. Some wholesalers have also been cleared out and one of the largest wholesalers, who have limited supplies, are being forced to ration supply of coins and bars to their favoured customers. Gold.ie

-No mass mania for gold yet less than 1% of public in western world have invested in gold. The notion that gold is in a bubble and soon to fall is entirely bogus and peddled by many of the same suspects who have gotten us into this mess with their “don’t worry, be happy” brand of economics and personal finance advice.

It is likely that less than 1% of the public in the western world (probably as low as 0.5%) has invested in gold and/or silver and we are a long way from mass mania and the mass participation associated with market tops (as seen in stock and property markets in recent months). When gold is featured on a daily and even weekly basis in the newspapers and there are supplements dedicated to investing in gold and precious metals then it will be time to sell or at least go underweight gold and silver. Gold.ie

-It is important to reiterate that the fundamentals of both gold and silver remain as sound as ever, if not more so. Gold and silver remain the investment and wealth preservation opportunities of a lifetime and all individuals, companies, institutions and pension funds should have an allocation to gold bullion not derivatives, gold or silver futures, CFDs or ETFs, but real fully owned physical gold bullion. The major central banks of the world retain the majority of their gold bullion as monetary reserves in order to protect against macroeconomic, systemic and monetary risk and so should you. Gold.ie

-Gold’s lack of sharp movement is obviously, at least partially, the result of it being pulled on hard from opposite directions. Those who want to believe that the bailout will return things to ‘normal’ are discounting the metal’s strength; while those who believe they’re witnessing big government’s last big failure are stockpiling like mad.

Thus the disconnect between the paper futures market, and those on the ground who are paying any price to get their hands on actual gold. “The unintended consequence of the ongoing financial bailout will be a return of inflationary pressures to the commodity markets,” was the curious commentary of analyst Francisco Blanch at Merrill Lynch.

That the buck is deliberately being sacrificed for the perceived lesser of two evils recession prevention could hardly make the return of inflation ‘unintended.’ Peter Grant, senior analyst at USAGOLD, seemed more on target when he said that, “I anticipate further debasement of all currencies, including the dollar, which will ultimately drive gold prices higher.”

Meanwhile, analysts at Merrill Lynch, figuring in the inflationary effect of all the bank bailout measures now underway, predicted gold will go to $1,500 an ounce and oil back to $150 a barrel, though they posited no timeline.

MarketWatch.com went further, writing that “with a U.S. administration that’s overseen the biggest deficits in history about to be replaced by the closest thing to a socialist government America’s ever had, ’stimulus’ spending will likely remain high on Washington’s agenda. Given all that, $1,500 for gold looks more like a floor than a ceiling in the years to come.” Casey Daily Resource

-Dan Norcini, writing on jsmineset.com, says that all of the recent gold selling is “FORCED liquidation on account of redemption requests. That has NOTHING TO DO with the real physical gold market where demand remains at unprecedented levels, levels so high that it is producing serious shortages of bullion for would-be buyers. This is what is producing the increasing dichotomy between the Comex and the real gold market. I would go as far as saying that we are for all practical purposes seeing a BLACK MARKET in gold beginning to develop.” Casey Daily Resource

-”Unlimited dollars. Unlimited euros. All but unlimited sterling. We are talking about a global re-inflation on a massive scale. We’ve recently seen gold set new all-time highs against euro and sterling. Gold nearly set a new record high against the Swiss franc. Given ongoing strong demand for physical gold and incredibly tight supplies, one has to wonder how long the dollar gold charade can be maintained.” USAGOLD

-Minister Says U.K. Forces Investigating ‘Great’ Terror Plot. Home Office minister Lord Alan West, a former head of the Royal Navy, said British authorities are investigating a serious terror plot, and that the threat to Britain is ”huge.”

“Another great plot is building up again, which we are monitoring,” he told the House of Lords, the U.K.’s upper chamber of Parliament. ”We have done all the things that we need to do, but the threat is building the complex plots are building.”

The Home Office issued a statement shortly afterward, saying the threat level to the U.K. has been at ‘’severe” the second-highest level which indicates an attack is likely for ‘’some time.” The level is raised to ”critical” once security services judge an attack is imminent. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aECtMZfJixCs&refer;=home

RARE COLORED DIAMONDS

-With only one carat in every 30,000,000 taken from the Argyle mine in Western Australia being pink in color and only around a 10 to 12 year supply left, pink diamonds are particularly precious. Read more here-http://www.retail-jeweller.com/page.cfm/action=Archive/ArchiveID=1/EntryID=46

-Rio Tinto reported Wednesday that its rough diamond production fell 9.7 percent to 6.110 million carats in the third quarter of 2008, compared to the corresponding quarter last year. The drop came as a result of declines in production at its flagship Argyle mine in Australia and at its Diavik mine in Canada. Rio Tinto’s third operating mine is the Murowa alluvial mine in Zimbabwe.

For the first nine months of the year, Rio Tinto’s total diamond production fell 23 percent to 13.962 million carats. Rio Tinto is the third largest producer of rough diamonds in the world behind De Beers and ALROSA, and the second largest mining group behind BHP Billiton.

Production at Argyle in the third quarter ending September 30, 2008 decreased 4.2 percent to 4.659 million carats, while for the year it has fallen 23 percent to 9.823 million carats. The company noted, however, that third quarter production at Argyle had increased 56 percent from the second quarter due to the re-establishment of access to the high grade areas of the pit.

“This resulted in improved feed grade and higher throughput,” Rio Tinto explained. “Variability in feed grades and production rates will continue as the open pit approaches the end of its life and the mine transitions to an underground operation.”

The Argyle mine is the world’s premiere source of rare pink diamonds, which Rio Tinto sells at its Argyle Pink Diamond Tenders. The company recently said the exclusivity of the Argyle diamonds has been enhanced by the limited life span of the Argyle mine, which is expected to be depleted by 2018. Read more here-

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23703

-Sotheby’s Geneva Magnificent Jewels Sale Nov. 19. Sotheby’s Geneva the Magnificent Jewels sale will be held November 19, 2008 at the Beau-Rivage Hotel. One of the items, The Lesotho I, is an emerald-cut diamond of 71.73 carats cut from a rough diamond of 601 carats. The Lesotho I has a provenance of great rarity for a diamond of this size and importance, having remained in the collection of the present owner since it was sold by Harry Winston himself (estimate $3 million to $5 million.)

Another highlight is a Fancy Deep Blue briolette diamond, weighing 10.48 carats. This stone has been graded Flawless and awarded the highest-possible grade by the Gemological Institute of America for its polish and symmetry (estimate $6 million to $9 million.)

Other items include an extremely rare Fancy Red diamond, rectangular-cut, weighing 1.92 carats (estimate $2.5 million to $3 million;) an important diamond necklace / brooch combination by Pierre Sterlé (estimate $1 million to $2 million;) and a superb necklace made of nine rows of pearls measuring 3.4mm to 11.7mm held by a rectangular clasp set with diamonds (estimate $900,000 to $1.3 million.) Diamonds.net

-Customers Opt for Diamonds This Diwali. With the increased price of gold, jewellery shop owners are anticipating a dip in sales despite the festive season. The reason: Customers are eyeing diamonds instead of gold before Diwali. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23720

-Christie’s Jewelry Sale Garners $29M. Despite a dour Dow Christie’s Jewels: The New York Sale fared well with five of the top ten lots soaring over the million dollar mark to bring the auction total to $29,423,450. The top lot was the highly touted Ponahalo Diamond, a 102.11-carat rectangular cut LSI1, which sold for $4,114,500 to Dubai-based dealer Amer Radwan. He also, snatched up the second of the two stones, a 70.87-carat rectangular cut, LSI1 for $2,714,800.

The two stones were cut from a 316.15-carat rough diamond discovered at the Venetia mine in 2005. A portion of the sales proceeds will be donated to the Diamond Empowerment Fund. Important diamonds held strong prices with a 7.02 rectangular cut fancy intense blue diamond pulling in $3,610,500 and a pear shaped fancy intense purplish pink went for $2,714,500.

Rounding out the top five was a 16.05-carat rectangular cut, D potentially flawless diamond, which sold for $2,098,500. Smaller diamonds those under 10-carats did not sell as well and several that would have sold six months ago, failed to find a home during this sale. Overall, bidding was competitive with buyers in the full sales room vying with phone bidders from around the globe, leading to a sale that was sold 82 percent by value and 69 percent by lot.

Of the 254 lots offered, 183 were sold. The sale also included Superb 20th Century Jewels from an American Collection, 110 lots from a single owner of signed jewelry from notable design houses. That part of the sale did well, but there were some pieces that under normal economic circumstances would have sold and didn’t this time. Read and watch more here-

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23715

-The Nature of Diamonds Exhibition at Royal Ontario Museum. The Royal Ontario Museum will soon play host to The Nature of Diamonds, an exhibit “on the allure of diamonds.”

The exhibition explores the ongoing fascination with diamonds, with an examination of it as a natural substance, of its geologic origins, of its cultural significance in art, literature and ornamentation and its uses in modern science and technology. The exhibition at the ROM will run October 25 to March 22. Read more here-

http://www.idexonline.com/portal_FullNews.asp?id=31070

COMMODITIES-OIL

-The impact of the financial crisis on some of the most basic industries and commodities. Read more here-http://www.economist.com/business/displaystory.cfm?story_id=12414753

-Commodity run to continue for next two decades-VM Group. The VM Group says while China can not escape economic slowdown in the world it is still a long-term, vast growth story. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=70870&sn;=Detail

-OPEC Brings Forward Meeting to Oct. 24 as Oil Slides. OPEC, the producer of more than 40 percent of the world’s oil, brought forward its planned meeting for next month in Vienna to Oct. 24 after crude prices slid to a 13- month low.

“Following consultations with the President of the OPEC Conference and colleague Ministers, it has been decided to re- schedule the Extraordinary Meeting of the OPEC Conference,” the group said today in an e-mailed statement.

OPEC lowered its 2009 demand forecast for a second month yesterday as the worst financial crisis since the 1930s threatens to send the global economy into a recession. The 13-member group reduced its forecast for average oil consumption next year by 450,000 barrels a day, or 0.5 percent, to 87.21 million barrels a day.

“OPEC would like to engineer a soft landing for oil prices,” John Escario, who helps manage $13 billion at Rydex Investments in Rockville, Maryland, said earlier today. ”Their decision to trim supplies last month really didn’t do anything to support prices.”

Crude oil for November delivery on Thursday fell below $70 a barrel after a U.S. government report showed a bigger-than-forecast increase in inventories. Crude oil for November delivery fell $5.04, or 6.8 percent, to $69.50 a barrel at 11:43 a.m. on the New York Mercantile Exchange. That’s down 53 percent from a record $147.27 a barrel reached on July 11.

OPEC President Chakib Khelil said earlier today that the group hadn’t yet decided on the size of an output cut it may opt for at its next meeting. The summit had previously been scheduled for Nov. 18. The ”ideal” price for crude is between $70 and $90 a barrel, Khelil told reporters at the Hassi Rmel gas fields in Algeria. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=apbedp_qDKEo

-Iraqi official: $100 a barrel is ‘fair’. Oil ministry spokesman, Assem Jihad, says if crude prices continue to fluctuate, OPEC will cut production. Read more here-

http://money.cnn.com/2008/10/16/news/international/iraq_oil.ap/index.htm?postversion=2008101610

-Two major banks released bearish forecasts for oil and natural gas prices Thursday, saying global economic turmoil is expected to further dampen energy demand. Read more here-

http://www.resourceinvestor.com/pebble.asp?relid=47104

-Pro-commodities Goldman turns bearish, warns on $50 oil. Although Goldman Sachs is currently bearish on commodities, the bank said infrastructure growth in China and expanded consumer demand for manufactured goods supports a bullish case for base metals. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=70694&sn;=Detail

INFLATION

-”Inflationary Holocaust. ‘Legendary investor Jim Rogers warned during a CNBC interview this week that global central banks are creating the environment for an inflationary holocaust by their ceaseless overprinting of currency, a measure that isn’t even successful in stabilizing the stock market. Watch video here-

http://www.youtube.com/watch?v=jJ4dNtbT_u8 or read story here-http://news.goldseek.com/GoldSeek/1223913333.php

-U.K. Inflation Reaches Fastest Since at Least 1997. U.K. inflation quickened to the fastest pace in at least 11 years in September, squeezing consumers with higher living costs as the financial market crisis curbed the availability of credit.

Prices rose 5.2 percent from a year earlier, the most since records began in 1997, the Office for National Statistics said in London this week. The median forecast of 32 economists in a Bloomberg News survey was 5 percent. Inflation has now exceeded the Bank of England’s 2 percent target for a year. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid;=amXSPbnUn93k&refer;=home

-There is now the possibility of competitive currency devaluations and a global monetary crisis with severe inflation being experienced by economies internationally, but especially in the larger debtor nations. Talks of Zimbabwean style hyperinflation for major economies is likely over the top but severe inflation and stagflation looks increasingly likely and the present slight moderation in inflation rates is likely a temporary phenomenon. Gold.ie

FINANCIAL CRISIS

-The Woman Who Could Have Prevented This Financial Mess Was Silenced by Greenspan, Rubin and Summers. Read more here-http://www.alternet.org/workplace/102559/the_woman_who_could_have_prevented_this_financial_mess_was_silenced_by_greenspan,_rubin_and_summers/

-How we got here. The current financial crisis stems from the decision to divorce our currencies from a reliable standard of value. Read more here-

http://www.financialpost.com/related/links/story.html?id=851901

-EU Nations Commit 1.3 Trillion Euros to Bank Bailouts. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=azerJ573HcbI&refer;=home

-Financial crisis: Countries at risk of bankruptcy from Pakistan to Baltics. A string of countries face the risk of “going bust” as financial panic sweeps Asia, Eastern Europe, and Latin America, raising the spectre of a strategic crisis in some of the world’s most dangerous spots. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3174217/Financial-crisis-Countries-at-risk-of-bankruptcy-from-Pakistan-to-Baltics.html

-Birmingham on the brink of bankruptcy. With $3.2 billion in debt, the county that is home to Alabama’s largest city is about to go bust. How the credit crisis went South. Read more here-

http://money.cnn.com/2008/10/13/news/economy/Birmingham_brink_Whitford.fortune/index.htm

-Switzerland bails out UBS; Credit Suisse raises funds. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=asXluOJgpUn8

-US Bank Failures Sit at 13 and Counting. Read more here-http://www.time.com/time/business/article/0,8599,1849481,00.html

-In a sign that the liquidity crisis is becoming more acute for Russian lenders, Bank Globex, one of the industry’s medium-sized players, has blocked early withdrawals from fixed-term deposit accounts for five days. Read more here-http://www.themoscowtimes.com/article/1010/42/371690.htm

-Banks Hoard Cash as Credit Card Defaults Rise. Consumers are increasingly unable to pay off their credit cards, forcing banks to hoard cash to protect against future losses and lend to fewer people, according to reports yesterday from several of the nation’s largest banks. These financial disclosures showed a spike in credit card loans going bad, putting further pressure on already-stressed balance sheets.

J.P. Morgan Chase said the number of credit card loans in default rose 45 percent in the third quarter from the comparable period a year ago and predicted that default rates would sharply accelerate through 2009, with 7 percent of credit card loans going bad. “We have to be prepared that it gets a lot worse,” J.P. Morgan chief executive Jamie Dimon said about the overall economic outlook. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/10/15/AR2008101503233_pf.html

U.S. RECESSION

-Roubini Predicts a Recession That May Last 24 Months. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T;=Roubini%20Predicts%20a%20Recession%20That%20May%20Last%2024%20Months&clipSRC;=mms://media2.bloomberg.com/cache/vDHgWim6Nh8U.asf

-Roubini Sees Worst Recession in 40 Years, Stock Drop. Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years, driving the stock market lower after it rallied the most in seven decades this week. “There are significant downside risks still to the market and the economy,” Roubini, 50, a New York University professor of economics, said in an interview with Bloomberg Television.

“We’re going to be surprised by the severity of the recession and the severity of the financial losses.” The economist said the recession will last 18 to 24 months, pushing unemployment to 9 percent, and already depressed home prices will fall another 15 percent. The U.S. government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy, Roubini added.

Treasury Secretary Henry Paulson said today he plans to use $250 billion of taxpayer funds to purchase equity in thousands of financial firms to halt a credit freeze that threatened to drive companies into bankruptcy and eliminate jobs. “This will be the first round of recapitalization of the banks,” Roubini said. ”The government has to decide to intervene much more directly in the provision of credit and the management of these companies.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=azsdISpWRfls&refer;=home

-World May Be Lucky to Get Worst Recession Since 1983. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aKwXOAeSWBCY&refer;=home

-Former Fed chief says U.S. now in recession. Former Federal Reserve Chairman Paul Volcker said on Tuesday the U.S. housing sector faced more losses and the economy was in recession even as authorities moved to stabilize the financial system. Volcker said the priority for U.S. authorities in the credit crisis was to stabilize the financial system even though that meant heavy government intrusion.

“The first priority is to stabilize the financial system. It is necessary even though the cost involved is heavy government intrusion in markets that should be private,” he said in a speech at a seminar in Singapore. “House prices in the U.S. are still declining. There are still more losses to come there. The economy, I believe, is in recession.” Read more here-http://news.yahoo.com/s/nm/20081014/us_nm/us_financial_volcker or http://money.cnn.com/2008/10/14/news/economy/Volcker_recession.ap/index.htm

-Gates Predicts ‘Significant Recession,’ More Job Loss. Microsoft Corp. co-founder Bill Gates said the U.S. economy is headed for a ”fairly significant recession,” and that the unemployment rate may peak at more than 9 percent.

Higher personal and governmental debt are contributing to the U.S. economic slowdown, Gates said today in comments at Harvard Business School in Boston. The U.S. unemployment rate climbed to 6.1 percent in August and stayed at that level in September. Alumni gathering at the business school’s centennial celebration responded to questions about the worst U.S. financial crisis since the Great Depression.

The perception of a strong economy led many investors to have unrealistic expectations of high, stable market returns while there were few defaults and other signs of trouble, Gates said. “That encourages people to get leveraged and take risks,” Gates said. “The danger of leverage is pretty incredible.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aeJtdzVvNYk4&refer;=home

-U.S. Economy: U.S. Manufacturing Slumps to Weakest in 2 Decades. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=amFeRbbaluc0

-U.S. Retail Sales Slump 1.2%, Most in Three Years. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=azLqc6JsI7ng&refer;=home

-Mall’s demise could doom community. Sharp jump in store vacancies and a frozen credit market could force closures, resulting in loss of vital revenue and jobs. Read more here-

http://money.cnn.com/2008/10/16/news/economy/mall_economy/index.htm?postversion=2008101616

U.S. DEBT-TRADE DEBT

-Cost of U.S. Crisis Action Grows, Along With Debt. The global financial crisis is turning into a bigger drain on the U.S. federal budget than experts estimated two weeks ago, ballooning the deficit toward $2 trillion. Bailouts of American International Group, Fannie Mae and Freddie Mac likely will be more expensive than expected. States are turning to Washington for fiscal help.

The Federal Reserve said this week it will begin buying commercial paper, the short term loans companies used to conduct day-to-day business, further increasing costs. And analysts now say the $700 billion bank rescue plan passed by Congress last week may have to be significantly larger. “I always assumed they would be asking for more money along the way if it was necessary, and it looks like it’s going to be necessary,” said Stan Collender, a former analyst for the House and Senate budget committees, now at Qorvis Communications in Washington.

“At the moment, there’s nothing happening here that’s positive for the budget, nothing.” The 2009 budget deficit could be close to $2 trillion, or 12.5 percent of gross domestic product, more than twice the record of 6 percent set in 1983, according to David Greenlaw, Morgan Stanley’s chief economist. Two weeks ago, budget analysts said the measures might push deficit to as much as $1.5 trillion. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&refer;=us&sid;=aXCtv.lATO8I

-U.S. 2008 Budget Deficit at Record $455 Billion. The U.S. government posted a record budget deficit for 2008 as financial market strains slowed economic growth and spending rose the most since 1990. The shortfall widened to $455 billion in the fiscal year ended Sept. 30, compared with a $162 billion deficit a year earlier and the previous high of $413 billion in 2004, the Treasury said today in Washington.

The gap was 3.2 percent of gross domestic product, up from 1.2 percent last year, the Treasury said. The 2008 deficit was the largest as a share of the economy since 2004, when it was 3.6 percent of GDP. The excess of expenditures over receipts this year could get even worse. As the Treasury uses $700 billion to rescue the financial system from the credit crisis, Morgan Stanley chief economist David Greenlaw predicts the shortfall may almost quadruple to about $2 trillion.

“There’s no sugar-coating what the deficit is going to be,” said Joseph Brusuelas, chief economist at Merk Investments LLC in Palo Alto, California. ”We’re now looking at a deficit in this fiscal year of well over $1 trillion.” The final total for 2008 was higher than the Congressional Budget Office’s Oct. 7 projection for a year-end $438 billion deficit. Total spending in 2008 rose 9.1 percent to $2.98 trillion from a year earlier, the biggest jump in annual outlays since a 9.6 percent gain in 1990.

Revenue decreased 1.2 percent to $2.52 trillion, the first drop since 2003. For the month of September, the government posted a surplus of $45.7 billion, less than half the surplus of $112.9 billion the same month a year earlier, the Treasury said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aTsaLgmMTrFc&refer;=home

-The 56 trillion dollar deficit. Bill Maher interviews former Comptroller General David Walker. Watch video here-http://www.youtube.com/watch?v=0NM5Q5VDpnA

-August trade deficit falls to $59.1B. Drop in oil imports helps slash trade gap by 3.5%, but imports from China soar to new record. Read more here-

http://money.cnn.com/2008/10/10/news/economy/trade_deficit.ap/index.htm

DOW JONES -40 DECLINES 1885 TO 2008

-From 1885 to 2008, (123 years) the Dow Jones Industrial Average, (DJIA*) has fallen -40% from a bull market high on only nine occasions. Such deep bear markets are always historic and distressing. There is a good chance that 2008’s bear will give the 1929 bear a run for his money.

This may be the second time that a -40% will prove to be another historic bull trap. Washington, Wall Street and yes the American voters are corrupt all the way down to the bottom. The financial markets and the US dollar will not be far behind. Read more here-http://www.gold-eagle.com/editorials_08/lundeen101308pv.html

HEDGE FUND MELTDOWN

-Hedge-Fund Clients Pulled $43 Billion Last Month, TrimTabs Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3VqxSmtq6mQ&refer;=home

-Citadel Hedge Fund Falls 30% on Bond, Stock Losses. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aCmkPlsDhD7I&refer;=home

-Morgan Stanley’s Mack Says Some Hedge Funds May Fail. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=al_b7htcxZWc

-Highland Shuts Funds Amid ‘Unprecedented’ Disruption. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aqNuqwjFf.2Q

-Hedge Funds May Cut 10,000 Jobs, Options Group Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=apFudrCA_kJs&refer;=home

-Paulson Signals Hedge Funds Aren’t Currently Eligible for Government Money. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a8mmeEdlurPQ&refer;=home

REAL ESTATE-MORTGAGES-FORECLOSURES

-California Home Prices Likely to Dip 6% Next Year, Realtors Say. Home prices in California will drop 6 percent next year after falling about 32 percent this year, as foreclosed houses jam the market and the credit crisis makes it difficult for prospective homebuyers to obtain mortgages.

The median price for detached, single-family homes in the most populous U.S. state likely will drop to $358,000 next year from an estimated $381,000 this year, the California Association of Realtors said in its annual housing forecast released today. The number of homes sold likely will rise 13 percent to 445,000 next year, following a 12 percent increase this year. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=aHlPaD48xgl8&refer;=home

-U.S. Homebuilder Confidence Index Fell to Record Low in October. Confidence among U.S. homebuilders slid in October to the lowest level since record-keeping began in 1985, a sign the crisis in credit markets may deepen the worst housing recession in a generation.

The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 14, less than forecast, from 17 in September, the Washington-based association said today. A reading less than 50 means most respondents view conditions as poor. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=acBZGGY0dfC0&refer;=home

-To cut losses, homeowners consider default. Some struggling homeowners are being tempted to default on purpose in order to qualify for mortgage relief from the federal government or their lenders. More than four in 10 South Florida homeowners who bought in the last five years owe more on their mortgages than their homes are worth.

For those who bought in 2006 the year prices peaked the situation is even worse. A startling 76 percent of those homeowners are ”under water,” meaning their mortgage debt exceeds their property’s market value. Read more here-http://www.miamiherald.com/business/story/728184.html

The GoldBugg Report – October 21, 2008
Posted by Worldwide Precious Metals on Tuesday, October 21, 2008

The GoldBugg Report – October 14, 2008

October 14, 2008

WORLD FINANCIAL REPORT ON RADIO OCT 10 2008 SHOW

-Gold set to end losing streak on weaker dollar

-Louise Yamada calling for $3000 dollar gold.

-Jim Cramer says its time to get out of the stock market.

GOLD

-Gold set to end losing streak on weaker dollar, http://www.marketwatch.com/news/story/metals-stocks-gold-rises-first/story.aspx?guid={A57A941D-D6C6-4E39-83A3-D10FC234721D}

-CNBC airs prediction of default in paper gold. CNBC today gave a few minutes to Swiss Asia Capital CEO Jurg Kiener to talk about gold, and he noted the disparity between the explosive physical market price and the sluggish paper market price, blamed the speculation of Wall Street banks for the latter, and predicted the failure of the paper market and the quick doubling of the gold price. GATA-Watch video here-http://www.cnbc.com//id/15840232?video=880574352&play;=1

-Louise Yamada calling for $3000 dollar gold. Watch video here-http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl;=9992261&src;=finance&ch;=1316259

-U.S. Mint stops producing quarter and half-ounce gold. Unprecedented demand for precious metals and volatile markets forced the U.S. Mint to cease production for the half-ounce and quarter-ounce popular American Eagle gold coins for the rest of this year and to supply other bullion coins on an allocation basis.

“Due to the extreme fluctuating market conditions for 2008, as well as current market conditions, gold and silver demand is unprecedented and the demand for platinum is unusually high,” the U.S. Mint said in a Monday memorandum to its authorized coin dealers.

“The U.S. Mint has worked diligently to attempt to meet demand, however, blank supplies are very limited and it is necessary for the U.S. Mint to focus remaining bullion production primarily on American Eagle Gold One-Ounce and Silver One-Ounce Coins,” the Mint said. Read more here-http://www.gata.org/node/6734

-Royal Canadian Mint under strain to meet demand for gold. The plunging stock market in Canada has led to a spike in gold purchases, and gold brokers may soon have trouble keeping up with demand. A teller at Scotiabank’s precious metals exchange desk in the Scotia Plaza said Thursday that nervous investors had already purchased all of Scotia’s one-ounce gold bullion bars, which are slightly cheaper than the Scotia one-ounce gold coins.

The bars, which are emblazoned with the Scotiabank logo, are expected to be in stock by the end of October or early November. “It’s been crazy here,” the teller said. All other denominations, including the one-ounce gold maple leaves produced by the Royal Canadian Mint, are readily available at the moment.

Michael Levy, a gold broker based in Surrey, B.C., said the volume of people purchasing gold is at its highest since the inflation scare of 1979. “People were buying then because of inflation, now because of a growing distrust in paper currency,” he said. “It’s a different mentality but the same rush.” Read more here-http://www.gata.org/node/6715

-Austrian Mint Triples Gold-Coin Production on Increased Demand. Muenze Oesterreich AG, the Austrian mint that makes the world’s second best-selling gold coin, increased production of its Philharmonic bullion coin almost fourfold to meet surging investor demand.

The mint produced 370,000 one-ounce Philharmonic coins in the year through Oct. 7, up from 96,000 the year before, Vienna- based Marketing Director Kerry Tattersall said today in an interview. Gold bar demand more than doubled to 347,000 ounces.

The 800-year-old mint, located in a former Habsburg palace, has also added a third work shift to press more coins. “I’ve never seen that sort of increase,” said Tattersall, a Sydney native who helped introduce the Philharmonic in 1989. “There has been a lot of panic buying.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aUgNHR3yTflo

-Central banks all but stop lending gold. Central banks have all but stopped lending gold to commercial and investment banks and other participants in the precious metals market, in a move that on Tuesday sent the cost of borrowing bullion for one-month to more than twenty times its usual level.

The one-month gold lease rate rocketed to 2.649 per cent, its highest level since May 2001 and significantly above its five-year average of 0.12 per cent, according to data from the London Bullion Market Association. Gold lease rates for two, three, and six months and for a year also jumped to levels not seen in the last seven years.

Traders said the jump reflects the fact that central banks mostly European have almost completely stopped lending gold in the last few days and are not rolling forward old leases after maturity. This is because of fears that some borrowers might not repay their bullion loans if they are engulfed by the financial crisis. “A number of central banks have been cutting back on their gold lending,” said Tom Kendall, a precious metals strategist at Mitsubishi in London. Read more here-http://www.gata.org/node/6738

-Slow central bank gold sales to lead to third Central Bank Gold Agreement. The VM Group says a shortfall in central bank gold sales under CBGA II does not imply an ending to official sector gold sales yet. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=63917&sn;=Detail

-Gold prices will reach $1,200 in 2009: LBMA Poll. Will gold prices shoot up in 2009? Yes, says a poll from the delegates who attended the London Bullion Market Association’s (LBMA) annual meeting in Kyoto. The poll predicted that 2009 will see a significant rise in gold prices as more investors continue to seek safe haven investments.

Jeremy Charles, chairman of the LBMA, told delegates that gold’s role as a safe haven asset has returned with a vengeance amid Wall Streets woes. “High bullion prices are here to stay,” he said. His bullish comments came as many delegates said that they forecast gold prices reaching between $700 to $1,200 an ounce in 2009. Read more here-

http://www.commodityonline.com/news/Gold-prices-will-reach-$1-200-in-2009-LBMA-Poll-12020-3-1.html

-Citigroup says gold will benefit from both monetization and muddle-through and doom & gloom scenarios. Citigroup says gold is “badly mispriced,” asserting that “the forces that have propelled gold for the past five years are firmly in place.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=70360&sn;=Detail

-BMO: Gold ‘notable bright spot on the landscape’. BMO Capital Markets metals analysts suggest that base metals and bulk minerals seem “to be a cyclical downstream amid a secular uptrend for commodities.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=63872&sn;=Detail

-Chinese gold hoarding set to increase with liberalized gold trading. London-based analyst Gary Mead for Virtual Metals Group sees China as a big global driver for expanded gold demand through liberalization of its trading regulations, seeing the colossal financial and metal price collapses as being “gold friendly.” Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=63918&sn;=Detail

-Gold Fields CEO sees global gold supply tighter. Global gold supply will likely contract as the financial crisis in the United States saps funds away from planned mining projects, Nick Holland, the chief executive of Gold Fields said last Friday.

‘Some of the juniors and intermediate companies are not going to be able to develop their projects. And I think what this means is that mine supply in gold is probably going to decline more than what people realize,’ Holland told Reuters. Read more here-http://www.forbes.com/feeds/afx/2008/10/05/afx5509732.html

-Historical World Gold Production. Read more here-http://www.goldsheetlinks.com/production.htm

-Gold Price Expected To Gain From Global Financial Crisis. According to Bill Murphy, the chairman of the Gold Anti-Trust Alliance, quoted on Miningmx last week, bullion was being kept artificially low by central banks and bullion banks seeking to prop up demand for their currencies.

He argued that the price should be over $2,000/oz now, based on physical demand, but a cartel was using the derivatives market to restrain it. James Moore, a dealer at TheBullionDesk in London, said Wednesday that with banks unwilling at present to lend money, even to one another, investment funds were selling liquid assets such as commodities to raise cash.

At this point, gold was fulfilling its safe- haven role because it was able to generate cash in a crisis. But once markets stabilized, investment demand for gold was expected to gather momentum and Moore said gold could be expected to exceed $1,000/oz again or even set a record of $1,250/oz. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=46798

-Richard Russell says hang on to your gold. Read more here-http://www.321gold.com/editorials/russell/russell100808.html

-John Hathaway: Other ’safe havens’ will fail, leaving only gold. It’s really too bad that John Hathaway doesn’t write every day, or even every week. But then he’s got the Tocqueville Gold Fund to run, and running it gives him the long-term perspective often lacking elsewhere. Tonight he asks, “Is Gold Still in a Bull Market?,” and concludes that this week’s ample move upward is not just a head fake.

Other supposed safe havens for capital, Hathaway writes, are failing or are likely to fail soon, including U.S. government bonds, which just a few decades ago were mocked as “certificates of confiscation.” That will leave gold standing alone, Hathaway predicts, with $1,000 per ounce acting as a floor rather than a ceiling. GATA-Read more here-http://www.gold-eagle.com/editorials_08/hathaway100808.html or http://www.tocqueville.com/media/Is_Gold_Still_In_a_Bull_Market.pdf

-Big buyers who are requesting gold delivery from the Comex are getting phone calls trying to persuade them not to take delivery or they are being threatened not to take delivery. This is a perfect example of today’s free markets. A CIA mentality of anything goes.

Considering all that is going on in the financial world we do not see much in the way of gold sales from European central banks. This now is their only safe reserve asset. South African gold production fell 10.4% in the second quarter due to the electricity crisis. First half production fell 13.6%.

If you live in Australia you had best buy your gold coins before January 1, 2009. After that dealers will have you fill out forms and you’ll provide ID before you can buy gold. This needless to say is to combat terrorism. Buy while you can. Bob Chapman

-Physical Demand Soars as The Financial Crisis Worsens, but Gold Goes Down! Read more here-http://www.kitco.com/ind/Bevan/oct062008.html

SILVER

-When fear and emotion run high, as they presently do, it often creates exceptional profit opportunities. In other words, when everyone is running scared and is concerned about risk, it is precisely the time to look for rewards as well. We are currently positioned the best I have ever witnessed for risk and reward in silver. The downside looks extremely limited and the upside looks explosive. Yes, volatility is great, but everything is lined up perfectly.

I would like to revisit a familiar theme the suggestion that gold-heavy investors take advantage of the extreme undervaluation of silver compared to gold. This is not intended as a knock on gold, or a suggestion that gold can’t or won’t go higher. It would not surprise me if gold moved much higher. I hope that it does. Then why would I suggest that gold owners convert some of their gold into silver? For the simple reason that silver should climb much higher in value than gold. Maybe two or three times, and perhaps much more.

In fact, if silver eventually reverts to its historical ratio of 16 to 1 to gold, that means silver would have outperformed gold by more than four-fold. At that rate, every dollar invested in silver would return four times more than a dollar invested in gold. What are the chances that old ratio could return? Quite good, I think.

It has been a long time (except for a brief moment in 1980) since the world has witnessed a 16 to 1 gold/silver ratio. This is the ratio that prevailed for hundreds of years. This ratio was set arbitrarily, by government edict back when gold and silver were money. Regular readers know I don’t envision silver as being used as money again. So why would I think the ratio would move to 16 to 1, when conditions are much different today?

When the ratio was 16 to 1 there was much more silver in the world than there was gold. In fact, much more than 16 times more. That was before the industrial revolution at the turn of the last century, when it was discovered that silver was a marvelous and versatile industrial material. After the industrial consumption of the past 100+ years, there is no longer more than 16 times more silver in the world. There is now much less silver than gold. I am talking about bullion material available to the market at anywhere near current prices.

Maybe one in a million of the world’s citizens realizes that there is much more gold in existence than there is silver. If sufficient numbers of people knew this fact, gold would not be 75 times the price of silver. In fact, gold might be a lot less than 16 times the price of silver. This isn’t complicated. When enough people come to learn that there is less silver than gold in the world, they will buy silver (and maybe sell gold) until the relative price of each reflects silver’s greater rarity.

While silver’s rarity to gold is the main factor assuring that silver will climb in value compared to gold, there are other reasons. For one, the price of silver is below the cost of its primary production for many miners, while the gold price is currently above the cost of production. This suggests a contraction in silver production compared to gold. And while silver is produced as a byproduct for the majority of its production, many of the base metals, like zinc, are below the cost of production, suggesting a curtailment of supply.

Additionally, a large amount of the world’s gold inventory resides in government hands. While there does appear to be a lull in central bank gold sales, higher prices and budget pinches may induce more official gold selling in the future. This is a threat largely absent in silver, because so little is in government hands.

Further, a larger percentage of the remaining world silver inventory is in the control of publicly-owned investment entities, like ETFs, closed end funds and exchange-licensed warehouses. Such holdings are less likely to be sold than government metal. More often with these the metal goes in but rarely comes out. I estimate total world silver bullion inventories to be one billion ounces. More than 460 million ounces, or almost 50% are in publicly-held funds and exchange warehouses. In gold, two billion ounces exist in world bullion inventories, and less than 50 million ounces, or less than 2.5%, are held in publicly-owned entities. What this means is that not only is there much less silver than gold in the world, the silver is held in much stronger hands. This silver is much less likely to be sold than gold. Certainly, silver doesn’t face the threat of central bank or IMF dumping.

Silver is basically an industrial commodity, while gold is not. However, any fear of a decline in industrial demand for silver is misplaced because 70% of silver production comes as a byproduct to other types of mining, such as copper, lead and zinc. The real advantage of silver being an industrial commodity is lost in the current financial crisis. That advantage is profoundly powerful. Because silver is an industrial commodity, it is a candidate for an industrial shortage, while gold is not. We already have a widespread retail silver shortage, so a wholesale shortage is likely. What clinches the likelihood is that the world’s vast army of silver industrial consumers hold little in the way of inventories, thanks to just-in-time inventory and production practices.

When they face delays in silver shipments the industrial users will panic and attempt to build inventories all at once. I see them as a vast herd of wildebeests on an African plain, nervous and easily spooked. It won’t be the scent of a lion that sets them off, it will be a phone call from their silver supplier telling them there will be a 10 day delay. This is unique to silver and not gold. If you are gold heavy and silver light, please fix that. If you are just silver light, fix that as well. Ted Butler-Read more here-http://news.silverseek.com/TedButler/1223353403.php

-In India, physical buying in silver is expected to be the strongest this month with Dhanteras and Diwali festivals, when people buy precious metals for auspicious reasons. Dhanteras falls on October 26 and Diwali, two days later. Read more here-http://in.reuters.com/article/domesticNews/idINBOM36909120081008

-Gold, silver in short supply for those getting out of stocks. If you are thinking of diversifying your portfolio to include gold and silver, you may have to stand in line. Richard Hana of Belmont Coin said his shop ran out of pure gold and silver coins two weeks ago. “We people come looking for gold or silver, we take their name and when something comes in, we call them,” Hana said Wednesday, Oct. 8. “In a sense, it is already sold before it comes in the door.”

Hana said business is up 300 percent to 400 percent, particularly in the past weeks. “People are scrambling to buy gold and silver,” said Ed Fritz of Centerville Coin & Jewelry Connection. “There is huge shortage worldwide. People are pulling money out of economy, which has created a huge demand,” said Fritz, who has been in the business for 40 years. Read more here-http://www.daytondailynews.com/n/content/oh/story/news/local/2008/10/08/ddn100808goldweb.html

-Notes from the Sixth Annual Silver Summit in Coeur d’Alene, Idaho. Read more here-http://www.silverinvestingnews.com/457/silver-summit-analysts-cry-manipulation.html

-50 Lies About Silver from Jason Hommel. Read more here-http://news.silverseek.com/GoldIsMoney/1223346766.php

DEFINITIONS-QUOTES-QUICK HITS

-London Interbank Offered Rate-LIBOR. An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers’ Association.

The LIBOR is derived from a filtered average of the world’s most creditworthy banks’ interbank deposit rates for larger loans with maturities between overnight and one full year. The LIBOR is the world’s most widely used benchmark for short-term interest rates. It’s important because it is the rate at which the world’s most preferred borrowers are able to borrow money.

It is also the rate upon which rates for less preferred borrowers are based. For example, a multinational corporation with a very good credit rating may be able to borrow money for one year at LIBOR plus four or five points. Countries that rely on the LIBOR for a reference rate include the United States, Canada, Switzerland and the U.K. Investopedia.com

-Libor Holds Central Banks Hostage as Credit Freezes. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a6.wGKIe.RGg&refer;=home or http://www.bloomberg.com/apps/news?pid=20601109&sid;=a6.wGKIe.RGg&refer;=home

-”Life’s tough, it’s even tougher if you’re stupid.” John Wayne

-”Invest in inflation; it’s the only thing that’s going up.” Will Rogers

-”America’s been greedy and drowning in debt. We all thought we should live in $1 million houses, when we should have bought $100,000 ones. So the market turned around and kicked us in the balls.” Gene Simmons of KISS

-”This is the worst financial experience in world history,” said Joseph Granville, 85, a technical analyst who has been publishing the Granville Market Letter from Kansas City, Missouri for 45 years. ”We’re in October, and the market is crashing. What we’re seeing right now is complete demoralization.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601103&sid;=amzLJ00ydmvM&refer;=us

-”Governments lie; bankers lie; even auditors sometimes lie: gold tells the truth.” Lord Rees Mogg

-”The earthquake will come via a collapse in the market for U.S. government bonds as domestic and foreign investors realize that the only way Uncle Sam can meet his future spending obligations is to print massive quantities of money,” “The result will be sky-high inflation and interest rates and, most surely, a prolonged reduction in output and employment.” Boston University economist Laurence J. Kotlikoff

-Gold “should look to make further gains in the coming days as flight-to-safety demand increases.” James Moore of TheBullionDesk.com

-”The credit-market contagion has spread, people are fearful about putting money into banks, and they’re still turning to gold.” Matt Zeman, of LaSalle Futures Group in Chicago

-”The digital printing presses around the world are injecting incredible liquidity levels into the system as the financial system continues to crumble.” “This is clearly all very gold and silver positive.” Peter Spina, President of GoldSeek.com.

-”Gold’s ultimate status as a safe-haven asset is showing its luster again as the financial crisis escalates.” “Paper money from all walks of life is flowing into gold as uncertainty and fear rocket to new heights.” Peter Spina, President of GoldSeek.com.

-”This is truly a financial panic.” “It’s obvious safe-haven buying for gold. Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois

-”Gold is continuing to “de-link” from the rising dollar” says Jeffrey Nichols of American Precious Metals Advisors and falling price of oil as fear drives investors to the safe haven of gold. This is testimony to gold’s unique qualities as a monetary asset like none other, an asset that is not another’s liability and dependent upon the financial strength of the issuer.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=70494&sn;=Detail

-The price of gold has increased substantially over the past 7 years, but today might be one of the better times to allocate a portion of your portfolio towards gold. In the first stage of this gold bull market, many investors were too focused on their profitable stock and real-estate investments to allocate towards this sector.

Today, it is becoming increasingly clear that gold’s tangible qualities go beyond capital appreciation. Historically, Gold has served as a hedge against inflation, a hedge against a declining US dollar, and a hedge against times of economic and political crisis.

While many naysayers argue that gold is no longer money, but simply an archaic relic, gold’s actions over that past several years clearly prove otherwise. Indeed, gold is the only currency in the world that has successfully preserved wealth for generations. Consider allocating to gold bullion and gold coins. Emanuel Balarie-Read more here-http://www.kitco.com/ind/balarie/printerfriendly/oct062008.html

-Jim Cramer, the normally bullish host of CNBC’s “Mad Money” program, caused a stir Monday when he warned investors to take whatever money they need for the next five years out of the market now. On Tuesday, he called it “the most horrible market that I’ve ever seen.”

Money manager Peter Schiff, who has long espoused the bleakest of market views, said the Dow has a good chance to sink to 7,500 or lower. He expects the bear market to last another five years or more. That would signal a possible loss of at least 20 percent more in shareholder value.

“Everybody wants to think there’s a government solution to spare us the pain,” said Schiff, who runs the investment firm Euro Pacific Capital Inc. in Darien, Conn. “There is no government solution. All there is more pain.” AP

-Stocks plunged Thursday, sending the Dow Jones industrial average down 679 points more than 7 percent to its lowest level in five years. The Standard & Poor’s 500 index also fell more than 7 percent.

The declines came on the one-year anniversary of the closing highs of the Dow and the S&P.; The Dow has lost 5,585 points, or 39.4 percent, since closing at 14,164.53 on Oct. 9, 2007. It’s the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the Dow lost 45 percent. The S&P; 500, meanwhile, is off 655 points, or 41.9 percent, since recording its high of 1,565.15.

U.S. stock market paper losses totaled $872 billion Thursday and the value of shares over all has tumbled a stunning $8.33 trillion since last year’s high. That’s based on figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies’ stocks and represents almost all stocks traded in America. AP

-U.S. Mutual Fund Withdrawals a Record as Investors Choose Banks. Investors pulled a record $72 billion from U.S.-managed stock and bond mutual funds in September, seeking the safety of government-insured bank deposits as the financial crisis worsened.

Shareholders took $43.5 billion from stock funds last month and $28.8 billion from bond funds, according to data compiled by TrimTabs Investment Research in Sausalito, California. The exodus continued in the first week of October, with an additional $49.3 billion of outflows. “People are scared,” Conrad Gann, TrimTabs’ chief operating officer, said in an interview. ”This market is different from what we’ve seen before.”

The five largest diversified U.S. stock fund managers, including Fidelity Investments and Vanguard Group Inc., posted an average 28 percent loss this year through Oct. 6, 2 percentage points more than the Standard & Poor’s 500 Index, according to data compiled by Morningstar Inc. Investors deposited $185.5 billion into savings and checking accounts last month through Sept. 22, TrimTabs data show. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a10POAxGqTZc&refer;=home

-The firm managing a money-market mutual fund that “broke the buck” last month is shutting down 14 more of its funds. Reserve Management Corp. said Thursday that fund trustees voted to liquidate the assets of the 14 funds. The funds include Reserve’s Yield Plus Fund and 13 municipal money-market funds that invest in government debt.

The New York-based firm says it can’t estimate when investors will receive money back from the funds. There’s no immediate word how much money investors can expect back. Last month, assets at Reserve’s Primary Fund fell below the level needed to ensure each investor dollar would be covered. The instance of “breaking the buck” led to that fund’s liquidation, and one other Reserve fund that shut down last week. Full story here-http://money.cnn.com/2008/10/09/news/companies/fallen_funds.ap/index.htm?postversion=2008100917

-Tontine Associates, a $10 billion Greenwich, Conn.-based Hedge fund, told investors last Friday that it expected to show a 2008 loss through Sept. 30 of 65%, according to two people familiar with the fund’s performance. Read more here-http://money.cnn.com/2008/10/06/news/companies/boyd_tontine.fortune/index.htm?postversion=2008100614

RARE COLORED DIAMONDS

-For centuries, jewellery has been a symbol of wealth and riches. In today’s world of high-interest deposit accounts, shares, listed property trusts and managed funds, however, does it stand up as a legitimate long-term investment? The answer depends upon who you speak to, but the overall theme is that you need to invest in the quality end of the market.

Jeweller and Shiels managing director Albert Bensimon says he has dealt with many jewellery investors over the years and “some have done extremely well.” “They’re usually people with some money to start off with,” he said. Bensimon said one client bought a $250,000 Mercedes-Benz several years ago and recently sold it for $80,000, while the $80,000 pink Argyle diamond he bought at the same time now was worth $600,000.

Another client has watched the value of his $200,000 16-carat diamond increase to $1.3 million. “But that’s an extreme case. People should not think ‘I will buy a diamond and double my money quickly’,” Bensimon said.

So is jewellery a good investment? “I would like to say yes but always with some caution,” Bensimon said. “If you are going to treat it as an investment, go for the quality end.” Supply and demand issues affect jewellery prices like they do the overall investment market. “Any diamond over 10 carats is in huge demand by the Russians they have gone mad on size,” Bensimon said.

“This is the first time in 30 years that there is a supply-and-demand issue with diamonds.” Bensimon said that unlike the $100,000 luxury car that would eventually turn to rust, quality jewellery would go up in price. “You get no enjoyment out of seeing shares in the market but you can see and wear a $10,000 ring for 10 years and still get something for it,” he said.

“Every one-carat diamond I have sold 10 years ago, I would buy it back tomorrow for substantially more than it was then.” When investing in quality jewellery, people need to spend thousands, not hundreds of dollars, Bensimon said. The minimum investment period is three to five years. “If you are not looking five years ahead, forget it.” Read full story here-

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23489

-Diamonds are safe haven, Harry Winston says. Demand for safe-haven investments and a dearth of significant new mines will lift diamond prices after the world’s financial markets stabilize, Harry Winston Diamond Corp. chief executive Robert Gannicott said.

Global supplies of rough diamonds are unlikely to meet expected demand as purchases rise with wealth in Russia, the Middle East and elsewhere in Asia. “There’s a lot more upside in diamond prices than the public market appreciates,” Mr. Gannicott said Tuesday in an interview in New York. “I don’t think the supply-demand gap is understood very well.”

Since early 2007, the price of some 3-carat diamonds have risen fourfold on speculation demand would outstrip supply. “If you bought good quality stones five years ago, you’re looking at a much bigger win than anything in the stock market,” Mr. Gannicott said.

“Rough diamond supply is likely to fall short of expected demand within the next three to five years,” London-based RBC Capital Markets analyst Des Kilalea said in an Aug. 27 note to clients. “Production growth will be limited as older mines become deeper and production is scaled back, while new production is not expected to fill the gap.”

A slow regulatory process in some countries will delay the startup of new mines, Mr. Gannicott said. Significant new diamond discoveries will probably await development of the industry’s next “magic wand,” or some breakthrough technology that improves the odds of explorers finding diamonds, said Mr. Gannicott, a geologist by training.

On the demand side, Mr. Gannicott expects sales to rise in China, India, the Middle East and Russia, partly for cultural reasons that are not well understood in Western countries. As sales in the U.S. have slowed, women in Russia and the Middle East have been increasing purchases of diamonds as security against the possibility of divorce, he said.

“The ladies that become owners of these things don’t have the benefit of divorce laws that we’re used to,” said Mr. Gannicott. “The ownership of a very expensive piece of jewellery that is clearly theirs and is clearly portable means a lot more than it would in our society.” Read more here-http://www.nationalpost.com/news/story.html?id=850003

-South African diamond industry in “crisis” A short supply of rough diamonds is causing the South African diamond industry to shrink. The South African diamond cutting industry is in crisis over the short supply of rough diamonds and has convened an industry meeting this month to address the woes that have shrunk the sector. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page37?oid=63919&sn;=Detail

-The Nature of Diamonds Exhibition at Royal Ontario Museum. The Royal Ontario Museum will soon play host to The Nature of Diamonds, an exhibit “on the allure of diamonds.”

http://www.idexonline.com/portal_FullNews.asp?id=31070

COMMODITIES-OIL

-OPEC to Meet Nov. 18, ‘Likely’ to Cut Oil Production. OPEC is ”very likely” to cut oil production at its extraordinary meeting in Vienna on Nov. 18 because prices have fallen “dramatically,” the group’s President Chakib Khelil said Thursday. The Organization of Petroleum Exporting Countries announced the meeting today after the global financial crisis sent crude prices below $90 a barrel.

“The Organization is concerned about the deteriorating economic conditions with contagion risks,” OPEC’s Vienna-based secretariat today said in an e-mailed statement. The gathering will “discuss the global financial crisis, the world economic situation and the impacts on the oil market.” Qatar’s Oil Minister Abdullah bin Hamad al-Attiyah and Shokri Ghanem, chairman of Libya’s National Oil Corp., had earlier told Bloomberg that they backed such a summit next month. OPEC had been scheduled to next meet on Dec. 17 in Algeria.

Oil prices have plummeted 40 percent from their July record of $147.27 a barrel as the worsening credit crunch threatens to restrain economic growth and curtail energy demand. OPEC’s Khelil confirmed the meeting today by telephone. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a6IpiOmhoN6w&refer;=home

-Oil prices: Buckle up for a wild ride. Outlook for crude depends largely on the health of the global economy. Analyst predictions range from a fall to $50 or a surge to $150 a barrel. Read more here-http://money.cnn.com/2008/10/07/news/economy/oil_prices/index.htm?postversion=2008100813

INTEREST RATES

-Fed, ECB, Central Banks Cut Rates in Coordinated Move. The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression.

The Fed, ECB, Bank of England, Bank of Canada and Sweden’s Riksbank each cut their benchmark rates by half a percentage point. The Bank of Japan, which didn’t participate in the move, said it supported the action. Switzerland also took part. Separately, China’s central bank lowered its key one-year lending rate by 0.27 percentage point. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aREZkHrskr_E&refer;=home

-Asian banks slash interest rates. Read more here-http://www.cbc.ca/money/story/2008/10/09/asia-markets.html

-Australia Slashes Rates, Central Banks Inject Cash. Australia slashed its benchmark interest rate by the most since 1992 and central banks pumped more than $480 billion into money markets as policy makers tried to staunch the worsening financial crisis. Australia’s central bank lowered its key rate by one percentage point to 6 percent, twice as much as economists forecast. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=ah..g7ZmiUR0&refer;=home

-Canada Will Cut Key Rate to 1.5% by January, Credit Suisse Says. The Bank of Canada will lower its key interest rate by another percentage point to 1.5 percent by its Jan. 20 meeting, said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. Canada’s central bank will lower the rate by half a point at its next meeting on Oct. 21, then a quarter of a point each at decisions on Dec. 9 and Jan. 20, Basile said today. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=ah3kPuf8jGdo&refer;=canada

-Trichet Can’t Rule Out More Rate Cuts, Floods Banks With Cash. European Central Bank President Jean- Claude Trichet said he can’t rule out further interest-rate cuts after joining a round of global reductions today and offering to flood the banking system with as much cash as it needs.

The Frankfurt-based ECB lowered its key lending rate by half a point to 3.75 percent and said it will start lending banks unlimited cash in its weekly auctions at the new benchmark. Asked if the rate cut was a one-off, Trichet replied: “I don’t say that. I say that we will always do whatever is necessary.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=avdXQv77GHbU&refer;=home

U.S. DOLLAR

-The Dollar is Doomed. Read more here-http://www.financialsense.com/fsu/editorials/barry/2008/1003.html

FINANCIAL PANIC OF 2008

-The financial panic of 2008. One should ensure your debt is eradicated, that you have cash reserves on hand, and that you own gold (and by extension silver) as they have a long history of acting as currency. It is only since 1971 when we went full blown into fiat currencies that gold ceased to be money or that is what the monetary authorities led you to believe.

There were other periods of debauching gold in order to inflate the money supply usually to print money to finance wars. The massive monetary and debt inflation since 1971 has left us living in a world of financial illusion. The illusion it now seems is coming apart in the “Financial Panic of 2008″. David Chapman-Read more here-

http://www.321gold.com/editorials/chapman_d/chapman_d_100608.html

-Five Decades of Evidence on Financial Crisis and Recession: How Long? How Deep? Read more here-http://www.resourceinvestor.com/pebble.asp?relid=46779

GLOBAL FINANCIAL CRISIS

-Canadian banks ranked soundest in the world. U.S. has fallen to No. 40 in World Economic Forum list. Read more here-http://www.cbc.ca/money/story/2008/10/09/wef-canada-banks-rating.html

-Global debt writeoffs to total $1.4 trillion US: IMF. Read more here-http://www.cbc.ca/money/story/2008/10/07/imf.html

-Volcker: Financial system needs reform. Coalition of top economic thinkers finds that governments need to revise financial regulatory structures to prevent crises during market turmoil. Read more here-http://money.cnn.com/2008/10/06/news/economy/group_of_thirty/index.htm

-Paulson Signals Treasury May Invest Capital in Banks. Treasury Secretary Henry Paulson signaled the government may invest in banks as the next step in trying to resolve the deepening credit crisis. Paulson told reporters in Washington Wednesday that legislation Congress passed last week to rescue financial institutions gave him broad authority that he intends to use, beyond just buying mortgage-related assets on banks’ balance sheets.

He indicated that an option available may be boosting companies’ capital with cash infusions. “It is the policy of the federal government to use all resources at its disposal to make our financial system stronger,” Paulson said. ”We will use all of the tools we’ve been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size.” Banks worldwide aren’t raising enough capital to offset losses: while posting $592 billion of writedowns and losses during the crisis, they have added just $442.5 billion of new capital, according to data compiled by Bloomberg.

The International Monetary Fund anticipates losses will more than double to $1.4 trillion. In a sign that potential costs to taxpayers from any government aid to financial companies could be higher than at first foreseen, the Federal Reserve Wednesday increased its lending to American International Group Inc. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aEjIowwf9FE0&refer;=home or http://www.bloomberg.com/apps/news?pid=20601087&sid;=asrBlxAsNT3s&refer;=home

-Fed May See Companies, States as Next Crisis Fronts. Federal Reserve Chairman Ben S. Bernanke may find the next fronts of the financial crisis to be just as chilling as last month’s downfall of Wall Street titans: its spread to corporate America and state and local governments.

Companies from Goodyear Tire & Rubber Co. and Duke Energy Corp. to Gannett Co. and Caterpillar Inc. are being forced to tap emergency credit lines or pay more to borrow as investors flee even firms with few links to the subprime-mortgage debacle. California Governor Arnold Schwarzenegger says his and other states may need emergency federal loans as funding dries up.

A cash crunch on Main Street would endanger companies’ basic functions paying suppliers, making payrolls and rolling over debt. The widening of the crisis suggests that Bernanke and Treasury Secretary Henry Paulson may have further fires to put out even as the Treasury sets up the $700 billion financial- industry rescue plan approved last week.

“The rest of the economy is clearly being affected right now by the tightness of credit,” said Kurt Karl, chief U.S. economist at Swiss Reinsurance Co. in New York. “It’s just gathering momentum in the wrong direction.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aktjzhZEdgfY&refer;=home

-British Banks Get Unprecedented Government Bailout. Britain’s banks will get an unprecedented 50 billion-pound ($87 billion) government lifeline and emergency loans from the central bank after the freeze in credit markets threatened to bring down the financial system.

The government will offer to buy preference shares from Royal Bank of Scotland Group Plc, Barclays Plc and at least six other banks, and provide about 250 billion pounds of loan guarantees to refinance debt, the Treasury said in a statement today. The Bank of England will make at least 200 billion pounds available. The plan doesn’t specify how much each bank will get. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVNmfwifeMEg&refer;=home

-Bailout for major German lender. The German government and private banks come together in $69 billion deal to rescue Hypo Real Estate AG. Read more here-

http://money.cnn.com/2008/10/05/news/economy/europe_bailout.ap/index.htm

-Germany guarantees savings to avert panic. Read more here-http://www.ft.com/cms/s/0/d895ef54-92ef-11dd-98b5-0000779fd18c.html?nclick_check=1

-Russia Couldn’t Escape Gravity. The global financial crisis has seen Moscow’s RTS index lose 50% this year, while the ruble plummeted. Read more here-

http://www.businessweek.com/globalbiz/content/sep2008/gb20080924_863635.htm?chan=globalbiz_europe+index+page_around+the+globe

-Bank of America profits plunge 68%. Banking giant reports more than a week in advance worse-than-expected earnings. Dividend halved and $10B stock sale announced. Read more here-http://money.cnn.com/2008/10/06/news/companies/bank_of_america/index.htm or http://www.bloomberg.com/apps/news?pid=20601087&sid;=apL87YjlvFnw&refer;=home

-WaMu employees’ pensions fate unclear; many to lose jobs. Washington Mutual employees will not find out for another two months whether they have a job and the fate of their pensions remains unclear, according to a JPMorgan Chase executive who spoke to employees from both companies in a frank, hourlong conference call Thursday.

JPMorgan also plans to rebrand WaMu branches across the country with the JPMorgan Chase name, said Charlie Scharf, head of JPMorgan Chase’s Retail Financial Services group.

WaMu employs about 43,000 employees nationwide including 3,500 in downtown Seattle and JPMorgan Chase has about 195,600. Scharf, who spent a chunk of the conference call answering blunt questions from employees, said employees’ pension plans are part of WaMu’s business that’s held up in Chapter 11 bankruptcy, so it’s not JPMorgan’s responsibility to honor them. Read more here-http://seattle.bizjournals.com/seattle/stories/2008/09/29/daily25.html

-AIG taps $70 billion. Federal Reserve report shows ailing insurance giant uses $9 billion more of $85 billion government loan. Read more here-

http://money.cnn.com/2008/10/09/news/companies/AIG_loan/index.htm

-U.S. Consumer Credit Dropped by the Most on Record. Borrowing by U.S. consumers unexpectedly fell in August by the most on record as banks shut off access to loans, a report from the Federal Reserve showed.

Consumer credit fell by $7.9 billion, the most since statistics began in 1943, to $2.58 trillion, the Fed said today in Washington. In July, credit rose by $5.2 billion, previously reported as a $4.6 billion gain. The Fed’s report doesn’t cover borrowing secured by real estate. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=araFtj3EAFFw&refer;=home

-When banks find it hard to borrow, so do the rest of us. Read more here-http://www.economist.com/displaystory.cfm?story_id=12342237

GLOBAL RECESSION

-IMF: World economy to slow sharply. Global body predicts U.S. growth to drop to standstill by 2009 as the epicenter of financial meltdown. Read more here-

http://money.cnn.com/2008/10/08/news/economy/world_outlook.ap/index.htm?postversion=2008100810

-No global recession on horizon: CIBC. Read more here-http://www.cbc.ca/money/story/2008/10/09/cibc.html

-U.S. in Midst of Recession as Credit Shrinks, Spending Sinks. By almost all accounts, the U.S. is now in a recession, according to economists surveyed by Bloomberg News. The economy will shrink at a 0.2 percent annual pace in the third quarter and 0.8 percent in the last three months of 2008, according to the median estimate of 52 economists surveyed Oct. 3 to Oct. 8.

The contraction would follow declines in the four monthly gauges the National Bureau of Economic Research also uses to determine recessions: payrolls, production, income and sales.

Growth will be undone by the demise of the longest expansion in consumer spending on record as Americans retrench in the face of the worst financial meltdown since the Great depression and mounting job losses.

Economists, in a follow-up survey yesterday, projected the Federal Reserve will cut interest rates again after the unprecedented coordinated action taken by central banks. “They’re responding rapidly to a rapidly changing situation,” said Ken Goldstein, an economist at the Conference Board. ”It’s causing central banks to make it up on the fly to keep things from getting worse. As a forecaster, it’s become very difficult” to gauge the economic fallout, he said. Declining output would open the way for the NBER, the arbiter of U.S. business cycles, to declare a recession.

Robert Hall, the Stanford University economist who leads the NBER panel that makes the call, this week said the group was in “waiting mode” as gross domestic product had yet to shrink significantly. The market turmoil will spark the longest and deepest recession in at least three decades, Harvard University’s Martin Feldstein, another member of the group, said this week in an interview on Bloomberg Television. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aeOkWd5PPLv4&refer;=home

-Harvard’s Feldstein Says U.S. Recession to Be Longer Than Usual. Financial market turmoil may spark the longest U.S. recession in at least three decades, said Harvard University economist Martin Feldstein, a member of the committee that charts American business cycles.

“This is going to be a longer recession than the last four, over three decades, where the average duration was about 12 months,” Feldstein, who retired in June as president of the National Bureau of Economic Research, said today in a Bloomberg Television interview. ”I think it is going to be deeper in terms of decline” in output, he said.

Robert Hall, chairman of the NBER committee, said Tuesday that it is not yet clear a recession has begun. ”We’ve had this perplexing period of rising output and declining employment” since the end of last year, he said.

The U.S. labor market is shrinking, with Labor Department figures showing last week that payrolls fell by 159,000 in September, the biggest reduction in five years. Still, the economy, fueled by exports, grew at an annual rate of 2.8 percent in the second quarter.

Earlier Wednesday, the Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented coordinated effort to ease the economic effects of the worst financial crisis since the Great Depression. Full story here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=acjCtcxT4Lrc&refer;=home

-Credit Crisis to Deepen U.S Recession, Business Economists Say. The credit crisis that pushed money- market rates to records last week will deepen a U.S. recession and extend it into next year, according to a survey by the National Association for Business Economics.

The economy will stall in the fourth quarter, followed by 1.3 percent annualized growth in the first three months of 2009, according to the poll of 48 professional forecasters taken Sept. 8 to Sept. 18. Should the credit turmoil not ease by year end, then the economy will contract from October through March, a supplementary poll taken Oct. 1-2 showed.

“If financial conditions fail to improve quickly, near-term economic prospects could deteriorate markedly,” Chris Varvares, NABE President-elect and the president of Macroeconomic Advisers, said in a statement. ”Still, the NABE panel expects that lower oil prices, a bottoming out in home prices and a better functioning of financial markets should enable the economy to resume trend-like growth by the second half of 2009.”

Two out of three analysts said the U.S. is now, or soon will be, in a recession, compared with 56 percent in the last survey in May. Almost half the panel thought the downturn began around the start of 2008, and the same share predicted it will last into next year or 2010, making it longer than the last two recessions.

Forecasts for 1 percent growth in the third quarter and 0.1 percent growth in the fourth quarter of 2008 marked a downgrade from predictions of 2.2 percent third-quarter and 2 percent fourth-quarter growth in the May survey. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=at1qO3Xj1g5I

ICELAND IS MELTING

-Iceland teeters on the brink of bankruptcy. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/10/07/AR2008100701879_pf.html

-The party’s over for Iceland, the island that tried to buy the world. Almost overnight, its population became the wealthiest on Earth. Tracy McVeigh in Reykjavik finds that the credit crunch is making the cash disappear. Read more here-http://www.guardian.co.uk/world/2008/oct/05/iceland.creditcrunch

-Iceland suspends trading for 2 days. The Nordic country took control of the nation’s largest bank and stopped trading to lower risk of ‘national bankruptcy.’ Read more here-

http://money.cnn.com/2008/10/09/news/international/iceland_stocks.ap/index.htm?postversion=2008100910

-Iceland Takes Over Kaupthing as Biggest Banks Fail. Iceland’s government seized control of Kaupthing Bank hf, the nation’s biggest bank, completing the takeover of a banking industry that collapsed under the weight of foreign debt.

Iceland is guaranteeing Kaupthing’s domestic deposits and taking control of banks in an attempt to provide a ”functioning domestic banking system,” the country’s Financial Supervisory Authority said in a statement on its Web site Thursday. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a6s61daCJ2Ko

-Iceland Guarantees Domestic Bank Deposits Amid Crisis. Iceland’s government pledged to guarantee all domestic bank deposits and gave regulators the power to take over bank assets and appoint new boards to obtain funds from lenders that may become “inoperable.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aoV5448Ja2yE

JIM CRAMER-TIME TO GET OUT OF THE STOCK MARKET

-Jim Cramer says its time to get out of the stock market. Watch video here-http://www.breitbart.tv/?p=189093 or http://www.msnbc.msn.com/id/27045699/

STOCK MARKET-ONE YEAR DOWN AND COUNTING

-Down market hits 1-year mark with no clear bottom. The bear market that is ravaging investor portfolios is now one of the worst in modern U.S. history and has wiped out more than $7 trillion in shareholder value, with no bottom clearly in sight. When it stops and how far it drops, no one can predict with any accuracy a painful uncertainty underscored by Wall Street’s giddy mood at the moment the steep descent began.

A year ago Thursday, Wall Street was celebrating the fifth anniversary of a bull market that had created $10 trillion in shareholder wealth since 2002. The Dow Jones industrial average and the Standard & Poor’s 500 index hit all-time highs on Oct. 9, 2007. A headline in USA Today captured the prevailing sentiment: “Market’s run could keep going for a while.”

In fact, the party was over. The subprime mortgage problem that was laid bare by a decline in home values developed into a much broader credit crisis that toppled giant banks and financial institutions. Panicked investors have been fleeing from stocks. The S&P; is down 37 percent from its peak of 1,565 a year ago, closing at 985 on Wednesday, and the Dow has tumbled 35 percent from 14,164 to 9,258.

Most experts don’t see a recovery until there’s greater stability in the housing market, banks are lending freely and employment improves. Unlike other periods that saw precipitous drops, this one is rooted in foundering credit markets. That makes predictions more difficult than if the plunge were based on company profits or stocks alone. Read more here-

http://apnews.myway.com/article/20081009/D93MN3700.html

-In the past five months, the world’s top 20 mining and top 20 oil stocks have surrendered a combined USD 3 trillion in market value. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=70343&sn;=Detail

-S&P;: most dividend cuts in 50 years. According to S&P;, 138 companies decreased their dividend during the third quarter, up from 21 last year. Read more here-http://money.cnn.com/2008/10/03/news/companies/dividends_decrease.ap/index.htm

PENSIONS LOSE 2 TRILLION

-Pensions lose $2 trillion. Congressional budget analyst says many workers may need to delay retirement. Americans’ retirement plans have lost as much as $2 trillion in the past 15 months, Congress’ top budget analyst estimated Tuesday.

The upheaval that has engulfed the financial industry and sent the stock market plummeting is devastating workers’ savings, forcing people to hold off on major purchases and consider delaying their retirement, said Peter Orszag, the head of the Congressional Budget Office. Read more here-http://money.cnn.com/2008/10/07/news/economy/retirement_meltdown.ap/index.htm?postversion=2008100715

WALL STREETS SHADOW MARKET

-A Look at Wall Street’s Shadow Market. 60 Minutes: How Some Arcane Wall Street Financial Instruments Magnified Economic Crisis. Read and watch story here-

http://www.cbsnews.com/stories/2008/10/05/60minutes/main4502454.shtml

POLL SAYS BAILOUT AIMED AT WALL STREET

-Bailout aimed at Wall Street poll. CNN/Opinion Research survey shows only 40% of Americans think the $700 billion plan was aimed at helping Main Street. Read more here-

http://money.cnn.com/2008/10/07/news/economy/bailout_poll/index.htm?postversion=2008100712

60% SAY DEPRESSION LIKELY

-Poll: 60% say depression ‘likely’. Poll finds 6 of 10 believe a depression is somewhat or very likely – seeing 25% unemployed and millions homeless and hungry. Read more here-

http://money.cnn.com/2008/10/06/news/economy/depression_poll/index.htm?postversion=2008100616

DEBT CLOCK RUNS OUT OF DIGITS

-NYC National Debt Clock runs out of digits. In a sign of the times, the National Debt Clock in New York City has run out of digits to record the growing figure. As a short-term fix, the digital dollar sign on the billboard-style clock near Times Square has been switched to a figure the “1″ in $10 trillion. It’s marking the federal government’s current debt at about $10.2 trillion.

The Durst Organization says it plans to update the sign next year by adding two digits. That will make it capable of tracking debt up to a quadrillion dollars. The late Manhattan real estate developer Seymour Durst put the sign up in 1989 to call attention to what was then a $2.7 trillion debt. AP-Story here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aie8b6bn8lts

AUTO MAKERS

-Big drop predicted for global auto sales. As U.S. and European auto markets will see further declines, J.D. Power predicts growth will slow in developing nations. Read more here-

http://money.cnn.com/2008/10/09/autos/jdpa_sales_down/index.htm?postversion=2008100913

-GM Falls to Lowest Since 1950; S&P; May Cut Rating. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUMsMdzmXd_o&refer;=home

-Ford, GM May Not Get U.S. Loans in Time, Globe and Mail Reports. Ford Motor Co. and General Motors Corp. may not receive $25 billion in loan guarantees from the U.S. government in time to help them survive the crises in the credit and equity markets, the Globe and Mail newspaper reported, citing a Citibank Inc. analyst. Read more here-

http://www.bloomberg.com/apps/news?pid=20601082&sid;=aegzvEwrvIjc&refer;=canada

REAL ESTATE-MORTGAGES-FORECLOSURES

-U.K. Sept. house prices off 12.4% on year. Read more here-http://www.marketwatch.com/news/story/uk-house-price-drop-12/story.aspx?guid={E6FC48DB-8A0E-43AC-84E3-ED3757C13A7A}&siteid;=yahoomy

-U.S. Pending Home Resales Rose 7.4% as Foreclosures Cut Prices. More Americans unexpectedly signed contracts in August to purchase previously owned homes as mounting foreclosures pushed down prices, making homes more affordable. The index of pending home resales rose 7.4 percent, the most since October 2001, after falling 2.7 percent in July, the National Association of Realtors said today in Washington. The increase is the fourth so far this year.

Purchases “have apparently been boosted by sales of heavily discounted foreclosed homes,” James O’Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, said before the report. ”Still, we expect even existing home sales will fall somewhat further, reflecting an intensifying credit crunch and broad-based weakening in the economy.”

The Federal Reserve and other central banks today cut interest rates as part of a coordinated effort to help ease credit concerns amid the worst financial crisis since the Great Depression. Still, with concern that property values will keep sinking and foreclosures will mount, banks remain reluctant to lend to potential homebuyers. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=avsj6v77XbhI

-Skeleton houses, the sudden freeze in credit has caused homebuilders to halt building, leaving behind many unfinished homes. Watch more here-

http://money.cnn.com/video/#/video/news/2008/10/01/news.100108.simon.cnnmoney

GEOPOLITICAL NEWS

-Al-Qaida: US economic crisis equals Muslim victory. Read more here-http://news.yahoo.com/s/ap/20081005/ap_on_re_mi_ea/ml_al_qaida_american_video&printer;=1;_ylt=AqePZG9lFpgeALUB5B7XEccUewgF

-French FM warns of Israeli strike on Iran nuclear sites. Read more here-http://www.breitbart.com/article.php?id=081005201957.gzc8cnq6&show;_article=1

The GoldBugg Report – October 14, 2008
Posted by Worldwide Precious Metals on Tuesday, October 14, 2008

The GoldBugg Report – October 07, 2008

October 7, 2008

WORLD FINANCIAL REPORT ON RADIO OCT 3 2008 SHOW

-”We are currently positioned the best I have ever witnessed for risk and reward in silver. The downside looks extremely limited and the upside looks explosive. Yes, volatility is great, but everything is lined up perfectly.” Ted Butler writes in “An Exceptional Opportunity”: http://news.silverseek.com/TedButler/1223353403.php

-CNBC today gave a few minutes to Swiss Asia Capital CEO Jurg Kiener to talk about gold, and he noted the disparity between the explosive physical market price and the sluggish paper market price, blamed the speculation of Wall Street banks for the latter, and predicted the failure of the paper market and the quick doubling of the gold price. You can watch the interview here: http://www.cnbc.com//id/15840232?video=880574352&play;=1

-Gold up for second day as safety buying resumes. http://www.marketwatch.com/news/story/gold-rises-second-day-up/story.aspx?guid={CD68DBF8-32B4-42FA-B6A8-B7DCE698BAF6}&dist;=msr_3

GOLD

-Gold up for second day as safety buying resumes. http://www.marketwatch.com/news/story/gold-rises-second-day-up/story.aspx?guid={CD68DBF8-32B4-42FA-B6A8-B7DCE698BAF6}&dist;=msr_3

-David Tice, founder of David W. Tice & Associates and manager of the $1.08 billion Prudent Bear Fund says Dow May Fall Below 5,000; Gold Rise to $2,000. Watch video here-

http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/v5TY6R2aZM6M.asf

-Analyst: Dollar May Sink, So Look to $1,500 Gold. Aaron Smith, managing director at Superfund Financial, sees gold as a good bet as he believes it will rise to $1000 an ounce by year-end, and $1500 in two to three years’ time.

“We think the prognosis is quite bearish for stocks and actually if you are buying stocks long-only at this point it’s in my view sort of a sophisticated form of gambling,” Smith told CNBC. “But there’s no reason to be too too nervous. Investors could take advantage of cheap prices in commodity markets and benefit substantially from that in the next two to three years.” Watch more here-http://www.cnbc.com/id/26970932

-James Turk gold commentary, we are in the sixth inning. As we begin this year’s fourth quarter, it may be useful to step back from the trees and take a look at the forest. The big picture is shaping up pretty much as expected. In my February 1st alert I laid out my expectations for this year, specifically that “2008 is shaping up much like 1974.

There are many similarities. These include rapidly rising inflation and growing monetary problems not only in the States, but across the globe. In fact, the last serious global credit crisis before the present one occurred in 1974. If history is any guide and I really do believe that it is then the current banking and credit crisis is going to get much worse before it gets better.

Years of imprudent reckless lending are taking its toll on the global banking system.” Six weeks later in my March 16th alert I re-emphasized this point noting that the events then unfolding “adds more support to my view that 2008 is shaping up like 1974″. Read more here-http://goldmoney.com/en/commentary.php

-Gold and Silver Dealer Reports ‘Unprecedented’ Shortage of Metals. A surge for demand in gold and silver has resulted in an unprecedented shortage of the metals for retail investors in recent days, according to Gold and Silver Investments, a Dublin-based firm that allows retail investors to speculate on movements in the value of precious metals.

Gold and Silver Investments director Mark O’Byrne said the supply of gold and silver available for small retail investors suffered a dramatic deterioration within hours on Friday, as wholesalers reported that government mints and refiners, the primary suppliers of the metals, had stopped offering new supplies.

“It’s absolutely unprecedented,” said O’Byrne, who said the shortages were likely to drive up the costs of gold and silver in the secondary market. “This did not happen even in the 1930s and the 1970s, and will result in markedly higher prices in the coming months.”

According to O’Byrne, gold and silver were now easily accessible only in the primary market, which consisted of central banks and other major traders of the precious metals. However, he said that minimum transaction sizes in this market were out of reach for most retail investors at approximately $350,000 for gold and $135,000 for silver. Read more here-

http://www.gata.org/node/6686

-Wealthy Investors Hoard Bullion. Investors in gold are demanding “unprecedented” physical amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen. Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.

“There is an enormous pick-up in investment demand. I have never seen a market like this in my 33-year career,” said Jeremy Charles, chairman of the LBMA. “The gold refineries cannot produce enough bars.” The move comes as fears grow among investors over the losses at investment vehicles previously considered almost risk-free, such as money funds. Philip Clewes-Garner, associate director of precious metals at HSBC, added that investors were not flying into gold simply because they saw it as a haven amid Wall Street’s woes.

“It is a flight into gold because it is a physical asset,” he said. “Vault staff are also doing overtime,” another banker at the LBMA meeting said, adding that investors in some countries were paying premiums of up to $25 an ounce above the London spot price to secure scarce gold bars. Spot gold prices in London on Tuesday traded at about $900 an ounce, more than 25 per cent above the level before Lehman Brothers’ collapse.

Although some traders said the rush into physical gold could boost prices, others cautioned that prices were depressing jewellery demand, capping any price gain. Industry executives said gold refineries and government mints were working at full throttle to keep up with investor demand, but acknowledged they were suffering from shortages, particularly on coins. Johan Botha, a spokesman for the Rand Refinery in South Africa, which manufactures the Krugerrand, the world’s most popular gold coin, said the plant was now running at full capacity seven days a week.

“Even so, now and then we have shortages,” he said. The Austrian mint, which manufactures the Vienna Philharmonic, a popular gold coin in Europe, said it had extended work to the weekends to accommodate soaring demand. Last week the US mint suspended the sale of its American Buffalo coin after it ran out of stocks. Full story here-http://www.gata.org/node/6699

-Private banks rethinking gold, could be next big buyers. Private banks could be the next big buyers in the global gold market, helping drive prices higher as they consider restocking bullion bars that were sold off in calmer times, the top HSBC gold trader said on Monday.

Jeremy Charles, chairman of the London Bullion Market Association and global head of precious metals trade at HSBC Bank, also said he expected central banks around the world to put the brakes on their plans to sell down gold reserves as they see other assets deteriorate, lending further support to prices.

“I think the institutional investors and private banks in particular will all be reconsidering their strategy. My belief is they are likely to want to own some gold again “he told Reuters on the sidelines of the LBMA’s annual conference. The current generation of private bankers destocked their gold holdings in the 1980s and 1990s to pursue higher-return investments in recent years, but are now seeing the wisdom of the previous generation’s gold holdings, he said.

The deepening world financial crisis as the burden of toxic housing debt pushed U.S. and European banks to the brink of collapse has roiled investors globally, causing many to rethink their approaches and potentially putting a new shine on gold. Read more here-http://www.gata.org/node/6689

-Marc Faber says US bailout won’t stop recession, buy gold. “I think gold will be a relatively good investment under any kind of scenario until the US government bans the ownership of Gold in the United States. “They are very good at changing the rules of the game now banning short sales [of financial and other US equities].

“So yes physical gold, you should own. Not derivatives with Citigroup, J.P.Morgan, UBS and investment banks, but physical and outside the US.” Read more here-

http://www.bi-me.com/main.php?id=25070&t;=1&c;=35&cg;=4&mset;=1011

Bailout Could Spur a New Gold Rush. A James Bond villain who would be overjoyed today if he hadn’t met the fate of all 007 adversaries is Goldfinger. The words vary, but that’s essentially the message from several market watchers who say they see sizable market risk in Uncle Sam’s bailout a $700 billion rescue package they call heavily flawed, strongly indicating the prospects of further dollar weakness and higher inflation. That, in turn, could trigger a new gold rush.

One money manager critical of the rescue package, Leonard Mohr, a principal of Los Angeles-based MCR Associates, tells me he expects it to set the stage soon for the dollar to drop to below 1/1,000th an ounce of gold. The dollar, which wrapped up 2007 at 1/833rd an ounce of gold, plummeted to an all-time low last March of 1/1,033th an ounce of gold and is currently hovering at around 1/880th an ounce of gold.

The tracker of precious metals and natural resources at Florida-based Weiss Research, Larry Edelson, also casts his ballot for a sharply lower dollar resulting from the bailout translating into a higher gold price. “The government is printing money like crazy to clean up the financial mess and prop up the economy, but at the same time it’s devaluing the dollar and creating hyperinflation, which is great for gold,” he says.

Mr. Edelson says he’s seeing a lot of the same symptoms that were visible in the 1920s, such as a collapsing dollar and rising unemployment. Given his expectations, he insists “no ifs, ands, or buts, gold is definitely on the ascendancy. It’s no longer just an inflation play, but a crisis hedge.” Read more here-

http://www.nysun.com/business/bailout-could-spur-a-new-gold-rush/86693/

-BarCap sees “perfect storm” for fresh gold spike. A near “perfect storm” has reformed in the gold market that should drive bullion to new record highs within the next six months, fuelled by a mix of anxious uncertainty and a weaker dollar outlook, a Barclays Capital official said on Monday.

While gold prices may weaken briefly if other markets rally in relief once U.S. legislators gave the greenlight to a $700 billion bailout of the financial system, a reconsideration of gold’s merits should propel it beyond the March record of $1,030.80 an ounce, says Jonathan Spall, a director in BarCap’s commodities division.

“I think we should make new highs within the next six months, I would’ve thought,” he told journalists at the London Bullion Market Association’s annual conference in Kyoto. “We should be in a perfect storm for gold.” Read more here-http://in.reuters.com/article/domesticNews/idINSP31119620080929

-GFMS’ Walker looking for $1,000 gold soon. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=63442&sn;=Detail or

http://www.bloomberg.com/apps/news?pid=20601012&sid;=a2KyQepx5PDw&refer;=commodities

-Investors return to gold “in a major way”: LBMA Chairman. Read more here-http://www.platts.com/Metals/News/8058055.xml?sub=Metals&p;=Metals/News&?undefined&undefined;

or http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=63514&sn;=Detail

-In Albuquerque and other cities around the country, some gold dealers said they have more business than they’ve ever seen. One New Mexico gold dealer said people are buying and selling gold in record numbers, but he said now is not the time to sell. In fact, he said he’s running out of gold to sell and put people on a wait list. He said he’s never seen anything like it before. David Castle owns a gold trading shop in Albuquerque and said when the economy becomes unstable, the price of gold rises and that means more business for him.

He said he has had a steady flow of customers buying and selling, but he said that now isn’t necessarily a good time to hawk pieces from your jewelry box. If you bought a necklace or a ring at a jewelry store, the price you paid probably includes the cost of design and manufacture, so you could actually lose money by selling now.

“The people that are selling gold, I think, should think about it twice. I always advise people, ‘If you don’t need the money don’t sell.’ But unfortunately we have a lot of people that need money for just gas.” Those are the times when things can get really depressing, Castle said. He said people are parting ways with sentimental items, like wedding rings because they are desperate for money to pay the bills. Read more here-http://www.wmtw.com/save-money/17589216/detail.html

-European central banks have cut their sales of gold to the lowest level in almost a decade, reversing the practice of recent years when hefty sales helped depress prices. Institutions bound by the Central Bank Gold Agreement the banks of the eurozone plus Sweden and Switzerland — sold about 343 tonnes of gold in the year that expired on Friday, the lowest amount since the first CBGA was signed in 1999.

This compares with 475.8 tonnes in the year to the end of September 2007. Under the agreement, the banks are allowed to sell up to 500 tonnes of gold each year. The European trend is part of a global movement of reduced central bank selling and increased investor buying that is helping to underpin high prices at a time of turmoil in financial markets.

GFMS, the precious metals consultancy, estimates global central banks will sell 269 tonnes of bullion in 2008, the lowest since 1995. Much of the selling by European banks took place between October and December last year. Read more here-http://www.gata.org/node/6684

-Germany, Switzerland are done selling gold. Read more here-http://eos.gata.org/node/6692

SILVER

-Best outlook for silver since the days of the Hunt brothers. Investors who think the silver price is due for a major increase, and at current prices it is cheaper than it was 28 years ago the only commodity to be in that position should be buying these companies for maximum price leverage against the rising price of the underlying metal.

How high could silver prices go? Well, just to recover their inflation adjusted average price in 1980 silver would top $125 an ounce, and if markets overshoot then $200 is possible. When you consider that the price at the time of writing is $11.10 that could prove to be the investment opportunity of the decade, and far more exciting than following Warren Buffet and waiting for the US financial sector to recover.

Incidentally he successfully played the silver market a decade ago and doubled his money in a short period, so do not rule out his also getting in on silver again. Read more here-http://news.silverseek.com/SilverSeek/1222408200.php

-Why is silver so cheap when there are shortages of physical silver? In the 70’s through to the culmination price highs gold increased 24x and silver nearly 40x. Silver can’t be mined by many of the world’s mines much lower than 15-17 bucks and most people want to make a profit so add some and you should have $20 at a minimum. Add the stupid ratio we have and it should be more like $50 plus, then there wouldn’t be a shortage and it would be mined to meet all demand.

Such is the law of wacky races this one will correct way to the upside and then find a new level. I like David Morgan’s saying re silver. “If it doesn’t scare you out it will wear you out” so go get some nappies, be patient and enjoy the ride! Read more here-http://www.rapidtrends.com/blog/2008/10/01/why-is-silver-so-cheap-when-there-are-shortages-of-physical-silver/

-Inflation will push precious metal prices much higher. Real assets hold value. In investment terms that means you hold something perhaps one of the few real assets that will retain its value as inflation devalues everything else around you. This is why I remain confident that as economists and markets digest the true cost of the bailouts in terms of inflation in the future that the value of gold and silver will rise.

Once this obvious truth becomes generally accepted then we can expect a sudden shift by retail investors into gold and silver for protection against inflation. Both are very small markets by comparison to global equities, real estate or bonds particularly silver, so the price movements will be very large.

Therefore, I would comfortably expect gold and silver to pass their March highs of $1,030 and $20 within a couple of weeks, and head on to $1,200 and $30 an ounce by the end of the year. Next year could be an anus mirabilis for precious metals with a doubling of gold and trebling of silver prices. Peter J. Cooper-Read more here-

http://news.goldseek.com/GoldSeek/1222864826.php

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1222712899.php

-Got Gold Report, Gold, Silver Demand White Hot. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=46521

COUNTERPARTY RISK WITH ETF’S

-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

-ETF providers fear contagion risk. Exchange traded fund providers are scrambling to draw a line between themselves and other exchange traded products, amid fears that the counterparty risk in certain exchange traded notes and commodities is too great for investor comfort. Read more here-

http://www.ft.com/cms/s/0/bbafe6a4-8694-11dd-959e-0000779fd18c.html

DEFINITIONS-QUOTES-QUICK HITS

-Counterparty Risk. The risk to each party of a contract that the counterparty will not live up to its contractual obligations. In most financial contracts, counterparty risk is known as “default risk”. Investopedia.com

-Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies. Groucho Marx

-”The American consumer is toast, done, finished.” Stephen Roach, Morgan Stanley

-”We’ll see big write-downs all the way through next year that won’t abate until 2010.” Bank of America CEO Ken Lewis

-”I’ve never lived through something like that,” Stephen Jarislowsky, the 83-year-old chairman of Montreal-based money manager Jarislowsky Fraser Ltd., said this week after Wachovia Corp. joined Fannie Mae, American International Group Inc. and Washington Mutual Inc. on the list of financial companies to fail in the past month.

“I don’t even think the ’30s were like that,” he said in a telephone interview. ”At least they had a bank holiday and they closed all the banks. These idiots in Washington didn’t do that.”

“I’m more than worried,” said Jarislowsky, who co-founded his firm in 1955 and oversees C$51 billion ($49 billion). ”In a market like this, I’m not looking at opportunity. I am looking at preservation of capital. If governments aren’t careful and this mess isn’t solved fast, capitalism as we know it will be wiped out.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=acpVGEFPzQmc

-Gold of between $3,000 and $5,000 is not impossible; the gold price should be well over $2,000 now. Bill Murphy GATA-Read more here-

http://www.miningmx.com/gold_silver/771756.htm

-I have never felt more sure about gold and the investments therein. I am not concerned about anything. Jim Sinclair

-’It is imperative you own some gold, some real gold, gold you can bite down on, gold that clanks.’ Dan Ferris, DailyWealth

-The bailout of Wall Street is being done with total disregard of the secondary and tertiary consequences. If you own paper assets instead of Gold, be prepared for the value of your wealth to deteriorate. Ned W. Schmidt-Read more here-http://news.goldseek.com/NedSchmidt/1222440239.php

-Jeffrey Christian, a managing director at CPM Group in New York, concurs, saying that, “Gold and silver will probably rise because they will be seen as a safe haven and as a portfolio diversifier. Investors around the world are turning to gold and silver as a means of protecting their assets from the financial maelstrom that we are in the middle of.” Casey Daily Resource

-James Moore, of TheBullionDesk.com, wrote that, “Given the volatility in the equities market and the likely downgrading of U.S. financial assets by the bailout deal, we again expect investors to diversify their portfolios and look favorably upon gold.” Casey Daily Resource

-Capital is also flowing into gold and we are now witnessing increased demand. The price of gold, after hitting a low of $740 only two weeks ago, has recovered to $882. While this is still well short of the record $1,014 seen in March 2008 we fully expect that level to fall before year end. Quite simply, gold that has no liability is a safer vehicle than US Treasury Bills that are merely debt obligations of the US Government. David Chapman-Read more here-http://news.goldseek.com/UnionSecurities/1222669080.php

-In the titanic battle between the gold bulls and the gold bears, the gold bears and powerful selling entities have again won the short term battle this week. But this looks set to be another pyrrhic victory as the shorts are likely to get their heads handed to them on a plate when gold’s supply/demand fundamentals which become more bullish by the day, ultimately overwhelm the short sellers.

Gold would appear to be well supported at the $850/oz to $860/oz level but anything is possible given the unprecedented nature of the volatility in global money markets. However, with interbank rates continuing to rise to new record levels, systemic risk remains elevated which will support gold.

Gold, unlike all other asset classes, is up some 17% in the last 3 weeks (since its recent September 11th lows it has gone from $750/oz to $878/oz Wednesday) and may need to consolidate between $850 and $910 prior to rechallenging $1,000/oz in the coming weeks. Gold.ie

-Both technically and fundamentally gold is looking as good as it has ever done and prices are set to surge in the coming months. Informed speculation is that once the election is over on November 4th we will see fireworks in these markets and a price surge akin to that seen in the late 1970s. In the four years after the election of Jimmy Carter, gold surged by more than 700% and given the confluence of even more bullish factors in this election year, we are likely to see a similar price surge.

It appears we are witnessing a broad based flight to safety internationally with increasing retail, hedge fund, institutional and even central bank buying of gold. The price would appear to be artificially capped at the $900/oz level for the moment but given the extent of the growing demand, any short term manipulations will be just that as the long term fundamentals will see markedly higher prices. Gold.ie

-Despite the wildly bullish fundamentals, gold remains taboo in most of the financial press. It is rarely covered and when it is covered, it is done superficially and more often than not negatively and sometimes even inaccurately. Some stockbrokers and purveyors of other financial products (most of whom never predicted any of the recent financial and economic developments whatsoever and never warned of possible macroeconomic and systemic risk) have lost much of their clients’ wealth and yet continue to spout nonsense about gold.

They will be found out in the coming months and many questions will rightly be asked regarding what purported to be personal finance and wealth management advice in the coming months. Questions will especially be asked of those of who failed to inform the investment community of the very bullish fundamentals driving the gold market.

Some have deterred investors from making an essential diversification into gold, one of the few asset classes that will protect and even increase wealth in the coming months. It appears we are witnessing a broad based flight to safety internationally with retail, hedge fund, institutional and even central bank buying of gold having increased in recent days. Gold.ie

-The global financial crisis will support gold prices at near-record levels, according to the chairman of the London Bullion Market Association. Speaking at the LBMA’s annual conference on Monday, Jeremy Charles told delegates that gold’s important role as a haven had returned.

Mr. Charles, who also acts as head of precious metals at HSBC in London, said “High bullion prices are here to stay. Those who traditionally have shied away from gold as part of an investment portfolio can no longer afford to ignore this unique asset. “It is my opinion that, even when the crisis draws to an end as it inevitably will at some point, that gold will be looked at in a very different light going forward.” Gold.ie

RARE COLORED DIAMONDS

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23489

-Harry Winston Says Asian Diamond Demand May Resist U.S. Turmoil. Harry Winston Diamond Corp. Chief Executive Officer Robert Gannicott says Russian, Chinese and Indian buyers may prop up demand for luxury jewelry as sales to U.S. customers decline amid financial turmoil.

Sales at Harry Winston’s flagship jewelry shop on New York’s Fifth Avenue have risen 15 percent this year, helped by demand from clients in Asia and the Persian Gulf, Gannicott said today in an interview. Increasing jewelry sales to buyers from beyond U.S. borders have Gannicott optimistic the industry may escape the worst of the widening U.S. financial crisis. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aJOLxLz5lLrE&refer;=canada

COMMODITIES-OIL

-Despite severe commodities correction, Citigroup insists mining supercycle will survive. Citigroup metals analysts say they regard current mining/metals conditions “to be a severe correction amid a secular bull market” that possibly may come back even stronger. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=63674&sn;=Detail

-Credit Crisis May Affect 2009 Harvest, Schafer Says. The credit crisis roiling financial markets may affect next year’s corn, wheat and soybean output as farmers find themselves unable to get loans to buy seeds and fertilizer, according to U.S. Agriculture Secretary Ed Schafer.

“We certainly could see tight credit having an effect on agricultural production” in the U.S., Schafer told reporters after speaking to Department of Agriculture employees in Washington. “The costs of farming operations today are huge, and that backs up to the banks that have balance sheets that are tight, it backs up to elevators that have credit stretched out.”

Farmers, who may reap record profits of $95.7 billion this year according to the USDA, are also experiencing the highest costs ever. Farm expenses are projected to rise 16 percent this year to $294.8 billion, with higher fertilizer, fuel and seed prices biting into profits, the department said in an August report. Adjusted for inflation, costs will be the highest since 1980, before falling crop prices pushed farmers into the biggest agricultural crisis since the Great Depression. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aQfDSBXUXOo0

-Time to bet on an oil crunch. Oil prices will keep rising, says billionaire investor Richard Rainwater and he’s putting money on it. Back in May, when oil was at $129 per barrel and rising, billionaire investor Richard Rainwater did something as prescient as it was shocking: He sold off all the energy stocks he owned. Now he’s making another bold move: He’s betting on oil again. Read more here-http://money.cnn.com/2008/10/01/news/economy/rainwater_okeefe.fortune/index.htm

FINANCIAL CRISIS

-Buffett: Bailout may not be big enough. Investment guru says $700 billion bailout is crucial, but that it may not be large enough to solve the credit crisis. Warren Buffett said Thursday that it is crucial to the global economy that the controversial $700 billion Wall Street bailout passes, but warned that the pricetag may have to rise. Buffett also proposed that the U.S. Treasury Department and private investors team up to buy the troubled mortgage assets behind the crisis gripping markets worldwide.

“If we don’t get [this] solved next week, I may go back to delivering papers,” said Buffett during an appearance at Fortune’s Most Powerful Women Summit in Aviara, Calif. Buffett, the chairman and CEO of Berkshire Hathaway (BRK.A), likened the recent turmoil in the markets to an “economic Pearl Harbor” and said that a quick response is needed.

“We’ve never seen anything like this where perfectly credit-worthy companies can’t get funds,” he said. Read more here-

http://money.cnn.com/2008/10/02/news/newsmakers/buffett.fortune/index.htm

-U.S. ‘Casino’ Mentality Blamed for Planet’s Meltdown. Astounded by the U.S. government’s failure to resolve the financial crisis threatening the foundations of the global free market, fingers of blame are pointing at America from around the planet. Latin American leaders say the U.S. must quickly fix the financial crisis it created before the rest of the world’s hard-won economic gains are lost.

“The managers of big business took huge risks out of greed,” said President Oscar Arias of Costa Rica, whose economy is highly dependent on U.S. trade. “What happens in the United States will affect the entire world and, above all, small countries like ours.”

In Europe, where some blame a phenomenon of “casino capitalism” that has become deeply engrained from New York to London to Moscow, there is more of a sense of shared responsibility. But Europeans also blame the U.S. government for letting things get out of hand.

Amid harsh criticism is a growing consensus that stricter financial regulation is needed to prevent unfettered capitalism from destroying economies around the globe. And leaders of developing nations that kept spending tight and opened their economies in response to American demands are warning of other consequences a loss of U.S. influence globally and the likelihood that the world’s poor will suffer the most from greed by the biggest players in global finance. Read more here-http://www.gata.org/node/6702

-Cash-Starved Companies Scrap Dividends, Tap Credit to Survive. Carmike Cinemas Inc., the third- largest U.S. theater chain by screens, suspended its dividend, while Duke Energy Corp., owner of utilities in five U.S. states, tapped $1 billion from a credit agreement and RC2 Corp., the maker of infant and preschool products, canceled an acquisition.

The paralysis in credit markets is changing how U.S. companies do business as banks pull back on loans or make them prohibitively expensive. Some companies are closing plants and stores, postponing takeovers and grabbing any available credit in a fight for survival.

“If businesses don’t have access to capital, smaller companies in particular, they might get wiped out,” said Alec Young, a New York-based equity strategist at Standard & Poor’s. ”It’s impossible to quantify how expensive this crisis is going to be for Corporate America; there’s unlimited downside.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aa28qIGme_R8&refer;=home

-Bank Limits Fund Access by Colleges, Inciting Fears. In a move suggesting how the credit crisis could disrupt American higher education, Wachovia Bank has limited the access of nearly 1,000 colleges to $9.3 billion the bank has held for them in a short-term investment fund, raising worries on some campuses about meeting payrolls and other obligations. Read more here-

http://www.nytimes.com/2008/10/02/education/02college.html?_r=3&ref;=us&oref;=slogin&oref;=slogin&oref;=slogin

-Fed May Lose Out on Bear Assets, Bank of America Says. The U.S. Federal Reserve may lose as much as $6 billion on a portfolio of mortgage-backed assets it took over from Bear Stearns Cos., according to Bank of America Corp. analysts. Read more here-http://www.bloomberg.com/apps/news?pid=20601206&sid;=akRlc4ks5mDc&refer;=realestate

-’The Golden Age for financial services is over’. The new most powerful man in finance, Bank of America CEO Ken Lewis, talks about the future of Wall Street and the economy. Read more here-http://money.cnn.com/2008/09/28/news/companies/tully_lewis.fortune/index.htm

-Financial Crisis: So much for tirades against American greed. Ambrose Evans-Pritchard says it is ironic that European banks have turned out to be deeper in debt than their US counterparts. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3118994/Financial-Crisis-So-much-for-tirades-against-American-greed.html

-Financial Crisis: The next decade could be our very own Great Depression. Read more here-http://www.telegraph.co.uk/finance/comment/edmundconway/3090601/Financial-Crisis-The-next-decade-could-be-our-very-own-Great-Depression.html

-Chinese regulator calls US lending ‘ridiculous’. Read more here-http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/09/27/financial/f040132D61.DTL&type;=printable

-Credit crunch banker leaps to his death in front of express train. Read more here-http://www.dailymail.co.uk/news/article-1063356/Credit-crunch-banker-leaps-death-express-train.html

WAMU IN BIGGEST BANK FAILURE

-WaMu Assets Sold to JPMorgan in Record Bank Failure. Washington Mutual Inc. was seized by government regulators and its branches and assets sold to JPMorgan Chase & Co. in the biggest U.S. bank failure in history.

WaMu became “unsound” after customers withdrew $16.7 billion since Sept. 16, the Office of Thrift Supervision said yesterday. Branches are open and depositors have full access to their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVA8ErWOAjmI&refer;=worldwide

FORTIS BANK RESCUED

-Fortis Forced Into Rescue as Banking Crisis Worsens. Fortis became the largest European financial-services firm forced into a government rescue after the worsening global crisis shattered investor confidence.

Belgium, the Netherlands and Luxembourg will inject 11.2 billion euros ($16.3 billion) by taking minority stakes in Fortis’s banking units in each country, the governments said in a statement late yesterday. Fortis will also sell the Dutch banking operations of ABN Amro Holding NV purchased just last year. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=a9fhOKGrJQPg or http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVu.cl23xFhk&refer;=home

ICELAND SEIZES BANK

-Iceland seizes troubled Glitnir bank. Glitnir, threatened by collapse, is nationalized by Iceland’s government, which buys a 75% stake for $878M. Read more here-

http://money.cnn.com/2008/09/29/news/international/Iceland_glitnir.ap/index.htm

U.K. MORTGAGE LENDER NATIONALIZED

-UK mortgage lender nationalized. British Treasury confirms it is taking over Bradford & Bingley in effort to preserve stability. Read more here-

http://money.cnn.com/2008/09/29/news/international/bradford.ap/index.htm

U.S. RECESSION COMING

-IMF Says U.S. Faces ‘Sharp Downturn’ as Market Crisis Worsens. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aNeRYv3hytE0

-U.S. Heading for Slump, With or Without Bailout. The U.S. may face its longest recession in a quarter century no matter what action Congress takes on Treasury Secretary Henry Paulson’s $700 billion plan to rescue the battered banking industry. Economists including Joseph Lavorgna of Deutsche Bank Securities and David Greenlaw of Morgan Stanley said it now appears the economy shrank in the third quarter as credit- crimped consumers cut spending for the first time since 1991.

A further contraction is likely in the next two quarters, some economists predicted, which would make the recession the longest since 1981-82. “This has been a body blow to consumer and business confidence,” said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania. ”The next six months are going to be very difficult.”

How bad it gets depends on whether Congress passes some form of assistance for the banks. The Standard & Poor’s 500 index plunged 8.8 percent Monday, its biggest fall since 1987, after the House of Representatives rejected the rescue package. The stock-market rout wiped out a record $1.3 trillion of wealth. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=ayyjXs25Y7oE&refer;=home

-U.S. Factories Contracted at Faster Pace in September. Manufacturing in the U.S. contracted in September at the fastest pace since the last recession as sales slowed, signalling the credit crisis is spreading beyond Wall Street.

The Institute for Supply Management’s factory index dropped to 43.5, less than forecast and the lowest since October 2001, the Tempe, Arizona-based group reported today. A reading of 50 is the dividing line between expansion and contraction.

The housing slump has already spread to autos, and other industries may soon follow, as mounting foreclosures, tougher lending rules and rising unemployment choke off consumer spending. While exports have so far kept manufacturing from slipping much more, weakening economies around the globe are also causing overseas sales to slow.

“Manufacturing could be on the brink of a collapse,” said Lindsey Piegza, a market analyst at FTN Financial in New York. ‘There are no orders, no jobs and there is really no incentive for businesses to invest. The credit crisis is compounding the problem.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=asVxx.6YtnmU

-U.S. September Job Cuts Rise 33% From Year Ago, Challenger Says. Job cuts announced by U.S. employers climbed 33 percent in September from a year earlier, led by reductions at computer- and automakers, according to a private placement firm. Firing announcements rose to 95,094 last month from 71,739 in September 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today.

Hewlett-Packard Co., the world’s largest computer-maker, said last month it would eliminate 24,600 jobs, accounting for much of September’s increase, Challenger said. A slowdown in consumer spending and the ongoing housing recession are forcing businesses to trim payrolls to preserve profits. Firings may continue to rise as banks make credit more difficult to obtain. “It may take several weeks or months for the fallout from September’s Wall Street turmoil to hit the unemployment numbers,” John A. Challenger, chief executive officer of the placement company, said in a statement.

“Companies are cutting costs, and investments in new technology may be put on hold.” The Labor Department may report on Oct. 3 that the economy lost jobs in September for a ninth consecutive month. Economists surveyed by Bloomberg News forecast payrolls dropped by 105,000 in September after declining by 84,000 in August. Companies have announced a total of 763,090 cuts so far this year, up 30 percent from the first nine months of 2007, according to Challenger’s survey. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aM7LINS06Ewo

-Buffett Says Economy ‘on Floor’ After Cardiac Arrest. Billionaire Warren Buffett, the world’s preeminent stock picker, said the U.S. economy is ”flat on the floor” after a cardiac arrest as companies struggle to secure funding and unemployment increases.

“In my adult lifetime I don’t think I’ve ever seen people as fearful, economically, as they are now,” Buffett said today in an interview with Charlie Rose to be broadcast tonight on PBS. “The economy is going to be getting worse for a while.”

The biggest housing slump since the Depression has spurred a wave of defaults and a yearlong contraction in global credit markets, squeezing companies’ capacity for investment. Buffett’s Berkshire Hathaway Inc., based in Omaha, Nebraska, agreed in the past two weeks to buy $8 billion in preferred shares from General Electric Co. and Goldman Sachs Group Inc. to help the companies fund their businesses. The credit freeze is “sucking blood” from the U.S. economy, Buffett said. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=atMtOHVVYrko&refer;=home

MORE U.S. DEBT

-Budgetary Consequences of the Financial Crisis. Once one begins to take a look at the staggering problem at hand, the deficit that was previously projected by the Congressional Budget Office of -$438 billion could easily double. Our first cut estimate now expects that the deficit could reach as high as -$585 billion in fiscal year 2009. Read more here-

http://news.goldseek.com/GoldSeek/1222434620.php

-Giant U.S. debt a crisis waiting to happen. Crunch will come by 2020, lobbyist warns. Soon very soon the national debt of the United States will reach a staggering $10 trillion. If Fed Chairman Ben Bernanke dropped by and scribbled you a cheque for that amount of dough, it would look like this: $10,000,000,000,000.

Count ‘em up. That’s 13 zeroes. Kind of makes your head spin, doesn’t it? By any measure, that’s a massive pile of greenbacks. It’s roughly equivalent to seven times Canada’s annual GDP, or more than 14 times the size of the $700-billion-US Wall Street bailout er, “financial system rescue package” the U.S. Senate voted on last night.

With annual U.S. economic output of $14.3 trillion, the national debt-to-GDP ratio for the world’s biggest economy now hovers near 70 per cent. It’s certain to get a lot worse as the economy weakens, tax revenues slide and bailout costs mount, although no economist can provide a credible estimate, given the profound uncertainties now facing the U.S. economy.

Some say the U.S. budget deficit for fiscal 2009 could hit $1 trillion, or more than double the expected deficit for fiscal 2008, as Washington absorbs the costs of the bailout, the government takeover of residential mortgage giants Fannie Mae and Freddie Mac, the rescue of insurance behemoth AIG, and of course the ongoing wars in Iraq and Afghanistan.

That’s why the bailout plan calls for the U.S. to raise the statutory ceiling on government debt to more than $11.3 trillion from $10.6 trillion. Once OK’d, it would mark the seventh such hike since early 2004, and the second since July 30, when the ceiling rose by $800 billion. Since President George W. Bush took office, the U.S. national debt has grown by more than $4 trillion, to more than $9.9 trillion. Read more here-http://www.canada.com/edmontonjournal/news/story.html?id=075556bc-511b-4699-a500-5503714b9b85

INTEREST RATES

-ECB Keeps Rate at 4.25% Even as Recession Looms. The European Central Bank kept interest rates at a seven-year high today to curb inflation, even after the credit crunch forced governments to bail out banks and increased the likelihood of a recession. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aQjn7jKU1eoU

U.S. DOLLAR TO WEAKEN IN THE LONG RUN

-Chinese Banker Predicts Weakened U.S. Dollar in Long Term. The U.S. dollar will face short-term fluctuations and weaken in the long run, a leading Chinese banker predicted here on Sunday. Speaking at the Summer Davos forum in this north China port city, Bank of China Vice President Zhu Min said he believed it would be less likely for the United States to sell more treasury bonds to other countries to obtain the funds needed to bail out the turmoil-beleagued financial market, which would only accelerate inflation in other countries.

Instead, the U.S. could only issue other bonds to finance the rescue plan, which Zhu said would definitely cause the dollar depreciation in the long term. The bailout fund will have topped $1 trillion U.S. dollars if the U.S. Congress passes the Fed’s $700 billion financial rescue plan.

Zhu said market confidence could not be recovered simply with the help of the $700 billion, saying the U.S. dollar is a currency with turbulent fluctuations. “It takes a long time to solve the current liquidity strains and investment crisis,” Zhu said. Zhu also saw short-term fluctuations for the dollar since investment demand for the dollar is dropping and there could be “more bad news” in the coming few weeks. Read more here-http://www.gata.org/node/6682

U.S. STOCKS HAVE FURTHER TO FALL ACCORDING TO DOW THEORY

-U.S. Stocks Have Further to Fall, Dow Theory Says. Transportation stocks are signaling the market is poised for more losses after the Dow Jones Industrial Average posted its biggest-ever point decline.

Dow Theory, created by Wall Street Journal co-founder Charles Dow in 1884, holds that the 30-stock industrial average takes cues from the Dow Jones Transportation Average. The gauge of companies such as FedEx Corp. and Ryder Systems Inc. slid yesterday to the lowest since March 17, suggesting the industrials’ biggest point decline ever won’t mark its bottom, some investors say.

“When the Dow transports are making new lows, that generally signals more trouble for the markets,” said Frederic Dickson, who manages $17 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. ”The transports are really a signal of what Wall Street thinks of overall economic prospects.”

According to Dow Theory, weakness or strength in manufacturing will last only if matched in the shipping of products. Until Monday, when the transports joined the industrials in giving up gains since mid-July, that trend was bullish. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aqB2tptFv8zg

-Dow to fall to 7,000, FTSE to 3,300. We will eventually hit a real bottom in global stock markets perhaps around the levels I have indicated or a little lower. By then gold will be $2,000 an ounce or more and silver $60-70. Precious metals will be the best performing asset class by far in a sea of red ink. I think this will all take 18-24 months. But it could come very much quicker with a stock market crash as early as next month. Peter J. Cooper-Read more here-http://news.goldseek.com/GoldSeek/1222696980.php

BUFFETT BUYS INTO GE

-GE Raises $15 Billion; Buffett Gets Preferred Stake. General Electric Co. plans to offer $12 billion in common shares and billionaire investor Warren Buffett’s Berkshire Hathaway Inc. will buy $3 billion in preferred shares as GE bolsters its cash cushion amid volatile markets.

Buffett’s stake will pay an annual 10 percent dividend and is callable after three years at a 10 percent premium, Fairfield, Connecticut-based GE said today in a statement. Buffett also gets warrants to buy $3 billion of common stock with a strike price of $22.25 a share for five years.

The offering and stake will let GE accelerate the plan Chief Executive Officer Jeffrey Immelt announced last week to bolster its finances amid volatile financial markets. Buffett, 78, last month bought $5 billion in Goldman Sachs Group Inc. preferred shares to show faith in the investment banking company. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=a38DBL6ufMgw&refer;=home

LEHMANS 100% PRINCIPAL PROTECTIONS MEANS PENNIES ON THE DOLLAR

-Lehman’s ‘100% Principal Protection’ Means Pennies for Notes. A brochure pitching $1.84 million of notes sold by Lehman Brothers Holdings Inc. in August, a month before the firm filed for bankruptcy, promised “100 percent principal protection.”

Buyers had “uncapped appreciation potential” pegged to gains in the Standard & Poor’s 500 Index, the brochure said. In the worst case, they would get back their $1,000-per-note investment in three years. Only the last in a list of 15 risk factors mentioned the biggest danger: “An investment in the notes will be subject to the credit risk of Lehman Brothers.”

Lehman’s Sept. 15 bankruptcy leaves holders of the notes waiting in line with other unsecured creditors for what’s left of their money. The collapse has rattled Wall Street’s $114 billion structured-notes business, which Lehman, Merrill Lynch & Co., Morgan Stanley and Goldman Sachs Group Inc., all based in New York, used to raise cheaper funding as the credit crisis drove bond yields higher. About three-fifths of the $68.1 billion sold this year were bought by individual investors, according to data compiled by mtn-i, a London-based firm that tracks the market.

“Investors are going to be a lot more concerned about the credit of the issuers of these notes,” said James Angel, an associate professor of finance at Georgetown University in Washington. Until recently, “the buyers may have been mesmerized by the bells and the whistles,” he said.

The market for structured notes constructed by Wall Street firms from a combination of bonds, stocks, commodities, currencies and derivatives has mostly avoided fallout from the slump in sales of mortgage-backed collateralized debt obligations and auction-market preferred securities. Read more here-

http://www.bloomberg.com/apps/news?pid=20601109&sid;=aPQXoCH.fIa0&refer;=home

CREDIT DEFAULT SWAPS THE NEXT DISASTER?

-The $55 trillion question. The financial crisis has put a spotlight on the obscure world of credit default swaps which trade in a vast, unregulated market that most people haven’t heard of and even fewer understand. Will this be the next disaster?

In just over a decade these privately traded derivatives contracts have ballooned from nothing into a $54.6 trillion market. CDS are the fastest-growing major type of financial derivatives. More important, they’ve played a critical role in the unfolding financial crisis. First, by ostensibly providing “insurance” on risky mortgage bonds, they encouraged and enabled reckless behavior during the housing bubble.

“If CDS had been taken out of play, companies would’ve said, ‘I can’t get this [risk] off my books,’” says Michael Greenberger, a University of Maryland law professor and former director of trading and markets at the Commodity Futures Trading Commission. “If they couldn’t keep passing the risk down the line, those guys would’ve been stopped in their tracks. The ultimate assurance for issuing all this stuff was, ‘It’s insured.” Read more here-http://money.cnn.com/2008/09/30/magazines/fortune/varchaver_derivatives_short.fortune/index.htm

CREDIT CARDS TO IMPLODE

-A hurricane of bad credit card debt will start crashing ashore in the United States in the first quarter of next year, even as the mortgage crisis continues, analysts at New York research firm Innovest Strategic Value Advisors warned Monday.

“A combination of a 10-year steady drip of deteriorating personal finances and a tidal wave brought on by the mortgage and credit crisis leads us to believe that credit cards are going to implode in the near term,” Gregory Larkin, Innovest’s senior banking analysts said during an online seminar on the topic.

So far, credit-card “charge-offs” debts declared irrecoverable by card issuers have been “defying gravity,” with losses lower than in both 2001 and 2005, Mr. Larkin said. But, historically, after a time lag, irrecoverable credit-card debt has followed mortgage charge-offs up or down, and U.S. mortgage charge-offs have rocketed up eight-fold since the last quarter of 2007.

“If history is any indicator, there should be an equivalent surge in credit-card charge-offs very soon,” he said. “We forecast first quarter credit-card charge-offs will be $18.6-billion (U.S.) and that the total 2009 charge-off bill will add up to $96-billion.” Read more here-http://www.globeinvestor.com/servlet/story/RTGAM.20080929.wcreditcards0929/GIStory/

MORE CAR DEALERSHIP CLOSURES COMING-CAR SALES DOWN

-Dealership Closures May Accelerate This Year as Car Sales Slump. U.S. new-vehicle dealership closures may rise as much as 40 percent this year as slumping sales and surging borrowing costs cut into profits, the National Automobile Dealers Association said today.

As many as 600 may shut down or consolidate with other dealers, equal to about 3 percent of the total, said Paul Taylor, an economist at the McLean, Virginia-based group. That compares with 430 a year ago. Dealers that sell cars from General Motors Corp., Ford Motor Co. and Chrysler LLC probably will account for the bulk of the closings, Taylor said. Americans have tightened spending as gasoline prices hover at record levels. At the same time, dealers are paying higher interest rates to get cars on their lots, shrinking profit margins.

”There are more dealerships out there than there are cars to sell,” Taylor said in a telephone interview. The U.S. had 20,770 new car dealerships at the start of 2008. Two days ago, Bill Heard Enterprises Inc., operator of the largest Chevrolet dealership in the U.S., filed for bankruptcy protection as financing conditions worsened. Credit markets have frozen amid the worst U.S. financial crisis since the Great Depression, triggered by losses on mortgage-backed securities. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=au0IdtYdyw1s

-Ford, Honda U.S. Sales Plummet as Credit Tightens. Ford Motor Co. and Honda Motor Co.’s U.S. sales of cars and trucks tumbled in September as tighter credit scared off consumers.

Sales at Ford, the second-largest U.S. automaker, fell 35 percent from a year earlier, the Dearborn, Michigan-based company said in a statement today. Honda reported a 24 percent drop.

Industrywide sales probably will fall for the 11th month in a row, the longest slide in 17 years, as the financial crisis caused lenders to toughen loan standards and consumers curbed spending. Sales already had dropped 11 percent through August, in part because of high gasoline prices.

Ford’s decline ”is an indicator of the state of the industry, with the credit problem hitting all segments, all types of vehicles,” said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. ”People of all economic backgrounds are going to be impacted.”

The annual sales rate for September may drop to 13 million cars and light trucks, the average estimate in a Bloomberg survey of 36 analysts and economists. The rate was 16.2 million in September 2007, according to data compiled by Bloomberg. U.S. yearly sales reached a record 17.4 million in 2000 and averaged 16.8 million this decade. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aA5.92WRqrHQ&refer;=home

REAL ESTATE

-Home Prices in 20 U.S. Cities Declined 16.3% in July. House prices in 20 U.S. cities declined in July at the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month’s credit crisis. The S&P;/Case-Shiller home-price index dropped 16.3 percent from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

The housing slump is at the center of the meltdown in financial markets as declining demand pushes down property values and causes foreclosures to mount. Banks will probably stiffen lending rules even more in coming months to limit losses, indicating residential real estate will keep contracting and consumer spending will continue to falter.

“The fact that house prices quickened their slide before the worst point in credit markets hit this month does not bode well,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto. Home prices decreased 0.9 percent in July from the prior month after declining 0.5 percent in June, the report showed. The figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month-to-month. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aEyKpTpk90C0&refer;=home

-Singapore Home Prices Post First Drop in Four Years. Read more here-http://www.bloomberg.com/apps/news?pid=20601080&sid;=aeZ7pZbL2B6I&refer;=asia

-Canadian housing shows bubble traits: economist. U.S. economist Robert Shiller says Canada’s housing market has been following a similar boom-and-bust path as that seen in the United States, but fundamental differences between the two leave Canada less exposed to the U.S.-style fallout.

“There have been booms in some Canadian cities Edmonton, Calgary, Vancouver but maybe [prices] are weakening or actually falling, at least in those boom cities,” he said, noting that the pattern somewhat resembles that seen in many U.S. and foreign markets over the past few years.

“To me, it would be surprising if Canada didn’t involve itself somewhat in the U.S. real estate bubble, and subsequent bust,” the famed author and Yale University professor told the Ontario Economic Summit. However, he suggested that the relatively small use of subprime mortgages in Canada should mean the damage in this country will be much less severe. “There’s a difference. We [in the United States] have had a subprime revolution that I don’t think took place, to the same extent at least, in Canada.” Read more here-

http://www.reportonbusiness.com/servlet/story/RTGAM.20081001.wshiller1001/BNStory/Business/home

or http://www.canada.com/calgaryherald/news/calgarybusiness/story.html?id=825f956c-2742-4de3-8972-da0b07708ecc

FORECLOSURES

-Metro U.S. Home Prices Fall on Higher Foreclosures. Home prices dropped in 24 of 25 U.S. metropolitan areas in July from a year earlier, led by declines in Las Vegas and the coastal cities of California, as foreclosures depressed property prices.

Las Vegas had the biggest drop on a per-square foot basis, falling 33 percent, New York-based real estate data company Radar Logic Inc. said in a report today. Los Angeles, Phoenix, Sacramento and San Francisco each dropped about 28 percent. Three of the five worst-performing markets were in California. “Buyers are increasingly reluctant,” Radar Logic Chief Executive Officer Michael Feder said in an interview. ”There has been an awful lot of talk about the declining of the housing markets.”

U.S. foreclosures rose to a record 2.75 percent of all mortgages in the second quarter, according to the Washington- based Mortgage Bankers Association. Foreclosed houses tend to sell at a discount of about 20 percent, according to research by Lehman Brothers Holdings Inc. Those discounts are weighing on prices throughout the country, Radar Logic said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aTiVFv29og1s&refer;=home

-U.S. foreclosure filings soar. Wyatt Kenoly doesn’t have a lot of time to watch politicians haggle over the $700-billion (U.S.) rescue package for Wall Street or follow the stock market gyrations. He’s too busy trying to stave off foreclosure of his home in Stockton, Calif. The monthly payment on his $425,000 mortgage is about to double to slightly more than $4,000. He and his wife bought the house in 2004, taking an interest-only loan that has been resetting at higher rates for the past couple of years.

While the loan payments have soared, the value of the house has sunk and it’s now worth about $240,000. The couple just can’t pay the mortgage any more. “It is grim,” Mr. Kenoly said Tuesday after spending the morning negotiating with his bank, HSBC Bank. “We can only hope and pray.” Read more here-http://www.globeinvestor.com/servlet/story/RTGAM.20080930.wmeltdownsubprime01/GIStory/

GEOPOLITICAL NEWS

-Israel asked US for green light to bomb nuclear sites in Iran. US president told Israeli prime minister he would not back attack on Iran, senior European diplomatic sources tell Guardian. Read more here-http://www.guardian.co.uk/world/2008/sep/25/iran.israelandthepalestinians1

-Bet on Israel bombing Iran. Are we going to have an October surprise, an attack on Iran by either the Bush administration or by Israel to stop the regime from becoming a nuclear power?

It could happen and alter the dynamics of the presidential race in the blink of an eye but only if Israel pulls the trigger.

Don’t expect the United States to drop bombs anytime soon. The reason: Iran has us over a barrel. According to Britain’s Guardian newspaper, Bush earlier this year nixed an Israeli plan to attack Iran’s nuclear facilities. Reportedly, the President said no because we couldn’t afford Iranian retaliation against our troops in Iraq and Afghanistan or Iran closing down Persian Gulf shipping.

Nonetheless, cynical speculation is now swirling in some quarters that with the financial collapse working against McCain and Bush’s legacy coming into focus the President might reconsider. Could that tail really wag the dog? Read more here-http://www.nydailynews.com/opinions/2008/09/27/2008-09-27_bet_on_israel_bombing_iran.html

-Pentagon Seeks $57 Billion More in 2010, Jonas Says. The U.S. military wants an increase of $57 billion in fiscal 2010, about 13.5 percent more than this year’s budget of $514.3 billion, according to the Pentagon’s outgoing comptroller. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aWrLKUxMFUYA

-Russia sees in credit crisis end of U.S. domination. Read more here-http://www.iht.com/articles/2008/10/02/europe/russia.php

-China report urges missile shield. The United States needs new weapon systems, including missile defenses and other advanced military capabilities, to deter and counter China’s steady buildup of nuclear and conventional arms, according to a draft internal report by a State Department advisory board. Read more here-

http://www.washingtontimes.com/news/2008/oct/01/new-us-defenses-sought-to-counter-beijing-buildup/

-Nuclear Terrorism Is No. 1 Threat, ElBaradei Says. The likelihood that terrorists will detonate a nuclear weapon poses the greatest risk to world security, surpassing proliferation threats from Iran and North Korea, United Nations atomic chief Mohamed ElBaradei said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ae.wPfK0oXfM&refer;=home

The GoldBugg Report – October 07, 2008
Posted by Worldwide Precious Metals on Tuesday, October 7, 2008

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