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The GoldBugg Report – December 30, 2008

December 30, 2008

WORLD FINANCIAL REPORT ON RADIO DEC 24 2008 SHOW

-Clive Maund gold and silver updates. See the charts.

-I still think that we could hit $2,000 an ounce next year in the price of gold. Peter Schiff

-Citigroup Bullish on Gold and Now Silver which is Likely to Outperform.

GOLD

-Gold: The Antidote To Our Problems. Gold is unique. It does not represent a liability of any institution and is not backed by debt. It is real money. It is a defacto currency. During the Depression, the loss of confidence in institutions and currencies pushed investors to seek refuge in gold as a store of value.

In Japan, gold protected investors from the depreciating yen in the Nineties. To be sure, the move to zero interest rates and trillion bailouts will set off an inflationary surge devaluing the dollar further. Gold has tripled in value over the last seven years, outperforming fiat currencies and fiat markets. It cannot be created except by an expensive mining process.

It is an asset that is both liquid and a currency. For that reason, gold will reach $2,000 per ounce next year once investors realize, as Bernanke realized eight years ago, that gold is the antidote to our financial problems. John Ing-Read more here-http://www.gold-eagle.com/editorials_08/ing121908.html

-2009 Likely Vintage Year for Gold. Read more here-http://www.321gold.com/editorials/browne/browne122208.html

-Clive Maund gold update. Read more here-http://news.goldseek.com/CliveMaund/1230041434.php

-GoldDrivers 2009 Extraordinary Bullish Outlook for Gold. There is a growing consensus that the only way to get out of this debt nightmare is to revalue the dollar against gold. There are many ways to calculate a hypothetical gold price which would counter balance most of world’s debt. In the 70’s for example Jim Sinclair predicted that gold would seek a price high enough to offset the public debt held in foreign hands.

He proved out to be right. A similar approach these days would require gold prices exceeding the $10,000 mark. Now $10,000 gold seems a lot but from an historical perspective it seems a reasonable target. When the gold price peaked at $850 in January 1980 the DOW was trading in that range as well. The DOW/GOLD ratio bottomed out at one. When the markets peaked in March 2000 the DOW/GOLD ratio peaked at 44 and has been in decline ever since.

In order to hit a DOW/GOLD ratio again of ‘one’ gold should appreciate above the $10,000 mark indeed with current DOW levels. I don’t see the DOW plunging much further from here. Compare it with the 1968 -1982 period were the DOW hovered around the 1000 mark for 14 years. Same is happening now, the DOW peaked in March 2000 (inflation adjusted) and it could take very well another couple of years before the DOW manages to leave the 10,000 mark for good.

I mean, there’s no economic justification now for the DOW to rise much further while a surge in inflation will cushion the DOW to the down-side. A DOW struggling around the 10,000 mark from 2000 to 2012-2015 is not unthinkable and neither is $10,000 gold somewhere in 2012-2015. Eric Hommelberg-Read more here-http://news.goldseek.com/EricHommelberg/1230042476.php

-Richard Benson: U.S. govt. may grab your gold if you’re not careful. My nature is not to be an alarmist and I honestly don’t know for sure when and if the US will grab the ETF gold. However, over the next two years the federal deficit, funded by selling new Treasury securities, is certain to be over 10 percent of GDP.

Holders of the dollar will want out and all that gold sitting in vaults makes it too easy for our federal government to come in and rob you of it in order to save the dollar and pay for socialism. I understand the morality here: Inflation is good so robbing savers (for the sake of government) is viewed as good! Therefore, robbing savers of their gold is even better! So, buying gold, silver, and precious metals is truly one of the few ways you can immunize yourself from the coming inflationary confiscation of wealth.

Owning physical gold and silver and keeping it safely in your possession is a good idea! If you can’t get gold, buy silver, platinum, palladium, etc., all in physical form. While you still can, think about moving into physical form any gold in ETFs you have; you won’t be sorry you did! Read more here-http://news.goldseek.com/SFG/1229625795.php

-I still think that we could hit $2,000 an ounce next year in the price of gold. Peter Schiff: Outlook for the Gold Market-Read more here-

http://seekingalpha.com/article/111857-peter-schiff-outlook-for-the-gold-market?source=feed

-Dollar weakness and US deficit will underpin gold price. Potash, oil and uranium also positive Scotiabank. Scotiabank economist Patricia Mohr forecasts that commodity prices will decline further this month, but also suggests a number of commodities should outperform. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=75673&sn;=Detail

-Phenomenal demand for gold coins continues. The SA Gold Coin Exchange says demand for gold coins has picked up as investors wish to take charge of their own affairs. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=75582&sn;=Detail

-GATA Chairman Murphy reports on meeting with CFTC. Read more here-http://www.gata.org/node/7019

SILVER

-Citigroup Bullish on Gold and Now Silver which is Likely to Outperform. Citigroup’s technical strategists issued a note today saying that silver may rise to a four-month high of more than $14 an ounce. Bloomberg’s Nicholas Larkin reports that Citigroup’s London based Shyam Devani noted that “silver could test the 200-day moving average currently at $14.49.” Citigroup’s Tom Fitzpatrick said in an e-mail “while the outlook for both gold and silver is bullish, we would not be surprised to see silver outperform in the short term.”

Citigroup recently warned that the damage caused by the financial excesses of the last quarter century was forcing the world’s authorities to take steps that had never been tried before. This gamble was likely to end in one of two extreme ways: with either a resurgence of inflation; or a downward spiral into depression, civil disorder, and possibly wars. Both outcomes will cause a rush for gold.

“They are throwing the kitchen sink at this,” said Tom Fitzpatrick, the bank’s chief technical strategist. “The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed through into an inflation shock.”

If they are unsuccessful, Fitzpatrick warns of a deflationary meltdown, civil unrest and massive political instability internationally. Gold and Silver Investments continue to believe that silver will likely reach its 1980 non inflation adjusted nominal high of $50/oz in the coming years due to the extremely favourable fundamentals. Silver remains an essential diversification in all portfolios. Gold.ie

-Silver to Continue to Outperform Gold and Other Assets in 2009. Silver has fallen sharply in recent months but will still outperform all major equity indices in 2008. This is quite an achievement especially given the fact that silver has surged in value in recent years and particularly in late 2007 and the start of the financial and economic crisis. While silver is some 50% lower than its record high at $20.86 an ounce, hit last March, it is important to state that silver is one of the few asset classes up for the year.

Silver is down 24% in USD terms, 22% in EUR terms but is up 0.5% in sterling terms, clearly showing it’s safe haven credentials. Silver did fall from a record nominal high of $20.86/oz, but it is important to remember that it is down some 50% after surging 83% in the previous 7 months. In the seven months from the start of the credit crunch and the collapse of Bear Stearns, silver had surged by 83%.

Thus after an 83% surge in just 7 months, silver had become overvalued and was due a correction. This is exactly what has happened and despite carnage in equity, commodity and property markets internationally silver has outperformed nearly all commodities, all indices and most asset classes in 2008 in all major currencies including the strongest currency in the world the US dollar.

Silver has risen sharply in recent years and had risen from some $6.70 in August 2005 to a nominal high of $20.86 in August 2007 or over 200% in just 2 years. Clearly despite very strong fundamentals irrational exuberance had entered the silver market and a sharp correction and consolidation was necessary. This is what has happened and today silver looks extremely good both from a fundamental and technical perspective. Gold.ie

-Clive Maund silver update. This minor pullback is offering prospective silver investors one of the greatest opportunities of our time. Read more here-http://news.silverseek.com/CliveMaund/1230041691.php

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1229965248.php

-Silver institute 4^th quarter newsletter. Read more here-http://www.silverinstitute.org/images/pdfs/4q08.pdf

-Silver’s back and so is its marketing apparatus. Read more here-http://www.nationaljewelernetwork.com/njn/content_display/fashion/jewelry-fashion-reports/e3id8413b8aaa2633217c6a4ea56504d94d

DEFINITIONS-QUOTES-QUICK HITS

-What Does Securities And Exchange Commission-SEC Mean? A government commission created by Congress to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers in the U.S. The SEC is composed of five commissioners appointed by the U.S. President and approved by the Senate.

The statutes administered by the SEC are designed to promote full public disclosure and to protect the investing public against fraudulent and manipulative practices in the securities markets. Generally, most issues of securities offered in interstate commerce, through the mail or on the internet must be registered with the SEC. Investopedia.com

-”You are dealing with a commission whose effectiveness in fraud deterrence is open to serious question,” said Professor Joel Seligman, an expert on the subject. Open to question? We would say the question is settled. The SEC does not fight fraud; it aids and abets it. One thing is sure; we’d get along fine without the SEC on the job. It does more harm than good. It merely helps perpetrate a fraud misleading investors into believing that their money is safe on Wall Street. As we’ve seen, donuts were safer on a fat farm. Bill Bonner-The Daily Reckoning

-As we know there are two sets of rules in banking and on Wall Street, one for the anointed and one for everyone else. The anointed never go to jail for their crimes. Bob Chapman

-”We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home.” President George W. Bush, Oct. 15, 2002-White House philosophy stoked mortgage bonfire-Read more here-http://www.iht.com/articles/2008/12/21/business/21admin.php

-The dollar is a terribly flawed currency. I hate to say it, but my goodness, they’ve messed up the dollar badly. So, I don’t like to do it, but I’m going to sell all the rest of my dollars sometime in the next few days, weeks, or months. Again, I don’t like saying it, but I’m afraid the dollar is going to go the way the pound sterling went. Jim Rogers-Pound sterling info here-

http://en.wikipedia.org/wiki/Pound_sterling

-”When people worry about where they have their money, they will want to own gold and silver.” Eric Sprott

-Eric Sprott said he’s betting against Canadian bank shares because he expects loan losses to soar as the global economy heads into a depression. “There are so many job cuts and output cutbacks it’s shocking,” Sprott said in an interview. “That’s not a recession, that’s a depression. I look at the data points and they just scream at me that we are off the cliff.” Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=ae26IkuOvck8&refer;=canada

-Charles Oliver of Sprott Asset Management is calling for $2,000 gold in the next 2-4 years. Watch video here-

http://watch.bnn.ca/the-close/december-2008/the-close-december-22-2008/#clip123729

-Since the summer we have experienced a sharp rise in demand for certain gold products. The one-kilo bar has become very popular. People used to buy certificates now they want physical gold. Fiorenzo Arbini, Pamp Refiners-Reuters

-Why anyone would keep a nickel of their assets in any kind of paper is beyond me. The equity markets are toast. The dollar’s current decline looks terminal and the bond market is another big bubble in search of a pin. The world’s financial system is in desperate straits and the “Inflate or Die” Syndrome has been unleashed over the entire globe. The quote above says it all. “People used to buy certificates now they want physical gold.” He obviously means “physical gold in hand” not in some paper form which is, once again, someone else’s promise to pay. Ed Steer

-James Turk, the founder of GoldMoney.com, says that, “The Fed made clear that there is no limit as to how much money they are going to print, they are debasing the dollar. That’s bullish for gold.” Casey Daily Resource

-”The Federal Reserve has embraced ‘Helicopter Bernanke’s’ inflate or die massive reserve and money creation academic theories in an attempt to prevent deflation,” wrote Mark O’Byrne, executive director at Gold and Silver Investments Ltd. “Markets realize that this will lead to a lower dollar and higher gold prices in the medium and long term,” O’Byrne said. Casey Daily Resource

-Even the most optimistic commentators are realizing that the financial and economic crisis looks set to deepen in the first few months of 2009 which should see a continuation of the weakness in stock markets and gold remaining firm, as seen in recent months.

Unprecedented zero interest policies, massive fiscal stimulus packages, massive money printing and competitive currency devaluations on an international scale will see gold again become the go to investment in 2009. Gold.ie

-The sharp decline seen in the dollar in the last month is leading to concerns of a disorderly run on the dollar as the creditors of the world’s largest debtor nation get worried about their US dollar denominated assets and need their own currency reserves to help protect and stimulate their own struggling economies. A prime distinction between the 1930’s deflation and Great Depression was that the US was the world’s largest creditor nation and the dollar was backed by gold.

Thus the US dollar strengthened in value as everything deflated in value versus it. Gold was even stronger as Roosevelt devalued the dollar by 60% and revalued gold by 60% from $22/oz to $35/oz in 1933. Today, the US is the largest debtor nation the world has ever seen and the levels of debt are increasing dramatically. And the US dollar is now a fiat paper currency, only backed by the “good faith and credit” of the US government.

It would not require significant selling by the Chinese, Japanese, Russian or OPEC nations to create a run on the dollar and sharp move upwards in long term interest rates (as US government bonds are sold) rather only a sharp reduction in their purchases of US debt instruments. This possibility is looking more probable and could see President elect Obama facing a monetary crisis in his first term.

Especially as the economic meltdown is leading to the US’ creditor nations having their own domestic financial and economic crisis to deal with. A sharp decline in the dollar will likely see other nations devaluing their currencies in competitive currency devaluations which would see the value of all currencies decline relative to gold. Competitive currency devaluations are already taking place in many countries internationally including in Japan (just last week Japanese Finance Minister Shoichi Nakagawa signalled Japan is ready to sell yen in order to artificially manipulate a weaker currency), Russia and China. Gold.ie

-Zachary Oxman, of Wisdom Financial, said that, “The dollar is again spiralling downward and in this deflationary environment, people are looking for safety and a store of value.” Oxman believes that “gold will continue to appreciate in the near term and probably slow after the first of the year.” He designated the $910 to $920 level as the key resistance area. Casey Daily Resource

-Buyers are likely to return to the gold market shortly, though. “The Fed’s actions show just how dire the credit crisis is and how desperate they are,” said Ralph Prestonof Heritage West Futures in San Diego. “The metals smell the fear. Market psychology is beginning to view gold as a safe haven.”

And Barclays Capital analysts said gold may average $820 next year. “In the near term, prices are likely to remain torn between two camps,” they wrote. “A pick-up in physical demand and additional safe-haven buying will support prices, but the need to liquidate positions to meet margin calls elsewhere will cap gold’s upside potential.” Casey Daily Resource

-Gold’s trading off the dollar,” wrote Frank Lesh of FuturePath Trading. “A weak economy and all-time low interest rates don’t call for a strong dollar.” Gold saw further support from investors looking for a safe haven during these troubled economic times. “We’re not going to get any revelations on the economy soon,” Lesh continued. “Those who want to hold gold are still looking at a shaky equity market worldwide.” Casey Daily Resource

-Versus gold every currency will fall. The chickens are coming home to roost. No matter what governments following Keynesianism say, every government will have to revert to a gold standard and God help those that do not have gold reserves. They will have to buy reserves back and that, of course, will send gold soaring.

Yes, inflation drives up gold and silver and deflation does as well as it becomes a flight to quality. When nations currencies are not worth the paper they are written on gold becomes the standard. We do not know for sure where gold is going.

Official inflation since 1980 would put it close to $3,000 and unofficial inflation over $6,000. If we return to a gold standard we could be looking at $9,000 to $10,000 an ounce, who knows. All we know is that is where all this is headed. We have seen one report that was looking for more than $50,000 an ounce. Bob Chapman

-Money market funds, an increasingly popular place to park cash, will need to raise fees or close to new money to remain profitable as yields hover at near-zero, according to industry managers. The funds, which manage $3,800bn and have seen big cash inflows, are reeling from frozen credit markets, subprime exposure and a crisis of confidence triggered by one fund “breaking the buck”, or returning investors less than they paid in.

The US Federal Reserve last week cut its target interest rate to between zero and 0.25 per cent, from one per cent. Jim McDonald, who runs taxable money market funds for T Rowe Price, said: “You can’t make money in this situation. If short-term interest rates stay where they are, it’s virtually impossible to run a government [bond] fund and make any money.

You can close the fund, that’s one option.” Vanguard last week closed two of its money market funds to institutional investors, while Credit Suisse said it would quit managing money market funds in the US and liquidate $8bn in assets across its three funds. Read more here-http://www.ft.com/cms/s/0/813bd074-cf8b-11dd-abf9-000077b07658.html?nclick_check=1 or http://www.gata.org/node/7030

-China says lending to US will not go on forever. China warned Wednesday it would not keep lending money to the US economy indefinitely, even as new data showed it had consolidated its position as the top buyer of American government bonds. “China’s increased purchase of US Treasury securities should not be interpreted as an endorsement of the assumption that the US can borrow its way out of the current financial crisis,” the China Daily said in an editorial.

The warning from the state-run newspaper, an English-language daily that mainly addresses a foreign audience, came after the US Treasury Department reported a steep increase in Chinese holding of US Treasury bonds. China held 652.9 billion dollars of US Treasury bonds at the end of October, up 11.2 percent from 587 billion dollars a month earlier, when China became the largest creditor ahead of Japan, according to the data released Tuesday.

Japan remained in second place, with total holdings of 585.5 billion dollars at the end of October. The China Daily said that, given the global economic crisis, the consequences would be serious if China and other nations stopped channeling money into the US economy. “Interest rates in the US would rise to undermine that government’s efforts to bailout distressed financial institutions and companies,” it said. China was also constrained by a lack of other places to put its money, according to the paper. Read more here-

http://sg.biz.yahoo.com/081217/1/4kvnw.html

RARE COLORED DIAMONDS

-The Rare Colored Diamonds Historical Value Tracker is the perfect tool for investors to view the potential future value of a rare colored diamond based on the current market trend of a particular type of diamond. Track the potential future value of colored diamonds here-http://www.rarecoloreddiamonds.com/HistoricalValueTracker.html

-Rio Tinto Claims Record Price for Argyle Diamond. Rio Tinto Diamonds said Monday it has received a record price for a pink diamond mined at its Argyle mine in Western Australia. The company did not disclose who bought the diamond or the price the stone fetched saying only that it sold above the reserve price.

The stone, named “Aphrodite” after the Greek Goddess of Love and Passion, is a 1.01 carat round, purplish red diamond, Rio Tinto explained. It was sold as part of this year’s Argyle Pink Diamond Tender which ran from August to November.

“In spite of the difficult economic outlook, this truly top end of the luxury market continues to defy gravity,” said Josephine Archer, sales and marketing manager of Argyle Pink Diamonds. “In the rarified world of Argyle Pink Diamonds we have seen and continue to see, sustained demand and very strong prices.”

The Argyle mine is the only known source of rare pink diamonds. Rio Tinto reported demand for its stones has increased due to the growing scarcity of the product. Production at Argyle is expected to decline as the mine transitions to an underground operation before it eventually closes within the next 10 years. Diamonds.net

-If your Christmas stockings are as deflated as your current stock portfolio, now is the time to consider giving the gift of natural fancy colored diamonds an extremely rare gift that keeps on giving. Investors with stock in most sectors have been on a financial roller coaster over the last year and face an uncertain future. If you held stock in Research in Motion (RIM) you would have seen it go from more than $118 USD per share in December 2007 to 38 $USD per share in December 2008.

Or, if you held stock in General Motors you would have seen it go from over $28 USD per share in December 2007 to $4 USD per share in December 2008. Comparatively, prices of natural fancy colored diamonds from the exclusive Argyle mine have increased 37 percent over the last year with the rarest gems doubling in value. Natural colored diamonds have intrinsic value and produce high financial returns. Unlike traditional or ‘white’ diamonds, natural coloured diamonds are rapidly increasing in rarity and value, as mines producing them near depletion.

For every 100,000 carats of flawless white diamonds, only one carat of gem-quality colored diamond is found. On average, natural fancy colored diamonds have increased in value by 10 to 15 percent annually since price monitoring began in the 1970s, with the greatest increase coming over this last year. Natural Fancy Coloured Diamonds even retain their value during recessions. “Sotheby’s and Christie’s auction houses have been setting records on the back of Natural Fancy Coloured Diamonds. NCDIA.com

-”I think diamonds could end up being thought of like they once were an emergency escape mechanism. The Jews sewed them into their hems and used them for safe passage. We’re all worried about the Banks and how we would ‘get out of Dodge’ if we had to.” Trend expert Faith Popcorn

-Bear Stearns and Lehman Brothers have disappeared and the Big Three and Citigroup hover on the edge of vanishing a diamond is forever. From Adam Hanft article De Beers: Diamonds Are a Recession’s Best Friend

-If more people bought diamonds instead of credit-default swaps, we’d be just fine now. From Adam Hanft article De Beers: Diamonds Are a Recession’s Best Friend

WORLD FINANCIAL CRISIS

-The governor of the Bank of Spain on Sunday issued a bleak assessment of the economic crisis, warning that the world faced a “total” financial meltdown unseen since the Great Depression.

“The lack of confidence is total,” Miguel Angel Fernandez Ordonez said in an interview with Spain’s El Pais daily. “The inter-bank (lending) market is not functioning and this is generating vicious cycles: consumers are not consuming, businessmen are not taking on workers, investors are not investing and the banks are not lending.

“There is an almost total paralysis from which no-one is escaping,” he said, adding that any recovery penciled in by optimists for the end of 2009 and the start of 2010 could be delayed if confidence is not restored. Read more here-http://www.breitbart.com/article.php?id=081221154025.lrwl34xi&show;_article=1

-The head of the International Monetary Fund (IMF) warned on Sunday that the economic situation could get even worse in 2009 if governments fail to take firm enough action. “Our forecasts are already very dark but they will be even darker if not enough fiscal stimulus is implemented,” Dominique Strauss-Kahn told BBC radio.

“We see 2009 as really being a bad year, with recession for most advanced economies and growth decreasing for emerging economies.” Read more here-http://www.breitbart.com/article.php?id=081221160957.e5z1c9vr&show;_article=1

-Russia would come under crippling financial pressure and may need to raise money externally if oil languishes at an average of $30 a barrel over the next two years, the World Bank predicted Friday. The bleak scenario would mark a rapid unraveling of Russia’s oil-fueled economic gains over the past eight years, during which time the government has paid down most of its foreign debt and built up a vast stockpile of international reserves.

“If oil prices in 2009 and 2010 average $30 a barrel, that would be a nightmare scenario for a global economy,” Zeljko Bogetic, the World Bank’s chief economist in Russia told investors on Friday.

“The pressures on the current account and public finances in Russia would quickly rise to a point where the financing constraint would become so sharp that it’s possible even to envisage Russia’s return from a creditor to international organizations to (that of) a borrower.” At $50 a barrel, Russia could drain much of its reserve funds and run budgetary deficits, but would not face a “meltdown” scenario, said Bogetic. Read more here-http://www.breitbart.com/article.php?id=D955PMC80&show;_article=1

-Where did the bailout money go? Banks keep it secret. It’s something any bank would demand to know before handing out a loan: Where’s the money going? But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.

“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,’” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”

The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest? None of the banks provided specific answers. Read more here-http://www.gata.org/node/7029

-AP finds $1.6 billion went to execs of bailed-out banks. Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found. The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines. Read more here-http://www.gata.org/node/7028

-Discover Financial Services Inc. and Capital One Financial Corp. are closing accounts of customers who haven’t used their cards for lengthy periods as part of efforts to reduce risk of defaults.

Discover, the fourth-largest credit-card network, has closed 3 million “inactive” accounts and plans to cut up to 2 million more, Chief Executive Officer David Nelms said in an interview yesterday. “Most of the accounts haven’t been used for years,” he said. “We think it’s a responsible move.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601213&sid;=aQT7YZF4Xgxc&refer;=home

-Hedge fund graveyard: 693 and counting. A research group says 344 hedge funds were liquidated in the third quarter a significant increase that represents 7% of all hedge funds. Read more here-http://money.cnn.com/2008/12/18/news/economy/hedge_fund_liquidations/index.htm

CALIFORNIA BROKE IN TWO MONTHS-CITIES IN TROUBLE

-A California official is warning that the state will run out of money in about two months unless a budget deal is struck. State Controller John Chiang said Monday that his office could be forced to defer billions of dollars in payments or issue IOUs. He says the instability of the banking industry has made borrowing money to bridge the gap an uncertain possibility.

Gov. Arnold Schwarzenegger is raising hopes of a budget deal this week. He says he wants to work with Democratic leaders to close a $42 billion shortfall projected through mid-2010.

Schwarzenegger says he and lawmakers are making progress on an $18 billion proposal that was passed without Republican support. Breitbart.com

-Moorlach Sees Up to 10 Municipal Bankruptcies in Coming Year. The accountant who predicted the nation’s largest municipal bankruptcy says as many as 10 insolvencies will roil the $2.7 trillion U.S. market for state, county and city debt next year as public finances worsen amid calls for federal aid to state and local governments. John Moorlach said in 1994 that Orange County, California’s leveraged investing strategy could wreck its finances.

The county went bankrupt about six months later after losing $1.6 billion. As many as four cities in the Golden State and six others nationwide may seek court protection from creditors next year under Chapter 9 of the bankruptcy code, the section devoted to municipal governments, Moorlach said in an interview. “The total could be higher,” said Moorlach, 53, now chairman of the Orange County Board of Supervisors.

He didn’t name any cities outside California, which has seen the cost of insuring state debt against default more than quadruple since September. He said his estimate was based on general economic conditions. States project a $97 billion shortfall over the next two years, according to the National Conference of State Legislatures.

This mounting pressure on public finances gives President-elect Barack Obama’s administration “strong incentives” to provide federal aid, wrote George Friedlander, a municipal strategist at Citigroup Inc., the largest U.S. underwriter for tax-exempt bonds, in the firm’s Dec. 12 Municipal Market Comment. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=adSvg08A04KI&refer;=home

FROZEN PORTS MEANS BLEAK 2010

-Frozen Ports in Long Beach, Singapore Mean Bleak 2010. Chris Lytle, chief operating officer of the port of Long Beach, California, took in a panorama of the slumping world economy from his rooftop observation deck one day this month. Shipping cranes stood still, truck traffic trickled and a cargo vessel sat idle, moored to a pier. “You never see that,” Lytle said. “It’s quiet, too quiet.”

Port traffic has slowed from North America to Europe and Asia as a recession erodes consumer demand and the credit crisis chokes off loans to export-dependent companies. International trade is set to fall by more than 2 percent next year, the most since the World Bank began measuring it in 1971. Idle ports around the globe are showing how quickly a collapse in trade can spread, undermining growth in each country it reaches. September and October are typically Long Beach’s busiest months as U.S. retailers take deliveries for holiday sales.

This year, imports fell 15.8 percent from a year earlier in September, 9.5 percent in October and 13.6 percent in November. “Everybody expects 2009 to be a bleak year,” said Jim McKenna, chief executive officer of the Pacific Maritime Association, a San Francisco-based group representing dock employers at U.S. West Coast ports. “Now, it looks like 2010 is going to be just as bleak.” Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=avcTZKlpHRqw&refer;=exclusive

SCAM OF THE CENTURY-BERNIE MADOFF

-Scam of the century. Bernie Madoff and the $50 billion heist. Watch the CNBC show here-http://www.cnbc.com/id/28256310

-U.S. regulators, trying to unravel the breadth of Bernard Madoff’s alleged $50 billion fraud, have found evidence of misconduct stretching back to at least the 1970s, two people familiar with the inquiry said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&refer;=home&sid;=ayNDQW6owsBs

-Pawnbroker Levi Touger tells reporters who want to see the Lamborghini that a Bernie Madoff victim hawked for quick cash that they needn’t bother stopping by. He doesn’t have it. And, by the way, it was a Ferrari. Touger’s Royal Pawn & Jewelry has made loans to some of the well-heeled Palm Beach investors caught in Madoff’s alleged $50 billion scam, turning his

business into a bit of a media sensation as television crews inquire about filming the big-ticket booty.

He says reports have overstated the items people were pawning, but not the income bracket of some of his more recent clients. “People call me and say, ‘Levi, if I need you, what could I get?’” he said. Read more here-http://www.boston.com/business/articles/2008/12/18/palm_beach_pawnshops_business_up_thanks_to_madoff/

-Madoff scandal hits Aspen. Dozens of families in this wealthy resort community fell victim to the massive Ponzi scheme. Losses in this small town alone could reach $1 billion. One very wealthy couple has already put their house on the market and moved in with their grown kids.

Then there’s the guy who smelled the recession coming, sold his expensive home here at the height of the market frenzy and, yes, invested it all with Madoff. Today no home, no money. Others speak with great pity of the widow who invested her husband’s life insurance money with Madoff only to find herself left without a penny. Read more here-http://money.cnn.com/2008/12/22/news/companies/madoff_aspen.fortune/index.htm

REAL ESTATE

-Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing speculation the market was close to a bottom. Purchases of both new and existing houses dropped 7.6 percent, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today.

A 13 percent drop in the median resale price was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said. “Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&refer;=home&sid;=aQ7HBEgYCzUE

-Sales of new homes in the U.S. fell in November to a 17-year low as credit dried up and consumer confidence sank. Purchases dropped 2.9 percent to an annual pace of 407,000, lower than forecast, according to figures from the Commerce Department today in Washington. The median sales price declined 11.5 percent from a year earlier. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid;=abyzcV_k5uT4&refer;=home

-Sales prices for existing U.S. homes fell the most on record in November, tearing a deeper hole into households’ already tattered finances. The median resale price fell 13 percent from a year before, to $181,300, “probably the largest price decline since the Great Depression,” National Association of Realtors Chief Economist Lawrence Yun said in Washington. Sales slid to an annual rate of 4.49 million, lower than forecast.

Sliding property values mean more Americans will be under water on their mortgages, likely leading to a further increase in already record foreclosure rates. Along with the wealth destruction from slumping stock portfolios, they also undermine consumers’ purchasing power. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&refer;=home&sid;=av.sqUTa2.T0

-10 worst U.S. real-estate markets for 2009. The housing market hasn’t bottomed out yet. For the third quarter, the closely-watched S&P; Case-Shiller national home-price index fell 16.6%, and experts are predicting further declines. Of the top 100 markets, here are 10 with the worst forecasts. Read more here-http://money.cnn.com/galleries/2008/fortune/0812/gallery.worst_markets.fortune/index.html

-U.S. commercial properties at risk of default could triple if rental income from office, retail and apartment buildings drops by even 5 percent, a likely possibility given the recession, according to research by New York-based real estate analysts at Reis Inc.

Lenders that used optimistic rent estimates to grant mortgages beginning in 2005 stand to lose as much as $23.1 billion, or 7.02 percent, of total unpaid balances if landlords lose 5 percent of net operating income, according to Reis. Analysts examined data on 22,890 properties that together may account for unpaid loans of about $329 billion in 2009, said Victor Calanog, director of research.

Banks are at risk as office vacancies are forecast to rise to 15.6 percent next year from an estimated 14.6 percent at the end of 2008. Lenders who sold commercial mortgage-backed securities to pension funds, investment banks and foreign governments have been hit by more than $1 trillion in losses and asset writedowns connected to bad residential loans.

“A large decline in net operating income isn’t necessary to shift a lot of properties underlying CMBS loans into debt- service coverage ratios that would be worrisome,” Calanog said in an interview. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ajBUTKShXZ7s&refer;=home

The GoldBugg Report – December 30, 2008
Posted by Worldwide Precious Metals on Tuesday, December 30, 2008

The GoldBugg Report – December 23, 2008

December 23, 2008

WORLD FINANCIAL REPORT ON RADIO DEC 18 2008 SHOW

-PRESERVING YOUR PERSONAL WEALTH

-Gold is money; therefore a hedge against inflation and deflation.

-Silver investigation: CFTC does U-turn.

PRESERVING YOUR PERSONAL WEALTH

-Driven by low interest rates and easy credit, businesses and consumers have been taking on excessive leverage and ignoring downside risk. That same leverage is now being unwound and financial asset prices are falling dramatically. In this extraordinary environment, preserving your personal wealth becomes priority one. Or, in other words, return of capital and not return on capital is priority one.

There are three key courses of action available to those who wish to safeguard their portfolios from further damage. The first is to bolster portfolio diversification beyond stocks, bonds and cash (the three traditional asset classes). The second is to understand the true size and cost of inflation and fully hedge against it. The third is to recognize where we are in the investment cycle so as to take advantage of a generational opportunity. Let’s examine these three keys in more detail.

Conclusion-Deleveraging is devastating the financial markets right now, and unfortunately it is likely to get much worse. For example, a financial institution with a net worth of $30 billion and assets of $600 billion can become insolvent if the value of its assets fall by only 5%. Without doubt, these are extraordinary times. You can take prudent action to preserve your portfolio’s value during this turbulent period by including an asset that has a long history of preserving value during structural monetary problems such as the US is currently experiencing. Today, preserving wealth should be priority one to accomplish this you should:

1) Bolster your portfolio by adding other asset classes, especially precious metals

2) Understand and hedge against true inflation

3) Recognize where we are in the investment cycle

Bullion preserves your wealth in both deflationary and inflationary cycles and is the only asset class that protects wealth from a systemic financial crisis. A modest allocation of 10% to 15% into precious metals bullion not only diversifies, but adds assets that keep their value because they are unaffected by the explosive growth of continually depreciating printed money from the world’s central banks.

Finally, the investment cycle, as indicated by the Dow-Gold ratio, is telling us to be overweight precious metals because true inflation is not only rising, but is substantially higher than officially reported numbers suggest. Nick Barisheff

GOLD

-”We are very reluctant to buy stocks of junior gold-mining companies that sit on a deposit that has not been turned into a mine yet,” Mr. Eveillard said. “In the extreme, if a deposit cannot be turned into a mine, then the price of gold could go to $3,000 an ounce but the stock would be worth zero.” Meanwhile, Mr. Eveillard said, First Eagle is one of the few gold funds to hold a large percentage in bullion, not relying upon exchange-traded funds.

As of this past week, 35% of the fund’s holdings were in bullion. “If you look at gold as insurance, then gold bullion is preferable to gold-mining shares,” he said, since it avoids the risks facing mining companies themselves. Mr. Eveillard said he is “extremely positive” about the longer-term prospects for gold. “What passes for the monetary system world-wide is fraying at the edges,” he said.

President-elect Barack Obama has signaled that his administration will use fiscal policy to stimulate the economy at the same time the Federal Reserve is doing the same with monetary policy. But ultimately, all of these plans are likely to prove to be inflationary, Mr. Eveillard said. And investors often buy gold as a hedge against inflation. Read more here-http://online.wsj.com/article/SB122929697856605179.html

-Interviewed Monday this week on the “Trading Day” program of Business News Network in Canada, former Federal Reserve Governor Lyle Gramley hinted that a big upward revaluation of gold may figure heavily in the Fed’s attempt to rescue the U.S. economy. The program’s guest host, Niall Ferguson, an author and history professor at Harvard, asked Gramley, now senior adviser at Stanford Group in Houston, about the seemingly grotesque expansion of the Fed’s balance sheet in recent months.

Ferguson asked: “I’ve heard it said that the Fed has turned into a government-owned hedge fund, leveraged at 50 to 1. Do you feel nervous about what this might actually do to the Fed’s reputation?” Gramley replied: “I think you have to reckon with the fact that one of the Fed’s assets is gold certificates, which are priced, as I remember, at $42 an ounce, and if we were to price them at market prices, the Fed’s leverage would look a lot less than it is now.”

While valuing the U.S. government’s claimed gold reserves at today’s Comex closing price of around $822 per ounce instead of the government antique bookkeeping entry of $42.22 per ounce would indeed vastly expand the government’s monetary assets, it might not be enough to offset the liabilities and guarantees the government lately has taken on. But the job might be done by revaluing the gold to $5,000 or $10,000 per ounce, as the British economist Peter Millar speculated two years ago might be necessary to prevent debt deflation. Story and video here-http://watch.bnn.ca/trading-day/december-2008/trading-day-december-8-2008/#clip119798 or http://www.gata.org/node/6989

-’Gold is serving its purpose as a hedge of wealth in uncertain times’ PwC. The 2008 Global gold price survey by PricewaterhouseCoopers has found, despite the global financial crisis, gold is holding its own. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=75025&sn;=Detail

-Gold is money; therefore a hedge against inflation and deflation. Gold is money. Real money maintains its purchasing power. Real money is a hedge against inflation (increase in credit and paper money supply) and its effects as well as deflation (decrease in credit and paper money supply) and its effects. Gold is a hedge against inflation and deflation otherwise it would not be real money. Hubert Moolman-Read more here-http://www.321gold.com/editorials/moolman/moolman121508.html

-Gold has rallied nicely off dollar weakness and continuing strong physical buying. The “Talking Heads” on TOUT-TV (CNBC) can knock gold all they want (and they do) but it has held its value through 2008. I bet these salespeople/anchor personnel wish their 401k did as good. Let’s see how well gold does when the dollar consolidates its losses. U.S. Dollar-The top I called for appears to have been put in. We can see some consolidation this week but make no mistake about it Uncle Sam’s paper is only going to get cheaper in 2009. Peter Grandich

-The U.S. Treasury bill bubble is soon to lose its luster, tarnished by chronic near 0% offered yields. Its supply requirements will lead to exhaustion. The investment community will seek an alternative in gold, especially when all cylinders will be fired up to produce inflation.

The policy makers are inching toward the inevitable decision to nationalize mortgages. By summertime, a panic will enter the picture, which will motivate a movement into gold for safe haven. The COMEX gold fireworks should light up the skies long before July Fourth. Jim Willie CB-Read more here-http://www.321gold.com/editorials/willie/willie121608.html

-Goldman raises gold and silver forecasts on anticipated dollar weakening. Goldman Sachs is raising its gold and silver price forecasts in line with its economists’ expectations on weaker dollar outlook and as havens from risk. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=75048&sn;=Detail

-Got Gold Report By Gene Arensberg. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=48705

-David Chapman, Gold Looking Up Again. Read more here-http://news.goldseek.com/UnionSecurities/1229533536.php

-John Embry Nov gold commentary. Read more here-http://www.sprott.com/pdf/investorsdigest/digest.pdf

-Sprott Resource Corp. announced today that it has acquired during this quarter 40,475 ounces of gold bullion and 852,478 ounces of silver bullion. The balance of SRC’s working capital is in short-term government of Canada treasury bills. “We intend to continue to look for attractive investment opportunities to allocate our capital while working on building accretive businesses,” said Kevin Bambrough, President and CEO of SRC.

“In the interim, we feel it is prudent to allocate a portion of our working capital into gold and silver bullion. We may allocate a larger portion into gold and silver, or other physical commodities, in the future depending on market conditions.” Kevin Bambrough continued: “Current yields on short-term government debt are approaching, and in certain cases have reached, zero percent. This is occurring while governments are assuming liabilities and issuing debt at an unprecedented rate.

We believe this situation is not sustainable over the longer-term and that global creditors will begin to hoard hard assets, in particular gold and silver, rather than purchase government debt that offers little nominal yield and is subject to a loss in real value as currencies are debased.” Read more here-

http://finance.yahoo.com/news/Sprott-Resource-Corp-cnw-13832038.html

-Richard Russell, the last man standing is gold. Read more here-http://www.321gold.com/editorials/russell/russell121708.html

-Adrian Douglas: The gold rush is on. My unique analysis methods at www.mareketforceanalysis.com indicate that gold and silver are at very good buy points. Gold and silver are selling for almost their cost of production, so the downside is severely limited because no commodity can trade below its cost of production for very long because producers go out of business, thereby reducing supply, which increases the price. Read more here-http://www.gata.org/node/6997

-Nervy investors spur rush at Swiss gold refiners. “I have been in the gold business for 30 years and I have never experienced anything like this,” said Bernhard Schnellmann, director for precious metal services at the refiner Argor-Heraeus, one of the world’s three largest.

“Production has dramatically increased since the middle of the year. We cannot cope with demand,” said Schnellman, wearing a gold watch on his wrist. Spot gold hit a record $1,030.80 an ounce on March 17. It fell below $700 in late October, partly because investors sold their holdings to cover losses in equity and bond markets hit by the credit crisis, and is now around $870 an ounce.

The trigger for the price to rise again could come from a much weaker dollar, making gold cheaper for holders of other currencies, and a renewed aversion to paper assets as governments and central banks pump large amounts of cash into the economy, stoking inflation. Read more here-http://www.reuters.com/article/marketsNews/idINLI46181820081217?rpc=44 or http://www.gata.org/node/6995 or http://www.swissinfo.ch/eng/front/Financial_crisis_boosts_Swiss_gold_production.html?siteSect=105&sid;=10089914

-Doug Pollitt on the possibly imminent end of paper gold. Read more here-http://www.kitco.com/reports/PositiveCarry-Dec09-08.pdf

-Antal Fekete: Backwardation that shook the world. Read more here-http://www.24hgold.com/news-gold-silver-Backwardation-That-Shook-The-World.aspx?langue=en&articleid;=353789_Antal_E__Fekete

-James Turk: More on gold backwardation. Read more here-http://www.kitco.com/ind/Turk/turk_dec122008.html

-In his “Midas” commentary at LeMetropoleCafe.com, GATA Chairman Bill Murphy announced his plans to meet in Washington shortly with Commodity Futures Trading Commission member Bart Chilton and U.S. Rep. Ron Paul to discuss the manipulation of gold and silver prices. Read more here-http://news.goldseek.com/LemetropoleCafe/1229325360.php

SILVER

-I’m actually now in a situation where I like silver, platinum, palladium and the other platinum group metals as well as gold. I like silver for a couple of reasons. One is it’s a financial asset like gold, it is benefiting from the move of investors into silver and gold, and it will continue to benefit from that. But you’ll also see several other things. First off, there is not a lot of metal in the silver market, half a billion ounces in bullion and maybe a half a billion ounces in bullion coins.

In gold you have a billion-plus ounces that investors own and another 980 million ounces that central banks own. There aren’t those large enormous stockpiles of silver if you’re looking at it on a dollar value basis. In addition, silver is an industrial metal with some very interesting new uses coming up. It’s losing some of its traditional uses such as photography; but in other uses, such as batteries and electronics, it’s actually growing very sharply and could grow more sharply over the next few years.

So I think silver’s got a lot of good things going for it. It’s an alternative financial asset like gold. It’s a smaller, less liquid, more volatile market than gold. And it has the industrial base that gold doesn’t have. So I like silver for those three reasons. Jeffrey Christian-Read more here-http://news.goldseek.com/GoldSeek/1229452680.php

-Trace Mayer: A problem with GLD and SLV ETFs. Read more here-http://seekingalpha.com/article/110609-the-problem-with-gld-and-slv-etfs or

http://www.runtogold.com/2008/12/a-problem-with-gld-and-slv-etfs/

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1229450490.php

-David Morgan Junk Silver or Junk Bonds? Read more here-http://news.silverseek.com/SilverInvestor/1229091883.php

-Silver investigation: CFTC does U-turn. Read more here-http://www.investegate.co.uk/invarticle.aspx?id=68374

DEFINITIONS-QUOTES-QUICK HITS

-Ponzi Scheme. A fraudulent investing scam that promises high rates of return at little risk to investors. The scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors.

The Ponzi scam is named after Charles Ponzi, a clerk in Boston who first orchestrated such a scheme in 1919. A Ponzi scheme is similar to a pyramid scheme in that both are based on using new investors’ funds to pay the earlier backers. One difference between the two schemes is that the Ponzi mastermind gathers all relevant funds from new investors and then distributes them.

Pyramid schemes, on the other hand, allow each investor to directly benefit depending on how many new investors are recruited. In this case, the person on the top of the pyramid does not at any point have access to all the money in the system. For both schemes, however, eventually there isn’t enough money to go around and the schemes unravel. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Charles_Ponzi

-Pyramid Scheme. An illegal investment scam based on a hierarchical setup. New recruits make up the base of the pyramid and provide the funding, or so-called returns, given to the earlier investors/recruits above them.

A pyramid scheme is initiated by an individual or a company that starts recruiting investors with an offer of guaranteed high returns. As the scheme begins, the earliest investors do receive a high rate of return, but these gains are paid for by new recruits and are not a return on any real investment.

From the day the scam is initiated, a pyramid scheme’s liabilities exceed its assets. The only way it can generate wealth is by promising extraordinary returns to new recruits; the only way these returns can be paid is by getting additional investors. Invariably these schemes lose steam and the pyramid collapses. Investopedia.com-Read more here-

http://en.wikipedia.org/wiki/Pyramid_scheme

-”Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” Charles Mackay-

http://en.wikipedia.org/wiki/Charles_Mackay

-The Fed is sending a message that it will print money to an unlimited extent until it starts to see the economy expanding. William Poole, former president of the St. Louis Fed, Bloomberg, 16 December 2008

-Gold’s gains “match the fall in the dollar all the way,” said Julian Phillips, editor at GoldForecaster.com. Frank McGhee, of Integrated Brokerage Services in Chicago, threw tact to the wind, saying that, “The dollar is going to the sewer, and this is highly bullish for gold.” And he added that, “The Fed is going to put as much liquidity into the system as it takes, but at the end of the day, what’s their exit strategy? It’s a huge inflationary bubble.” Casey Daily Resource

-Brian Hicks, co-manager of the $500 million Global Resources Fund at U.S. Global Investors, said he expected gold to revisit $1,000 some time next year, driven by negative real interest rates and the massive amount of money to be injected into the system by central banks.

“At some point, the market is going to transition from an environment of concerns over deflation to an environment of concerns over inflation, and that’s the real inflection point for gold,” said Hicks. “As we get out of this period of deleveraging and risk aversion, we think that the clear winner of commodities to investors will be gold,” said Hicks of U.S. Global Investors. Reuters

-Caesar Bryan, portfolio manager of GAMCO Gold Fund, said bullion could rally against most currencies as major industrial countries fight recession using policies that should depreciate their currencies. “When confidence falters in paper currencies and other investment assets, then interest rises in gold. I think that is where we are,” said Bryan, who manages $360 fund assets. Bryan said that a U.S. rate cut to zero would lower the opportunity cost of buying gold compared to fixed income investments and that should also discouraged central banks to sell gold. Reuters

-”The U.S. will have a debt crisis next year alongside a currency crisis. The dollar is on the verge of taking a complete dive,” said David Murrin, chief investment officer at Emergent Asset Management. Murrin added the repatriation trade, in which U.S. investors bring their money home and which has lifted the dollar in recent months, was mostly done. “Gold will rally because it’s a surrogate currency, I can see it reaching its highs within 16 months,” he said.

“The monetary expansion that took place in October and November was absolutely unprecedented,” said Markus Bachmann, fund manager at Craton Capital. “You can’t go wrong by holding physical gold. You don’t need to be a gold bug or a grave dancer. If you don’t know what the world is going to look like in the future then buy gold.”

“It would be prudent to have some exposure to gold given the fiscal and monetary stimuli taking place,” said Edward Hands, a portfolio manager at Commerzbank Corporates & Markets.

“Certainly over the course of three, four, five years, you could see the gold price double quite easily,” Hands said.

“Many are afraid of leaving their money in banks,” said Sandra Conway, managing director at ATS Bullion, which sells bullion and gold coins to institutions and the retail market. “It’s difficult to quantify, but I would say our turnover over the last three months has certainly doubled compared to the previous three months,” she said. “There are people buying gold from us, who have never bought gold before. It’s tangible, something they can tuck away.” Read more here-http://uk.reuters.com/article/stocksNews/idUKLNE4BF03U20081216?rpc=401&&pageNumber;=1&virtualBrandChannel;=0

-”It makes sense to me that we would go through a period of deflation and then all this liquidity out there will cause an inflation ,” says John Carter, president of Tradethemarkets.com. Inflation will rear its ugly head in late 2009,” pushing gold to $1,250 by midyear, he says. The wild card would be an Eastern European country going into default, as Iceland and Hungary have. ResourceInvestor.com

-The manoeuvring of the high-profile and well-informed Dennis Gartman of the Gartman Letter. Short gold at the beginning of the week, and projecting a $620 price objective in some TV interviews, Gartman abruptly cut the entire position early on Wednesday morning a day which saw gold up some $34. Read more here-http://www.marketwatch.com/news/story/dollars-decline-drive-gold/story.aspx?guid={24A3EC6F-D960-4EEF-908A-0F87A41A4924}&dist;=msr_1

-Almost a third of hedge funds will shut or merge after the $1.5 trillion industry posted its worst ever performance this year, according to IGS Group, which advises hedge funds on raising money. “The failure rate is going to go up, the closure rate is going up, and the merger rate is going up,” IGS Chief Executive Officer John Godden said in an interview in London. “It’s going to be a 30 percent wipe out.”

The number of hedge funds more than tripled in the last decade to a record 10,233 at the end of June, according to Chicago-based Hedge Fund Research Inc. That number will likely tumble after funds dropped 18 percent in the year through November, the worst year since HFR started its Fund Weighted Composite Index in 1990. Read more here-

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

-BP Capital LLC, the money manager founded by billionaire T. Boone Pickens, said the redemption rate at its equity fund was 65 percent as the company waived the normal requirements for investors to withdraw cash. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=adtevJ0UltfM

-Heat is more likely to kill an American than an earthquake, and thunderstorms kill more people than hurricanes do, according to a U.S. “death map” published on Tuesday. Researchers who compiled the county-by-county look at what natural disasters kill Americans said they hope their study will help emergency preparedness officials plan better.

Heat and drought caused 19.6 percent of total deaths from natural hazards, with summer thunderstorms causing 18.8 percent and winter weather causing 18.1 percent, the team at the University of South Carolina found. Earthquakes, wildfires and hurricanes combined were responsible for fewer than 5 percent of all hazard deaths. Read more here-

http://www.alertnet.org/thenews/newsdesk/N16172535.htm

-Israeli Defense Minister Ehud Barak is warning that if Iran acquires a nuclear weapon, it could try to attack the United States. Barak said the world should press Iran to stop it from building nuclear weapons. He spoke at a conference of the Institute for National Security Studies at Tel Aviv University. He said, “If it built even a primitive nuclear weapon like the type

that destroyed Hiroshima, Iran would not hesitate to load it on a ship, arm it with a detonator operated by GPS and sail it into a vital port on the east coast of North America.” Indicating the possibility of a military strike, Barak said, “We recommend to the world not to take any option off the table, and we mean what we say.” Read more here-

http://www.breitbart.com/article.php?id=D954L6K83&show;_article=1

RARE COLORED DIAMONDS

-If more people bought diamonds instead of credit-default swaps, we’d be just fine now. From Adam Hanft article De Beers: Diamonds Are a Recession’s Best Friend

OIL-BASE METALS-COMMODITIES

-OPEC Agrees to Cut Output by 4.2 Million Barrels. OPEC agreed to cut oil output by 4.2 million barrels a day from September production levels, Secretary-General Abdalla El-Badri said. The Organization of Petroleum Exporting Countries will cut output from a daily level of 29.045 million barrels three months ago, indicating a new quota target of 24.845 barrels a day.

The reduction will take place from the start of next year. OPEC, which produces more than 40 percent of the world’s oil, will next meet in March. Chakib Khelil, the group’s president, said OPEC has no oil-price target.

Oil’s $100-a-barrel collapse from July’s record prices has curbed revenue for producers, threatening government budget shortfalls. Saudi Arabia’s King Abdullah said last month that his country needs crude at $75 to spur investment. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a7Iwnj3_QVjc or http://www.bloomberg.com/apps/news?pid=20601087&sid;=ah2rPCVsI1zY&refer;=home

-Global oil supply will peak in 2020, says energy agency. Read more here-http://www.guardian.co.uk/business/2008/dec/15/global-oil-supply-peak-2020-prediction

-Merrill Oil Guru Shifts From Bull to Bear and Back. Francisco Blanch, the Merrill Lynch & Co. analyst who called the $147.27 record crude-oil price almost on the nose, sent markets into a tailspin with his forecast that the next move may be back to $25 a barrel in 2009. Such relief for consumers may be short-lived once the global recession ends, he said.

“If we reignite economic growth to a very fast level, we will have a shortage of energy again,” said the 35-year-old head of global commodity research at Merrill Lynch in London. Oil may rise to $150 in two or three years, said Blanch. World growth will reach 2.2 percent next year and rise to 4.8 percent by 2011, according to the International Monetary Fund. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=ahymsSFHUJVM&refer;=home

-Long term/short term investment conflict builds certainty of metals price surge. It seems inevitable that we are in for a surge in metal prices as current financial strictures will lead to severe supply shortages medium to long term but the question is when. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=75185&sn;=Detail

INTEREST RATES-U.S. DOLLAR

-Fed Cuts Rate to Zero-0.25%, Will Use All Tools. The Federal Reserve cut the main U.S. interest rate to “a target range” of between zero and 0.25 percent and said it will do whatever is needed to end the longest recession in a quarter-century and revive credit.

The Fed “will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Federal Open Market Committee said today in a statement in Washington. “Weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”

Treasury notes rallied in anticipation the Fed will buy the securities to force borrowing costs for consumers and companies lower. Nine rate cuts in the prior 14 months and $1.4 trillion in emergency lending have failed to reverse the economic downturn.

“The focus of the committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level,” the FOMC said.

The statement noted that the Fed has already announced it will purchase agency debt and mortgage-backed securities, and said the Fed is ready to expand the program. The central bank said it continues to weigh the potential benefits of buying longer-term Treasury securities. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aHtjzkdBhlrI&refer;=home

-Dollar May Reach $1.65 per Euro, Citigroup Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJ4e6Or8EJ2I

-Clive Maund, bye bye dollar, bye bye Treasuries. Read more here-http://www.321gold.com/editorials/maund/maund121708.html

-Axel Merk, Fed Fights to Weaken Dollar. Read more here-http://www.321gold.com/editorials/merk/merk121708.html

-A majority of the world’s biggest currency-trading firms say the dollar’s appeal as a haven amid the financial crisis all but evaporated. The U.S. currency slid to a 13-year low against the yen today and the weakest versus the euro in 11 weeks after the Federal Reserve reduced its target interest rate Tuesday to a range of zero to 0.25 percent, the lowest among the world’s biggest economies.

CMC Markets said today the currency’s prospects appear “ominous.” State Street Global markets said the dollar’s outlook has been “undermined.” “The dollar has been under heavy downward pressure,” said Robert Minikin, a senior currency strategist in London at Standard Chartered Bank Plc. “This move is very well-justified and has a long way to run.” Standard Chartered is preparing to cut its dollar forecasts, Minikin said.

This weeks rate cut brings the Fed’s target to below the Bank of Japan’s for the first time since January 1993. U.S. policy makers repeated plans to buy agency debt and mortgage- backed securities and said they will study buying Treasuries, a policy known as quantitative easing. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aSmEfH_9_GxE

-The Federal Reserve today made clear its intention to continue flooding the system with newly created dollars. It says in effect that it will do whatever it takes. Its Federal Open Market Committee (FOMC) lowered the federal funds interest rate target to a range of 0%-to-0.25%, which is an historic low, but it didn’t stop there. The FOMC also announced that it would “employ all available tools” in an attempt to jumpstart the moribund economy. That means it will monetize assets of all sorts. It will turn debt into more US dollar currency.

What’s needed today is the same medicine that has over time inevitably cured every other bust. It is capital and savings, and unfortunately, they are in short supply in today’s America. But the Federal Reserve will not be deterred from pursuing the reckless path it is on. They seem to think that they can avoid the bust, and further, that the economy can emerge unscathed from years of imprudent and reckless credit extension by the banks.

History says the Fed is mistaken, but history also tells us something else. The consequences of the Fed’s actions will debase the dollar, perhaps irreparably so. It is the same message being given by the market, as indicated by the following chart of the US Dollar Index. James Turk-Read more here-http://www.goldmoney.com/en/commentary.php

CREDIT CRISIS LOSSES AT 1 TRILLION AND COUNTING

-Credit Crisis Cost Tops $1 Trillion With Morgan Stanley’s Loss. Losses and writedowns from the credit crisis surpassed $1 trillion this week, and show little sign of ending, as Morgan Stanley marked down the value of mortgages and leveraged loans.

Morgan Stanley and Goldman Sachs Group Inc.’s markdowns this week bring losses by financial firms in the U.S. to $678 billion since last year, while European banks and insurers have written down a further $300 billion, according to data compiled by Bloomberg. Firms have raised about $928 billion to replenish capital, and cut about 239,000 jobs across the industry.

The losses have caused bank failures from the U.S. and the U.K. to Germany and Iceland, forcing governments to increase borrowing and buy stakes in financial companies. The U.S. alone is spending $700 billion, almost half of which will go directly into banks and insurers, in what has become the worst financial crisis since the Great Depression.

“You’re up to $1 trillion now and this is still going to run for some time,” said Charles R. Morris, a former banker and software company executive whose book “The Trillion Dollar Meltdown” was published in March. In Sept. 2007 “the first back-of-the-envelope calculation I did came up with $1.1 trillion and this was using really low-default estimates.”

Morgan Stanley today reported fourth-quarter mortgage related losses of $1.2 billion, which were more than offset by net revenue of $2.7 billion from the widening of Morgan Stanley’s credit spreads. The firm had mark-to-market losses of $1.7 billion on leveraged loans and leveraged-loan commitments, and writedowns of $800 million on securities in the firm’s subsidiary banks. Those losses were offset by gains of $1.1 billion related to debt hedges. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=asAJjiHQgPEw

American International Group Inc., which already has suffered more than $60 billion in writedowns and losses, may have to absorb almost $30 billion more because of flaws in the way its holdings are valued.

An examination of AIG’s credit-default swaps guaranteeing more than $300 billion of corporate loans, mortgages and other assets not covered by a $152.5 billion federal rescue shows the New York-based insurer may value some of its positions at levels that don’t reflect distress in the markets, according to an analyst at Gradient Analytics Inc. and a tax consultant who teaches at Columbia University Business School in New York. Executives at two firms that have similar investments say they account for the securities differently than AIG does.

“Every time I look at their statements I find something new,” said Donn Vickrey, executive vice president of Gradient Analytics in Scottsdale, Arizona. He estimated that AIG may need to take at least $28 billion in additional writedowns on swaps covering European corporate loans and prime residential mortgages, as well as collateralized loan and debt obligations. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aNSpiZqzDc6A&refer;=home

U.S. DEFICITS TO STAY HIGH FOR SOME TIME

-The Treasury said U.S. federal budget deficits are “likely to remain elevated for some time” after costs for financial bailouts and economic stimulus exceeded $1 trillion for the first time.

An annual report showed government spending exceeded revenue by $1.01 trillion in the 12 months to Sept. 30, compared with $276 billion a year earlier, under stricter accounting methods used to calculate the shortfall.

The outlook threatens the future solvency of entitlement programs such as Social Security and Medicare, the report released in Washington said. “Net operating costs and budget deficits are likely to remain elevated for some time as the government works to restore market stability,” the Financial Report of the U.S. Government said. “If budget deficits continue, the government will have to borrow more from the public in order to make benefit payments and pay for other programs.”

Almost $340 billion of the difference between today’s report and the budget deficit came from estimate benefits yet to be paid out to veterans, the report said. Public pending soared as Congress and the Bush administration committed taxpayer funds to a $168 billion economic aid package and bailed out financial firms such as mortgage companies Fannie Mae and Freddie Mac. The $700 billion financial rescue plan was passed Oct. 3, in the 2009 fiscal year.

“Throughout this unprecedented year, the Treasury Department has worked to achieve and maintain the stability of the financial system with short-term actions, but we must not forget the long-term needs that pose a significant threat to our fiscal sustainability,” Treasury Secretary Henry Paulson said in a statement accompanying the report. “The projected costs for Medicare, Medicaid and other social programs are much greater than the resources that will be available to pay for them,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aKO_aHqzLDj8

TWO MORE U.S. BANKS SHUT DOWN

-Georgia, Texas Banks Shut as Foreclosures Rise; Toll Reaches 25. Georgia and Texas banks with $544 million in deposits were shut by state regulators, raising the failure toll to 25 for this year, as mortgage delinquencies and home foreclosures climb in a deepening U.S. recession.

Haven Trust Bank of Duluth, Georgia, was seized yesterday and sold by the Federal Deposit Insurance Corp. to BB&T; Corp. of Winston-Salem, North Carolina, which will reopen four offices northeast of Atlanta as branches on Dec. 15, the FDIC said. Sanderson State Bank was shut by Texas regulators and its assets were sold to Pecos County State Bank of Fort Stockton, which will open a single southwest Texas office Dec. 15 as a branch.

The acquisitions by BB&T;, the fifth-best performing stock in the KBW Bank Index this year, and Pecos County Bank were “the ‘least costly’ resolution for the FDIC’s deposit insurance fund,” the Washington-based FDIC said in a statement.

Regulators have closed the most banks in 15 years, and the annual total now exceeds the combined toll for the previous six years, with the collapses of Washington Mutual Inc. and IndyMac Bancorp Inc. among the biggest in history. The U.S. entered a recession a year ago and President-elect Barack Obama on Dec. 7 said the slump will worsen before a recovery begins. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid;=a13sez1VxkgU&refer;=us or http://finance.yahoo.com/news/Fed-regulators-shut-2-banks-apf-13823673.html

SECOND MORTGAGE DISASTER COMING?

-A Second Mortgage Disaster On The Horizon? New Wave Of Mortgage Rate Adjustments Could Force More Homeowners To Default. The trouble now is that the insanity didn’t end with sub-primes. There were two other kinds of exotic mortgages that became popular, called “Alt-A” and “option ARM.”

The option ARMs, in particular, lured borrowers in with low initial interest rates so-called teaser rates sometimes as low as one percent. But after two, three or five years those rates “reset.” They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500. Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default.

“The defaults right now are incredibly high. At unprecedented levels. And there’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall,” investment fund manager Whitney Tilson explains. Read and watch more here-

http://www.cbsnews.com/stories/2008/12/12/60minutes/main4666112.shtml

REAL ESTATE

-U.S. homeowners may lose more than $2 trillion in the value of their properties this year, leaving about 11.7 million households owing more on their mortgages than their homes are worth, according to Zillow.com. U.S. home values dropped by $1.9 trillion this year through Sept. 30, and are likely to fall further this quarter, Zillow, a Seattle-based provider of real estate data, said in a study released today. That exceeds the $1.24 trillion lost in all of 2007, according to Zillow.

By the end of the third quarter, 14.3 percent of single- family homeowners owed more than their properties were worth, known as being under water, Zillow.com said. “Nationwide, we haven’t had a drop like this probably since the Great Depression, in terms of how much value has been taken out of the housing market,” Stan Humphries, Zillow’s vice president of data and analytics, said in an interview. “The amount of negative equity that you’re seeing out there right now is so great that it now has its own dynamic of causing people to walk away from their homes.”

The drop in home values comes amid soaring foreclosures, record job losses, and a national recession. One in 10 homeowners in the U.S. fell behind on mortgage payments or was in foreclosure during the third quarter, the Mortgage Bankers Association said this month. The number of Americans filing initial jobless claims rose to 573,000 the week ended Dec. 6, the highest level since 1982, the Labor Department said last week. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a1UuoXwn3Azo

-U.S. builders broke ground in November on the fewest new homes since record-keeping began, signaling the housing slump will extend into a fourth year. Construction starts on housing fell 18.9 percent last month to an annual rate of 625,000 that was the lowest since the government started compiling statistics in 1959, the Commerce Department said today in Washington. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=azP8gnGVza2U&refer;=economy

-Median home price in Southern California falls below $300,000. Read more here-http://www.mercurynews.com/businessheadlines/ci_11248874?nclick_check=1

-Confidence among U.S. homebuilders in December stayed at a record low and their outlook for six months ahead worsened, signs the housing recession will extend into a fourth year.

The National Association of Home Builders/Wells Fargo index of builder confidence held at 9 this month, the Washington-based association said today. A reading below 50 means most respondents view conditions as poor.

Builders’ profits are shrinking as sales slide and mounting foreclosures add to a glut of unsold properties that’s driving prices lower. Many prospective home buyers are getting turned away by mortgage lenders that are resisting government efforts to unclog credit.

“The home-buying environment is still very difficult,” Ryan Sweet, an economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “Prices will continue to decline in coming months. Foreclosures are a major problem, as they’re adding more inventory to a housing market that is already saturated.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aYN2fTt1vsoM

MADOFF FRAUD

-Bernard Madoff bio. Read more here-http://en.wikipedia.org/wiki/Bernard_L._Madoff

-Bernard Madoff, accused mastermind of a $50 billion investment fraud, was placed under house arrest as pressure mounted on the Securities and Exchange Commission to explain its failure to detect his financial wrongdoing for almost a decade.

Madoff, 70, will be subject to electronic monitoring and a 7 p.m. curfew while his wife, Ruth, today agreed to give up homes in Montauk, New York, and Palm Beach, Florida, if her husband flees. Madoff was arrested Dec. 11 after telling his sons that his firm was “one big lie,” the SEC said. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=a0qGtFYw_.uo&refer;=home

-Investors had at least $34 billion in funds overseen by Bernard Madoff, the money manager arrested last week in an alleged fraud, according to data compiled by Bloomberg and media reports.

Madoff, 70, told employees before his arrest last week that his firm was “a giant Ponzi scheme” that may have cost clients as much as $50 billion. The following is an alphabetical list of Madoff’s investors. Read the list here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ahokl6pCzvOc

-Bernard Madoff’s scam that allegedly cost investors $50 billion ensnared firms from London and Paris to Tokyo. HSBC Holdings Plc, Europe’s biggest bank, has $1 billion at risk after providing financing to funds that invested with Madoff, the London-based bank said today.

Nomura Holdings Inc., Japan’s largest brokerage, has 27.5 billion yen ($302 million) of exposure to Madoff’s funds, while France’s BNP Paribas SA has as much as 350 million euros at risk, the banks said. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aVTJBQRWrvlI&refer;=exclusive

-Bernard Madoff’s alleged Ponzi scheme, which might have cost investors $50 billion, couldn’t have been carried out alone, said Arpad ‘Arki’ Busson, chairman and founder of Swiss investment firm EIM SA. “For the amount of money and number of accounts, it’s practically impossible that he was doing this alone,” said Busson, whose $11.5 billion fund of hedge funds had about $230 million invested with Madoff. “What’s mind-boggling is the amount of assets and the amount of time he was doing it.”

EIM, which manages accounts for mostly institutional clients, invested with funds that had managed accounts overseen by Madoff. EIM will likely write down its stake to zero, Busson said. Madoff was arrested Dec. 11 after he told his sons that Bernard L. Madoff Investment Securities LLC was a fraud, according to the U.S. Securities and Exchange Commission. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aodwWsCGHTFQ&refer;=home

-Bernard Madoff’s financial records were “utterly unreliable” and will take six months to sort out, said Stephen Harbeck, president of the Securities Investor Protection Corp. “There are some assets, but I have no idea what the relationships of the assets available are to the claims against them,” Harbeck said on Bloomberg Television. “The records are utterly unreliable on this case.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aSuXv.c07vO4&refer;=home

-Madoff ‘Tragedy’ Said to Have Escaped Scrutiny by SEC. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=a63Or.fV7Oyo&refer;=home

-Kind to employees, generous to charities, devoted to regulation of the financial services industry, Bernard Madoff was a much-admired man whose oldest, dearest friends are among his biggest victims. Now it seems those fine attributes cultivated over a lifetime were nothing more than a con, a cover for one of the more blatant ways to steal money without gun or mask.

He told his sons last week he had been running a “giant Ponzi scheme,” precipitating his arrest. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&refer;=columnist_woolner&sid;=aRkt3IRpzH0c

-On June 18, 1991, a balmy late spring day on the North Shore of New York’s Long Island, stockbroker Pamela Martens sat on the patio of an exclusive local country club, meeting with a client for the first time. Martens would be taking over management of the customer’s municipal-bond portfolio, but was alarmed when she heard how the man had invested the rest of his nest egg. “He told me that the bulk of his money was with Bernie Madoff, and that Madoff guarantees a 13 percent a year return,” Martens recalls.

“I said, ‘First of all, that’s impossible, and second of all, that’s illegal.” Not to worry, the investor assured her. He and many other members of the country club had happily stashed money away with Madoff for years, pocketing regular monthly checks. Martens got copies of the man’s brokerage statements and phoned Madoff. “I said, ‘I’m looking at Mr. X’s statements, and it’s clear you’re not doing anything here that generated 13 percent a year,’” she recalls. “He said, ‘No one has ever dared question what I’m doing.”

And, happily for Madoff, any time someone did question him, the probes were all but ignored. It took a first-person confession by Madoff to his employees before law enforcement officials swept in with an arrest and charges of a scam. Madoff’s arrest last week for an alleged $50 billion Ponzi scheme is but the latest example of how financial players in high places can go for years fudging the rules and getting by without paying the price. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&refer;=columnist_antilla&sid;=ajTlcTh7XnYA

-Madoff Enjoyed $50 Pedicures, 9.8 Handicap, Boat Called ‘Bull’. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aQv4Kmx.cs78&refer;=home

-Madoff Case Creates Worst Loss for Jewish Charities Since 1930s. Read more here-http://www.bloomberg.com/apps/news?pid=20601088&sid;=ay38_dO238P8&refer;=home

-Madoff investors race to the courthouse. New York school sues Ascot Partners for entrusting investor money to Bernard Madoff. The case may be hard to prove. Read more here-

http://money.cnn.com/2008/12/17/news/parloff_madoff.fortune/index.htm?postversion=2008121716

-70 years before Madoff, there was Whitney. Former New York Stock Exchange president Richard Whitney boasted a sterling reputation during the Depression, then became a symbol of Wall Street’s betrayal of investors. Read more here-http://money.cnn.com/2008/12/16/news/madoff.whitney.fortune/index.htm or http://en.wikipedia.org/wiki/Richard_Whitney_(financier)

The GoldBugg Report – December 23, 2008
Posted by Worldwide Precious Metals on Tuesday, December 23, 2008

The GoldBugg Report – December 17, 2008

December 17, 2008

WORLD FINANCIAL REPORT ON RADIO DEC 12 2008 SHOW

-FOMC cuts rates to record low range of 0 to 0.25%

Promises to keep rates low and try new tactics – Market Watch

http://www.marketwatch.com/news/story/fed-sets-new-target-rate/story.aspx?guid={CA4128E7-21B4-4563-A28E-9170AEBFC789}&siteid;=bnbh

-Gold shines on. Investor Daily: Don’t let short-term trends fool you. The precious metal should continue to rise.

-Silver in my opinion could be the next really big winner. I do think gold and oil will be much higher in the long term, but will not offer the type of returns silver could yield us. – Chris Vermeulen

GOLD

-Trend of gold as store of wealth ‘may start to snowball’ ScotiaMocatta. Deep-rooted global financial problems will escalate the demand for gold as a safe haven. In its December Metals Matters report, ScotiaMocatta suggests that global financial problems “seem so deep rooted that demand for gold as a safe haven is expected to escalate.”

On silver ScotiaMocatta advised, “Investors remain key to silver’s fate, but its monetary attributes should keep investment demand strong.” Their analysis also noted that low PGM prices, especially for palladium, are “likely to rebalance the PGM markets before too long-thus providing long term investment opportunities. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=74850&sn;=Detail

-”I can only recommend one thing: precious metals,” Eric Sprott said in an interview. Governments worldwide are printing money furiously in a vain attempt to bail out the banking system and keep the economy afloat, he said. With the purchasing power of currencies being eroded, the only real safe haven is gold, he argues. “The developed world is throwing $20-trillion (U.S.) at the banking system. There are holes in the dike. You had better be ready for the worst of all possibilities.”

The allure of gold bullion is that it tends to hold its purchasing power, adjusting for currency shifts, rising with inflation and holding its value even in deflation. In a deflationary environment, even if the nominal price of gold just holds steady, its purchasing power will rise as other prices fall. That’s important, because Mr. Sprott says the world is in “a deflationary death spiral.” Given the steepness of the economic slump, companies will be hard pressed to earn a profit and stock prices will languish, Mr. Sprott predicted.

“You’ve got to try to survive this thing.” What about buying precious-metal stocks or gold-backed certificates instead of the metal itself? “With stocks, you need the price to go up,” he said. “If you buy bullion, if it just holds its value, you will be okay.” Gold bullion could hold steady, yet gold stocks could fall.

“I own lots of gold stocks, don’t get me wrong. But to be really defensive, gold is the only place to be.” As for certificates, “I tend not to be a big believer in anything that is just a piece of paper in your hand. Our banks sold citizens $35-billion of paper they said was good but it wasn’t,” he said, referring to asset-backed commercial paper. Read more here-

http://www.theglobeandmail.com/partners/free/globeinvestor/investment/nov08/online/buillon.html

-Gold might have lost some lustre in 2008 but was nonetheless an investment bright spot this year, according to a new survey of gold companies released Thursday. Price waterhouse Coopers, which conducts an annual survey of 45 gold miners throughout the globe, said that gold has basically held its value in 2008 while other investments have slipped dramatically.

PWC asked bullion producers the price they use to assess their mineral reserves and discovered that gold, which started the year worth $846 US an ounce, was still valued at roughly $800 by the beginning of December. The later price represented a drop of five per cent, nowhere near the approximate 38 per cent plunge experienced by the Toronto Stock Exchange during the same 11-month period, mainly due to the financial global meltdown.

“While other commodities and the economy have trended down, gold has held its value. Gold is serving its purpose as a hedge of wealth in uncertain times,” said Paul Murphy, leader of PWC’s Canadian mining practice. Many investors hold the shiny metal to protect against a falling economy, high inflation or a flagging U.S. dollar. That makes gold an attractive investment option during times of economic uncertainty. Certainly, as the world economy sags, the relationship between high gold value and bad economic times has remained true. Read more here-http://www.cbc.ca/money/story/2008/12/11/gold-prices-pwc.html

-Gold shines on. Investor Daily: Don’t let short-term trends fool you. The precious metal should continue to rise. Read more here-

http://money.cnn.com/2008/12/08/magazines/fortune/benner_gold.fortune/index.htm

-Physical gold to keep on outperforming, less optimistic on metals BMO. BMO Research suggests commodity markets may be re-energized soon after the G7 economies start to emerge from their slump in the latter part of 2009. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=74927&sn;=Detail

-Obama Policy Good For Gold. Read more here-http://news.goldseek.com/GoldSeek/1228744620.php

-India Post is selling gold coins like hotcakes. Read more here-http://www.commodityonline.com/news/India-Post-is-selling-gold-coins-like-hotcakes-13151-3-1.html

-Bullion coin premiums up to at 25% on eBay. Read more here-http://www.gata.org/node/6963

-Gold Will Central Banks Sell Out Or Are They Sold Out? Read more here-http://news.goldseek.com/GoldForecaster/1228503600.php

-What if They Returned to the Gold Standard? Read more here-http://news.goldseek.com/GoldIsMoney/1228979220.php

-Real Rates and Gold. The bottom line is negative real rates are one of gold’s most powerful fundamental drivers. And thanks to the Fed refusing to let housing speculators fail as they should, negative real rates are going to persist for a long time to come. Maybe years. But bond investors are not dumb.

They won’t invest for long in an environment where their capital is guaranteed to lose real purchasing power. Some will migrate into gold. Negative real rates were the monetary foundation of the biggest secular gold bulls in modern history, the 1970s and the 2000s.

And just as it took radically high 6%+ real rates to end that 1970s gold bull, this bull isn’t likely to end until we see sustained hugely positive real rates as well. In the meantime, gold will continue to thrive on balance despite big pullbacks from time to time driven by capricious sentiment. Read more here-http://news.goldseek.com/Zealllc/1228497007.php

-South African gold output fell 14.4 percent in volume terms, while overall mineral production was up 3.5 percent in October compared with the same month in the previous year, official data showed on Tuesday.

Production of non-gold minerals rose 6.5 percent, Statistics South Africa said on its Web site www.statssa.gov.za. South African gold output has fallen since state-owned power utility Eskom suffered a near collapse in the electricity grid in January. Eskom has since limited supply to around 90 to 95 percent power to mines in the country, the world’s biggest source of platinum and the second-ranked gold producer. Reuters

-Perhaps the greatest gift we all could receive in the coming season of year end holidays would be the final demise of the hedge fund industry. While that might not happen, we might have to settle for the end of the U.S. dollar’s false rally. Before going into that though, one question. If these funds are hedged, how come they have been losing so much money?

The U.S. dollar has been in a massive rally as imploding funds must repatriate dollars to repay those really unhappy investors that want their money returned. That false dollar rally seems to have spilled over into the Gold market. Each morning the funds also sell Gold in order to repay those gullible investors that invested money in them. That dollar rally, one, continues to make little economic sense and, two, seems on borrowed time.

In the first chart is plotted the Schmidt U.S. $ Index, which does away the distortions in the popular dollar index. That index, the black line using the left axis, has been rebased to the beginning of August. Since early August, the US$’s value has risen by more than 20%, and that appreciation has hurt the value of $Gold. The red line is the annualized rate of growth in U.S. money supply, M-1 SA, since the first of August.

With the U.S. money supply growing at more than a 20% annual rate, the artificially created shortage of dollars will soon be appeased. With the Federal Reserve committed to expanding the U.S. money supply, dollars will soon be in surplus. Additionally, with Obama committed to a plethora of public work projects, a great wall and pyramids may soon be announced, the U.S. government deficit will explode further. Unless foreign central banks continue committed to unlimited funding of the U.S. deficit, the Federal Reserve will be forced to monetize that debt. By the way, the U.S. government deficit correctly measured was more than $1.5 trillion in the past year.

With the Federal Reserve committed to unlimited creation of dollars and Obama committed to unlimited government spending, the U.S. dollar’s value could become the Dog of 2009. That should make $Gold worth considerably more than today’s value. Investors should be using any and all further price weakness in the price of $Gold to add to positions. Bush was good to Gold, and Obama will be like a gift falling from the sky to Gold investors.

The second graph is an update of one introduced earlier. The green line is the monthly average price of $Gold, using right axis. The red line, using left axis, is the inflationary component within the annualized six month rate of change for the U.S. money supply, M-2 NSA. Buy signals of that monetary measure are when it turns positive from a negative value. Currently, the monetary measure is extremely bullish for $Gold. Those buy signals are marked by black triangles.

Did you hear the story earlier this year about how oil would be $200 by year end? Well, slight revision to the popular prognostication. Oil will now be $10 in the spring. First forecast was used to rationalize buying commodities and Gold. Second one has become a rationalization for selling commodities and Gold. We suppose the gurus will get it right soon, but thus far a broken clock has a better record. It now reads, Wealth once lost to the tyranny of paper money and spendthrift politicians is never regained! Ned W. Schmidt

-A video of GATA Chairman Bill Murphy’s debate on gold market manipulation with Tim Wood, vice president of International Investment Conferences, held at the Las Vegas Hard Assets Conference on September 10, has now been posted. Read and watch here-http://www.gata.org/node/6972

SILVER

-Silver The Unpopular & Undervalued Metal. I have had my eye on silver for several years watching it go from $5 to over $20 within 5 years. That’s an average of 60% per year return which is what opened my eyes to his shiny metal. Silver is a metal, which only a small group of investors actually own compared to its popular sister (gold).

That being said, most investors only jump on the band wagon after things become popular. Silver in my opinion could be the next really big winner. I do think gold and oil will be much higher in the long term, but will not offer the type of returns silver could yield us.

So, this is why I am pointing out silver at these prices and looking for a low risk entry point. Silver is down over 50% from its highs and also looks to have found support at long term support levels. Chris Vermeulen-Read more here-http://www.321gold.com/editorials/vermeulen/vermeulen121008.html

-U.S. banks dominate COMEX short positions for gold and silver, startling gold and silver COT information. The Commodities Futures Trading Commission (CFTC) releases its Bank Participation in Futures Markets Report once a month on the first reporting week of the month. The figures for December are out and they are a shocker.

For background, refer to a previous article of mine at this link. As of December 2, as gold closed at $783.39, the CFTC reported that 3 U.S. banks had a net short positioning for gold on the COMEX, division of NYMEX, of 63,818 contracts. The CFTC also reported that as of the same date all traders classed by the CFTC as commercial held a collective net short positioning of 95,288 contracts.

That means that just three U.S. banks accounted for 66.97% of all the commercial net short positioning on the COMEX for gold futures. Here’s what the three U.S. banks’ positioning looks like on a graph. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=48524

-Ted Butler silver commentary and interview. Read more here-http://news.silverseek.com/TedButler/1228768232.php

Cook: Your friend and mentor, Izzy has written some powerful prose on silver and forecast prices north of $100.00. Do you agree?

Butler: I agree with a hundred for sure. He has some other numbers I am less sure of, but I’ve learned not to doubt the old son of a gun.

Cook: What should the folks who bought over $20 do now?

Butler: At a minimum, those that bought at $20 should hold on. As conditions dictate we should cross that number easily. Silver was always meant to be a long term holding. But if they really want to do themselves a favor, buy more at these prices. Those that bought at $20 will be able to sell at a big profit someday, but the profit will be much bigger for silver bought at lower prices.

Cook: At this perilous financial time we’re giving the strongest possible advice. We’re dealing with people’s life’s earnings and savings. In light of this important responsibility do you change your advice about silver in any way?

Butler: I fully realize the perilous times we are in, and how serious a responsibility it is to deal with one’s earnings and savings. The only change in my advice is, at current prices, silver looks better than ever. The price smash has taken so much risk out of owning silver that I can’t see how anyone could get hurt by buying it here. Risk is now ultra-low and profit potential is higher than it has ever been.

Cook: We advocate 10% to 20% of a person’s net worth in silver. Does that sound reasonable?

Butler: It sounds reasonable, but I’m not a personal financial analyst. As a silver analyst, I would say buy as much as you think you can afford and be sure to buy it in the right form and for cash. It’s one of the very few assets anyone can buy that can’t go bankrupt or worthless overnight. If someone is comfortable with buying more than 10% or 20%, I don’t see anything wrong with that.

Cook: Thanks for a great interview. Could you sum up the case for silver in one paragraph?

Butler: The case for silver is compelling. Recent developments have intensified an already spectacular long-term supply and demand situation, to an extreme I didn’t expect. We have a vital commodity with a critically low world inventory. It has varied industrial applications and a unique dual role as an investment asset. Its price is artificially depressed by a decades-long and increasingly obvious price manipulation. All these long-term conditions are under the radar of the world’s investment community, meaning more buying should come in as awareness spreads..

Throw in an obvious retail shortage for the first time in history with growing wholesale delays and tightness. We’ve seen the largest one-year rush into silver, driven by world financial conditions that’s highly suggestive of a flight into assets that are safe. Top that off with a new low price. I couldn’t make up this many bullish factors if I tried.

-Silver Certificate Default. Read more here-http://news.silverseek.com/GoldIsMoney/1228918256.php

-Silver Certificates and failure to redeem. Read more here-http://canadiansilverbug.blogspot.com/2008/12/silver-certificates-and-failure-to.html

-Ten Silver Questions with David Morgan. Read more here-http://news.silverseek.com/SilverInvestor/1228485529.php

-Mexico strike shuts world’s top silver pit. Striking Mexican workers have halted production at the world’s top silver mine and two major zinc mines after the government arrested union officials, the pits’ owner said on Friday.

Workers laid down tools at the massive Fresnillo silver deposit in the central state of Zacatecas late on Thursday, owner Fresnillo Plc (FRES.L: Quote, Profile, Research, Stock Buzz), the precious metals subsidiary of Penoles, said in a statement. The Fresnillo mine produced some 33 million ounces of silver and close to 26,000 ounces of gold in 2007.

Penoles, which controls the company’s base metals business, said the Madero and Sabinas zinc mines in Zacatecas were also shut down. The strikes began after authorities detained senior mining union members on fraud charges. “These actions were taken in retaliation for the arrests of two union leaders and the union has said it is going to stage various strikes,” a Penoles spokesman said. Read more here-http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSN0546430220081206

PLATINUM-PALLADIUM

-Platinum May Advance in 2009 on Output Cuts, Credit Suisse Says. Platinum may trade at $1,370 an ounce next year, about 69 percent higher than today, and advance further in each of the following two years as producers cut output, Credit Suisse Group said.

“The platinum industry will have to cut back supply sufficiently to stimulate a price recovery,” Credit Suisse said in a note today. “About 40 percent of producers are operating at a loss at current prices.” Platinum reached a record $2,301.50 an ounce in March. Platinum is used in jewellery and autocatalysts. Read more here-

http://www.bloomberg.com/apps/news?pid=20670001&refer;=commodities&sid;=aY3Jo09oEyN4

-Platinum ETF: have the Swiss stolen a march on the rest? The London platinum-backed Exchange Traded Commodity added metal last week. Is this foreshadowing a recovery in platinum? Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=74522&sn;=Detail

-Swiss see platinum as safe-haven investment. Read more here-http://www.guardian.co.uk/business/feedarticle/8111615

DEFINITIONS-QUOTES-QUICK HITS

-FOMC cuts rates to record low range of 0 to 0.25%

Promises to keep rates low and try new tactics – Market Watch

http://www.marketwatch.com/news/story/fed-sets-new-target-rate/story.aspx?guid={CA4128E7-21B4-4563-A28E-9170AEBFC789}&siteid;=bnbh

-Backwardation. A theory developed in respect to the price of a futures contract and the contract’s time to expire. Backwardation says that as the contract approaches expiration, the futures contract will trade at a higher price compared to when the contract was further away from expiration.

This is said to occur due to the convenience yield being higher than the prevailing risk free rate. When backwardation does occur in a futures market it has been suggested that an individual in the short position would benefit the most by delivering as late as possible. Backwardation in futures contracts was called “normal backwardation” by economist John Maynard Keynes.

This is because he believed that a price movement like the one suggested by backwardation was not random but consistent with the prevailing market conditions. Backwardation is the opposite of contango. Investopedia.com

-Red Alert: Gold Backwardation!!! Read more here-http://news.goldseek.com/GoldSeek/1228499200.php

-Backwardisation means big gold price rally coming! Read more here-http://news.goldseek.com/PeterCooper/1228916567.php

-Backwardation: Facts from Fiction. Read more here-http://news.goldseek.com/GoldSeek/1228767064.php

-Gold in Backwardation? Read more here-http://www.hardassetsinvestor.com/features-and-interviews/1/1307-gold-in-backwardation-not-so-fast-.html

-Thanks to Peter Grandich of Agoracom, who prompted them to do it, backwardation of the gold market was discussed at length Monday on the Business News Network in Canada as Kim Parlee and Andrew Bell interviewed John Ing, CEO of Toronto investment house Maison Placements.

While Ing was cautious on the issue, he concurred that demand for gold in hand is soaring and may be upending the gold paper market, even as the world may be developing what he called a “bailout fatigue” that will drive people to gold for wealth preservation. Watch video here-http://watch.bnn.ca/#clip119809 or http://www.gata.org/node/6973

-Contango. When the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date. This is the opposite of backwardation. Investopedia.com

-What financial crisis? Free-agent pitcher CC Sabathia signed with the NY Yankees. The deal will pay Sabathia about $160 million over seven years. ESPN

-Moral courage is the most valuable and usually the most absent characteristic in men. General George S. Patton, Jr.

-The simple truth today is that your economy (U.S.A.) is built on the global economy. And it’s built on the support, the gratuitous support, of a lot of countries. So why don’t you come over and I won’t say kow-tow but at least be nice to the countries that lend you money. Gao Xiqing, President of the China Investment Corporation, 08 December 2008-Full story here-

http://www.theatlantic.com/doc/200812/fallows-chinese-banker

-One of the top managers of China Investment Corp., the country’s $200 billion sovereign wealth fund, reckons current dollar strength is temporary and he would like to bet that the U.S. currency is headed lower. CIC President Gao Xiqing was speaking in an interview with monthly U.S. magazine The Atlantic two weeks before the Nov. 4 U.S. election.

“Everyone is saying, ‘Oh, look, the dollar is getting stronger!’ I say, that’s really temporary. It’s simply because a lot of people need to cash in, they need U.S. dollars in order to pay back their creditors. But after a short while, the dollar may be going down again. I’d like to bet on that!” he said. Read more here-http://www.gata.org/node/6966

-The policies of the developed nations on these financial institutions are not clear. Until they are clear, I don’t dare to invest in them. What if they go bust? I will lose everything. Lou Jiwei, Chairman and CEO, China Investment Corporation, December 4, 2008

-I do have the nagging feeling that this Christmas shopping season will be the ‘last hurrah’ for a huge number of small, medium and large retailers all across the western world. By mid January, once all the sales are over, we’ll soon find out who the fallen are. I expect the casualties to be in the thousands and some of the larger chains aren’t even waiting until Christmas

is over to announce huge cutback in stores and staff. All I have to do is walk around a couple of the malls close to my home here in Edmonton, and see the brown paper already up in some of the windows with signs that say “This Valuable Retail Space for Lease.” There will be a lot more brown paper in a lot more mall windows six weeks from now. Ed Steer

-I haven’t sold any commodities since the bull market began. I own some gold and if gold goes down, I’ll buy some more and if gold goes up, I’ll buy some more gold during the course of this bull market, which has several more years to go, will go much higher. Jim Rogers, Bloomberg, December 5, 2008

-Remember “if you don’t buy the weakness you can’t sell the strength.” Precious Metals International

-Since early September 2008, we have suggested four major factors relative to the precious metals markets.

The lower prices we have experienced have been synthetically created and there is no relationship to the continuing short supply of above ground inventories.

The only long term solution to the ultimate salvation of the current credit and financial crisis must be the devaluation of the U.S. dollar which equals “inflation”.

That volatility in all markets should be expected to continue.

That precious metals investors should be conservatively pro-active without overextending their ability to stay the course.

We have seen prices as low as $680.00 Gold and $8.40 Silver with rallies back up over $800.00 Gold and $10.70 Silver, only to see the prices retrace back. This price activity is indication of having seen the ultimate bottom, which supports our suggestion that Investors should now become aggressive towards accumulation of both Gold and Silver, with the objective of much higher prices throughout 2009. Precious Metals International

-Malaysia wants Organization of the Islamic Conference member countries to reconsider the use of the gold dinar for trade, especially with uncertainties in the international currency market. Read more here-http://www.gata.org/node/6962

-My advice: Buy precious metals at regular intervals. Don’t worry about the shake-outs that are inevitable. Then hold on, until the Gold-DJIA chart hits 1:1. Peter Degraaf-Read more here-http://www.kitco.com/ind/degraaf/printerfriendly/dec102008.html

-Of all factors, the dollar still rules, many believe. “People are getting more concerned about inflation down the road,” said Matt Zeman, of LaSalle Futures Group in Chicago. “If the government keeps on spending and interest rates stay low, it’s going to come back and bite us. If the dollar heads lower, that’ll be the stimulus gold needs to put together a nice run.” Casey Daily Resource

-Deutsche Bank analysts nailed it when they said the U.S. may [we'd say will] “employ a weaker dollar to reduce deflation risks.” And in that case, “we would expect rallies in the gold price to be based on more solid foundations, in contrast to the false breakouts that have occurred over the past few months.” Casey Daily Resource

-Investors are running headlong to liquidity, bypassing quality and safety. After they realize they’ve only solved part of the problem they will head for gold. The supply of US Treasuries grows exponentially every day. The dollar is strong and it shouldn’t be. The demand for physical gold cannot be filled so obviously some people realize what is going on. That is why Comex December futures’ physical delivery is at all-time highs. There are even rumours that the Bank of England has shipped gold to Comex to meet deliveries. Bob Chapman

-U.S. household wealth fell in the third quarter by the most on record as property values and stock prices tumbled, highlighting the tattered state of consumer finances even before the most recent slump in lending.

Net worth for households and non-profit groups decreased by $2.81 trillion, the most since records began in 1952, according to the Federal Reserve’s Flow of Funds report issued today in Washington. Real-estate-related assets declined by $646.9 billion, three times the prior quarter’s drop.

Combined with the loss of 1.9 million jobs so far this year, almost half of which occurred in the last two months, and the slump in bank financing since the credit crisis intensified, the figures darken an already gloomy outlook for consumer spending. President-elect Barack Obama has called for a stimulus package of unprecedented size as the economy slides toward the longest postwar recession.

“This is not pretty,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “It’s going to take a long time to repair balance sheets that are being severely impaired.” Feroli estimated wealth will drop by about another $4 trillion this quarter if stocks stabilize at current levels and home prices decline at the same pace as in the third quarter.

Household net worth dropped to $56.5 trillion, the lowest level since the last three months of 2006, from $59.4 trillion in the second quarter. The decline over the 12 months ended in September, at 11 percent, is the biggest year-over-year drop since records began, exceeding the slump caused by the bursting of the bubble in technology stocks in 2001. Read more here-

http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=anFhK5RdHHjw

-The Bank of Canada lowered its benchmark interest rate by more than anticipated to a half- century low and signaled more action may be needed as economic growth sputters amid a “broader and deeper” global slump. Governor Mark Carney and his rate-setting panel slashed the target rate for overnight loans between commercial banks by three-quarters of a point to 1.5 percent, the lowest since 1958. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=&sid;=acBimGdMUu30

-Jim Rogers, one of the world’s most prominent international investors, on Thursday called most of the largest U.S. banks “totally bankrupt,” and said government efforts to fix the sector are wrongheaded. Speaking by teleconference at the Reuters Investment Outlook 2009 Summit, the co-founder with George Soros of the Quantum Fund, said the government’s $700 billion rescue package for the sector doesn’t address how banks manage their balance sheets, and instead rewards weaker lenders with new capital.

“Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt,” said Rogers, who is now a private investor. “What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent,” he said.

“What’s happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics.” Read more here-http://www.reuters.com/article/InvestmentOutlook09/idUSTRE4BA5CO20081211

-In my view, U.S. stocks are still not attractive. Historically, you buy stocks when they’re yielding 6% and selling at eight times earnings. You sell them when they’re at 22 times earnings and yielding 2%. Right now U.S. stocks are down a lot, but they’re still very expensive by that historical valuation method. The U.S. market is yielding 3% today.

For stocks to go to a 6% yield without big dividend increases, the Dow will need to go below 4000. I’m not saying it will fall that far, but it could very well happen. And if it gets that low and I’m still solvent, I hope I’m smart enough to buy a lot. The key in times like these is to stay solvent so you can load up when opportunity comes. Jim Rogers

-The 2008 slump in global equities has further to go if Tobin’s Q ratio is any guide, according to CLSA Ltd. strategist Russell Napier. The ratio, a method of valuing U.S. companies developed by Nobel Prize laureate economist James Tobin, indicates that the Standard & Poor’s 500 Index, set for its worst year since 1931, may sink by another 55 percent to 400 when the market bottoms around 2014, London-based Napier said.

The ratio divides total market capitalization by the cost of replacing assets. “Bear markets always end for exactly the same reason, and that is the market begins to price in deflation,” said Napier, Institutional Investor’s top-ranked Asia strategist from 1997-1999. “If the value of assets falls and the value of debt stays up, then equity gets crushed. The results are always horrific.” Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=a6iiap2DL_gQ

-Marc Faber: Buffett Buy-and-Hold Method Dead. Read more here-http://moneynews.newsmax.com/streettalk/marc_faber_buffett_dead/2008/12/04/158173.html

-Does Buffett Stand By His 1999 Sun Valley Prediction? Read more here-http://news.goldseek.com/PeterCooper/1229004206.php

-8 really, really scary predictions. Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market’s sharpest thinkers and what they had to say about the future is frightening. Read more here-http://money.cnn.com/galleries/2008/fortune/0812/gallery.market_gurus.fortune/index.html

RARE COLORED DIAMONDS

-If more people bought diamonds instead of credit-default swaps, we’d be just fine now. From Adam Hanft article De Beers: Diamonds Are a Recession’s Best Friend

-A quote days prior to the sale of the Wittelsbach Diamond. “It’s not a stone we’ll be looking to buy,” Francois Graff managing director of the London-based jewelers, Graff Diamonds.

-Laurence Graff buys the Wittelsbach diamond. Read and watch video here-http://www.telegraph.co.uk/culture/3703861/Blue-grey-diamond-belonging-to-King-of-Spain-has-sold-for-record-16.3m.html or http://edition.cnn.com/2008/WORLD/europe/12/11/diamond.record/

-A colored diamond once owned by King Philip IV of Spain sold for 16.4 million pounds ($24.3 million) with fees at Christie’s International in London today, defying a slowing of demand from investors nervous of economic recession. Christie’s said the price was a record for a single stone at auction. The 35.56-carat grayish-blue gem, mined in India

The 35.56-carat fancy grayish-blue stone, mined in India and owned by the same private collector since 1964, had been expected to fetch 9 million pounds. The hammer price was 14.6 million pounds before fees. It will be the most valuable stone offered by the auction house this year.

King Philip (1605-1665) gave the stone to his daughter, the Infanta Margarita Teresa, as part of the dowry of her marriage in 1667 to the Emperor Leopold I of Austria. In the 18th century it entered the crown jewels of the Bavarian royal family and has been known as the “Wittelsbach Diamond” ever since, Christie’s said.

“It’s a very subtle stone,” said Keith Penton, head of Christie’s jewelry department in London. “Connoisseurs really love the way it hasn’t been re-cut since the 17th century. But they’re also looking at the size and the color, and the historic provenance. There are so many angles to this one.”

Raymond Sancroft-Baker, a Christie’s jewelry specialist, bought the gem. He said he was bidding on the telephone for London dealer Laurence Graff. Sancroft-Baker said he was underbid by a group of collectors from the Commonwealth of Independent States, represented in the room by a New York agent who would not give his name to Bloomberg News.

Today’s sale exceeded the $16.5 million with fees paid for the 100.1-carat “Star of the Season” pear-shaped colorless diamond at Sotheby’s, Geneva, in May 1995. Read more here-

http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=anWrqbbWSVGc

-Despite a global economy that has tanked in the past couple of months, Sotheby’s New York sale of Magnificent Jewels held its own. The sale totaled $20,348,376 against a presale estimate of $28,081,500 to $38,497,000. It was sold 62 percent by both value and lot. Two very special and rare diamonds were the top lots of the day. The first a 36.99-carat fancy vivid yellow diamond ring sold for $2,658,500, or $71,871 per carat.

The second highest lot of the day was a 15.37-carat D/VS2 type IIa pear shaped diamond mounted by Boucheron. It sold for $1,224,900, or $79,694 per carat. Both stones were sold to Asian privates. A collection of David Webb jewelry, always a sure seller at auctions, did not disappoint and those items sold at solid prices to collectors. Overall white diamonds did not dazzle at this auction, with passes on many of the stones.

It was notable that many of the regular buyers from the diamond trade were absent from this sale and were not bidding on the stones. And in this very selective market consumers were sticking with the rare, the unusual and that which if it wasn’t purchased now will never be seen again. Diamonds.net

-Diamonds: Better Than the Mattress? This week FOX business channel had on Daniel Koren, he is the President of Daniel K Jewelers in New York City. He’s one of the men who dresses the stars for red carpet events, but he also has a strong understanding of investing in diamonds.

He’s been holding speaking events here in NYC on the value of putting cash into diamonds for appreciated value versus bonds, stocks, or treasuries. With global raw diamond output down 40% at the mining level. Watch the video interview here-http://casone.blogs.foxbusiness.com/2008/12/10/diamonds-better-than-the-mattress/

-The Nature of Diamonds at the Royal Ontario Museum until March 22, 2009. Throughout time, no other gem has captured the world’s imagination quite like the diamond revered by royalty, celebrated by Hollywood and treasured the world over. What is it about these brilliant stones that captivates so completely?

Explore the blockbuster exhibition The Nature of Diamonds at the Royal Ontario Museum. This show has dazzled audiences from New York to Tokyo, and now it’s Toronto’s turn to fall under the spell of these precious jewels. Find out more here-http://www.rom.on.ca/exhibitions/special/diamonds.php

-Rare and colorful diamonds on display in London. In the bright light, the diamonds, fixed like pin heads to trace a pyramid shape, give out fireworks of color. Splashes of daffodil yellow, orange, olive green, lavender blue and purple dazzle the eyes.

But when the light goes down, the gemstones seem even more miraculous and mysterious. This time, exposed to ultraviolet light, there is an inner glow that makes the colors dance like fireflies in the glass case at London’s Natural History Museum.

The Aurora collection of 296 colored diamonds, with a 267.45 carat weight, has been collected and selected over 25 years by Alan Bronstein, an American dealer and gemologist. It was formerly displayed as the Aurora Pyramid of Hope at the American Museum of Natural History in New York from 1989 to 2005.

“It was like seeing a rainbow,” says Bronstein of his initial discovery in 1980 of a canary yellow diamond. “That was what started me off on my journey. Not just to sell, but because I wanted to learn more. That was the first moment I found something I could be inspired by.”

Since Bronstein thinks of the stones not just for their value but as an example of “the diversity of nature,” it is fitting that their display in London should be at the Natural History Museum’s new permanent display space: The Vault. Read more here-http://www.iht.com/articles/2008/12/08/arts/fdiamond.php

OIL

-Saudi Arabia Bullish On Oil’s Future. Kingdom’s Oil Minister Tells 60 Minutes U.S. Oil Addiction Is Here To Stay Due To Lack Of Alternatives. Read and watch video here-

http://www.cbsnews.com/stories/2008/12/05/60minutes/main4650223.shtml

-In the worst year ever for oil, investors can lock in the biggest profits in a decade by storing crude. Traders who bought oil at the $40.81 a barrel on Dec. 5 could sell futures contracts for delivery next December at $54.65, a 34 percent gain. After taking into account storage and financing costs investors would earn about 11 percent, according to Andy Lipow, president of Houston consultant Lipow Oil Associates LLC. The premium, known as contango, is the biggest for a 12-month span of futures since 1998, when a glut drove crude down to $10.

Stockpiling crude may provide higher returns than commodities, stocks and Treasuries as the U.S., Japan and Europe endure simultaneous recessions for the first time since World War II. Crude sank 72 percent in New York since peaking at $147.27 in July. The Standard & Poor’s 500 Index fell 40 percent this year and two-year government notes yield 0.9 percent.

“The bottom line is that you buy crude at a low price and lock in a profit by selling it forward,” said Mike Wittner, head of oil market research at Societe Generale SA in London. “It’s low risk. The contango can definitely pay for storage and the cost of capital and leave plenty left over.”

Royal Dutch Shell Plc sees so much potential in the strategy that it anchored a supertanker holding as much as $80 million of oil off the U.K. to take advantage of higher prices for future delivery. The ship is one of as many as 16 booked for potential storage instead of transporting crude, said Johnny Plumbe, chief executive officer of London shipbroker ACM Shipping Group Plc. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=aL2dc1mwHOdo

-Cheap oil: short-term good, long-term dangerous. Motorists must be glad the price of fuel is one thing they do not have to worry too much about as they face the worst recession since the 1930s, but cheap fuel is not good for anyone in the long run. Global oil prices have collapsed since July, losing two thirds of their value from a peak of almost $150 a barrel and dragging fuel costs to their lowest levels for several years.

But while low energy costs come as welcome short-term relief to consumers and companies struggling with the financial and economic crisis, longer term they can be bad for everyone. Low energy prices squeeze investment in the oil industry, reducing future supplies. They discourage energy saving and they destabilize countries dependent on oil exports, making oil in the future more likely to be expensive and even more volatile.

Perhaps most important of all, low energy prices stifle investment in alternative energy, deepening dependence on oil and other hydrocarbons and increasing greenhouse gas emissions. “In the very short term, because we are in a recession, we could all use a low oil price,” said Mike Wittner, global head of oil research at French Bank Societe Generale.

“It is like a tax break, putting money back into pockets for a short time.” “But in the longer term, today’s oil price is too low to support much new supply and will slow the momentum toward alternative fuels, new technology and conservation.” Read more here-http://www.reuters.com/article/newsOne/idUSTRE4B22QM20081203

-Time for OPEC to wake up and see the crisis. Read more here-http://www.financialpost.com/trading_desk/energy/story.html?id=1047848

-Crude Oil Forecast 2009 Time to Buy? Read more here-http://news.goldseek.com/GoldSeek/1228743900.php

U.S. T-BILLS TRADE AT NEGATIVE RATES-MONEY MARKET FUNDS

-Investors are so nervous that they’re willing to accept the same return from government debt that they’d get from burying money in a coffee can zero. Read more here-

http://www.gata.org/node/6975

-Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.

The Treasury sold $27 billion of three-month bills yesterday at a discount rate of 0.005 percent, the lowest since it starting auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills today at zero percent for the first time since it began selling the debt in 2001. Read more here-

http://www.bloomberg.com/apps/news?pid=20670001&refer;=worldwide&sid;=a9p7NHTIZswU

-Investors in money-market mutual funds that focus on U.S. Treasuries may lose money for the first time if the Federal Reserve cuts interest rates next week and yields become too small to cover expenses. Record-low yields on government debt have already led money-market funds to waive fees to keep returns positive. If the Federal Open Markets Committee, as

expected, cuts its target rate, some Treasury funds may allow returns to turn negative, said Peter Crane, president of Crane Data LLC, a money-fund research firm in Westborough, Massachusetts. “No one has ever paid above and beyond their interest income to be in a fund,” Crane said. “But if we see another cut, we’ll likely see negative yields.” The U.S.

Treasury sold $27 billion of three-month bills on Dec. 8 at a discount rate of 0.005 percent, the lowest since it started auctioning the securities in 1929. The U.S. also sold $30 billion of four-week bills yesterday at zero percent for the first time since it began selling that debt in 2001. Money market managers could impose a system of incremental debits or charge monthly account fees, Crane said. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=axHG.5Dvl3P4

-The Great Treasury Trap. Read more here-http://news.goldseek.com/CliveMaund/1228742856.php

U.S. RECESSION-DEPRESSION

-Worsening Spending Slump Paces ‘Scary’ U.S. Recession. The biggest slump in U.S. consumer spending since 1942 will extend the recession and push the jobless rate to the highest level in a quarter century, according to economists surveyed by Bloomberg News. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=aT3tIUszCRuY

-The number of Americans filing first time claims for unemployment benefits surged more than forecast last week to a 26 year high, a sign companies are stepping up firings as the recession deepens.

Initial jobless claims increased 58,000 to 573,000 in the week ended Dec. 6, the highest level since November 1982, from a revised 515,000 the previous week, the Labor Department said today in Washington. The number of workers staying on benefit rolls reached 4.429 million, also the most since 1982. Read more here-

http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=aAiegFNIqJt0

-Bank of America Corp the third largest U.S. bank said it plans to cut 30,000 to 35,000 positions over the next three years because of its acquisition of Merrill Lynch & Co. and the weak economic environment. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=aswiJZGC2Ca8

-World economy could be depressed beyond 2011: Krugman. The world economy will likely feel the impact of the global financial turmoil for another three years at least, the 2008 winner of the Nobel economics prize Paul Krugman said Monday. “We could easily be talking about a world economy that is depressed into 2011 and even beyond,” the Princeton University professor and New York Times columnist told reporters in Stockholm, where he will receive his Nobel prize this week.

“The scenario I fear is that we’ll see for the whole world the equivalent of Japan’s lost decade in the 1990s, that we’ll see a world of zero interest rates and inflation and no sign of recovery and it will just go on for a very, very extended period,” he said. “On top of that, we’ll have a series of extremely severe crises in particular countries in trouble,” he predicted, pointing out that “we certainly see the roots of Argentina or Indonesia-style crises particularly in the European periphery.”

As for the United States, Krugman, who has previously said that a stimulus plan of at least four percent of the US gross domestic product is needed next year, said Monday that amount might not be enough. “If you’re serious about the size of the hole that needs to be filled, that’s actually modest,” he said, stressing that that amount “is not enough to prevent a further decline in the economy. It’s enough to prevent a sharp decline.”

The falling US housing market, which triggered the global financial crisis, will probably continue to weaken, he said, pointing out that recent estimates show “we have another 10 to 15 percent to go.” Read more here-http://news.yahoo.com/s/afp/20081208/pl_afp/financeeconomyusjapannobelkrugman_081208181324

-CFOs: Recession to last another year. According to 1,275 chief financial officers polled by Duke University, firms will cut spending and slash jobs in 2009. Top execs began predicting recession last fall. Read more here-http://money.cnn.com/2008/12/10/news/economy/cfo_survey/index.htm?postversion=2008121014

-The Main Street Economic Effect: 10 Reasons why This Recession will feel like a Minor Depression. Read more here-http://www.mybudget360.com/the-main-street-economic-effect-10-reasons-why-this-recession-will-feel-like-a-minor-depression/

U.S. FISCAL-TRADE DEBT

-The federal government ran a record budget deficit in November, putting Uncle Sam on track to post an all-time high annual shortfall of $1 trillion or more. In just the first two months of the budget year that started Oct. 1, the deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, according to Treasury Department data released Wednesday.

If the deficit does top $1 trillion for the current budget year, it also would be a post-World War II high when measured as a percentage of the economy. The increased red ink stems from both lower tax revenue and increased spending that is a result of the recessionary economy.

The government is receiving less in business and personal income taxes while spending more on programs such as unemployment insurance and food stamps. Read more here-http://www.breitbart.com/article.php?id=D9504GN82&show;_article=1 or http://money.cnn.com/2008/12/10/news/economy/treasury_budget_deficit_Nov08/index.htm?postversion=2008121014

-Federal deficit totals $164.4B in November. Read more here-http://www.breitbart.com/article.php?id=D9501KH80&show;_article=1

-California’s budget deficit has widened to $14.8 billion for the next seven months, $3.6 billion more than forecast last month, amid lawmaker disagreement on how to close the gap, Governor Arnold Schwarzenegger said. During a press conference in Sacramento, Schwarzenegger said the size of the gap grows by $28,000 every minute the Legislature fails to act.

The governor’s office estimated last month that the state had an $11.2 billion deficit for the current fiscal year, which ends in June. “When you have a crisis, the most important thing is to make a decision,” Schwarzenegger told reporters. “The worst thing is not to make a decision.” California, the most-populous state, may run out of money as early as February unless lawmakers and the governor pass spending cuts or tax increases needed to make up for revenue lost because of the U.S. recession.

This week, Treasurer Bill Lockyer said as much as $5 billion of infrastructure spending set for the current year may be halted because of bond investor unease about the state’s solvency.

Like other states across the country, California is collecting less from income and sales taxes as workers lose their jobs and consumers cut spending at the fastest pace since 1980.

Nationwide, states are expected to collect about $100 billion less than they will need during the current and coming budget years, forcing spending cuts and higher taxes at a time when the federal government is trying to stoke the economy. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=&sid;=a1CGEMwO6TZo

-California, the world’s eighth-largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said. In a letter to legislative leaders Dec. 1, Genest said the state “will begin delaying payments or paying in registered warrants in March” unless an $11.2 billion deficit is closed or reduced. California,

which approved its budget less than three months ago, may run out of cash by March, state officials say. Governor Arnold Schwarzenegger warned that the state may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow. “It’s getting worse very quickly,” Schwarzenegger,

a 61- year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. “It’s like an avalanche in that it gains momentum. And that’s what we’re in right now, so it’s a real crisis.” Read more here-

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid;=a2TUhalNFDds

-The Real Cost of the 2008 Recession. Read more here-http://news.goldseek.com/GoldSeek/1228923600.php

-The U.S. trade deficit unexpectedly widened in October as faltering global demand led to a third consecutive drop in exports, signalling the American economy is sinking even faster than previously estimated. The gap expanded 1.1 percent to $57.2 billion from a revised $56.6 billion in September, the Commerce Department said today in Washington.

Exports dropped to the lowest level in seven months as foreign purchases of U.S. aircraft, automobiles, chemicals and food waned. The global credit crunch is slowing growth in Europe, Asia and Latin America, indicating the U.S. can no longer count on gains in trade to help offset the recessions in housing and manufacturing. American households and businesses are also retrenching, a sign that purchases of foreign oil, televisions and computers will keep softening.

“Trade is going to be a significant drag on fourth-quarter growth,” said Dean Maki, co-head of U.S. economic research at Barclays Capital Inc. “The slowdown in foreign demand is hitting manufacturing.” Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=aYMRfTaPRLCU

23^RD U.S. BANK CLOSES

-Georgia bank shuttered by regulators. First Georgia Community Bank is the 23rd bank to be closed this year. State regulators in Georgia closed First Georgia Community Bank on Friday, marking the 23rd bank failure of the year. The Federal Deposit Insurance Corp. said that the four branches of the Jackson, Ga.-based First Georgia Community Bank will reopen on Saturday as part of United Bank, of Zebulon, Ga.

First Georgia Community Bank had total assets of $237.5 million and total deposits of $197.4 million. The FDIC estimates that the cost of Friday’s action to the Deposit Insurance Fund will be $72.2 million. Read more here-http://money.cnn.com/2008/12/03/news/economy/bank_failure/index.htm

REAL ESTATE-MORTGAGES-FORECLOSURES

-U.K. home sales declined to the lowest level since at least 1978 as Britain plunged deeper into a recession, the Royal Institution of Chartered Surveyors said. Real-estate agents and surveyors sold an average of 10.6 homes in the quarter through November, the least since the series began three decades ago, RICS said today. A separate report showed retail sales fell in two consecutive months for the first time since at least 1995. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=&sid;=a1iecxTFdVWU

-Fewer Americans signed contracts to buy previously owned homes in October as credit markets seized, signaling the housing slump will extend into a fourth year. The index of signed purchase agreements, or pending home resales, fell a less-than-forecast 0.7 percent to 88.9 from a revised 89.5 in September, according to a report from the National Association of Realtors today in Washington. Gains in the South and Northeast offset weakness in the West and Midwest.

The drop in prices has attracted some buyers, preventing even steeper sales declines as the economy sinks into what may turn out to be the longest recession in the postwar era. Still, banks, resisting Treasury and Federal Reserve efforts to unleash lending, have been reluctant to write mortgages as record foreclosures drive down property values and widen losses.

“I wouldn’t say this is a great sign for the housing market, but at least there is some activity,” said Adam York, economist at Wachovia Corp. in Charlotte, North Carolina. Next year “will still be a very tough year for housing. So much of the activity is distressed sales that it’s tough to say whether there is underlying support for the market.”

Economists expected pending sales to fall 3 percent after an originally reported drop of 4.6 percent in the prior month, according to the median forecast of 35 economists in a Bloomberg News survey. Estimates ranged from a gain of 2.5 percent to a 7 percent drop. The Realtors group, whose pending sales data go back to January 2001, started publishing the index in March 2005. The gauge was down 1 percent from October 2007. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=aPh3LDFgaxzI

-U.S. housing crisis also hitting the wealthy. Less than a year ago, few people in this affluent Chicago suburb expected the subprime U.S. housing crisis would hit close to home. “We thought Hinsdale was virtually immune and we wouldn’t see any foreclosures, but we have,” said Dave Hanna, managing partner of Chicago-based Prudential Preferred CRE and president of the Chicago Association of Realtors. “Nowhere is immune.”

With a pretty red-brick downtown lined with stores, good schools and a railway line to nearby Chicago, Hinsdale has been popular among wealthy doctors, lawyers and executives. It has also seen a 37 percent jump in foreclosure filings this year, according to research firm RealtyTrac, and local data shows the average home sale price has fallen to $1.07 million from $1.15 million in September 2007. Read more here-http://www.reuters.com/article/idUSTRE4B61BC20081207

-Hong Kong’s luxury home sales fell in both quantity and value in November from a month earlier, as the slowing economy hurt the purchasing power of the wealthy. Transactions of apartments and houses valued at more than HK$10 million ($1.3 million) fell 34 percent to 92 last month, with the deal value tumbling 62 percent to HK$2.08 billion, according to figures compiled by realtor Centaline Property Agency Ltd. Both numbers are the lowest since September 2003, the agency said in a press release yesterday. Read more here-

http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=asx_hMntiFy8

-Chinese property hunters to raid U.S. Chinese bargain hunters are preparing to descend on American cities such as Los Angeles and San Francisco, where homeowners have suffered some of the steepest price falls in the US. Read more here-http://www.ft.com/cms/s/0/582d470c-c307-11dd-a5ae-000077b07658.html?nclick_check=1

-Are homeowners purposely falling behind on their mortgage payments to qualify for cheaper home loans? Read more here-http://www.usatoday.com/money/perfi/housing/2008-12-09-homeowners-late-mortgage_N.htm

-Mortgage Troubles Are Moving Downtown. Like others who got caught up in the recent commercial real estate frenzy, Joseph Moinian, the owner of 20 million square feet of office towers, apartment buildings and hotels throughout the country, sought to take advantage of the huge run-up in values as banks feverishly competed to make loans with exceedingly

generous terms. But now that office rents in Manhattan and elsewhere are declining and empty space is beginning to flood the market, Mr. Moinian, who is developing a 58-story W hotel and residential tower just south of the World Trade Center, finds himself with a problem. Read more here-http://www.nytimes.com/2008/12/10/business/10default.html?pagewanted=all

-One in 10 American homeowners fell behind on mortgage payments or were in foreclosure during the third quarter as the world’s largest economy shed jobs and real estate prices tumbled.

The share of mortgages 30 days or more overdue rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The gain in delinquencies was driven by an increase of loans with payments 90 days or more overdue.

“Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. “We’re seeing more loans build up in the 90-days bucket as lenders work to modify loans and states put in place programs that delay foreclosures.”

The U.S. economy has shed 1.91 million jobs this year, while falling home prices have made it difficult for people who can’t pay their mortgages to sell their property. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.

New foreclosures fell to 1.07 percent from 1.08 percent in the second quarter as some states enacted laws to temporarily stop home repossessions and lenders increased efforts to modify the terms of loans, Brinkmann said. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=worldwide&sid;=a37uyBrX6dvY

-Foreclosures soar 76% to record 1.35 million. Foreclosure rate hits nearly 3% in the third quarter, while another 7% of borrowers fell behind on their mortgages. Read more here-

http://money.cnn.com/2008/12/05/news/economy/mortgage_delinquencies/index.htm

-U.S. foreclosure filings climbed 28 percent in November from a year earlier and a brewing “storm” of new defaults and job losses may force 1 million homeowners from their properties next year, RealtyTrac Inc. said.

A total of 259,085 properties got a default notice, were warned of a pending auction or were foreclosed on last month, the seller of default data said in a report today. That’s the fewest since June. Filings fell 7 percent from October as state laws and lender programs designed to delay the foreclosure process allowed delinquent borrowers to stay in their homes.

“We’re going to see a pretty significant storm next year,” Rick Sharga, executive vice president of marketing for Irvine, California-based RealtyTrac, said in an interview. “There are two or three clouds that suggest a pretty heavy downpour.”

Rising unemployment, expiring foreclosure moratoriums and state efforts that “run out of steam” will push monthly filings toward the record of more than 303,000 set in August, Sharga said. The number of homes that revert to lenders, the last stage of foreclosure and known as “real estate owned” or REO properties, will increase to 1 million from as many as 880,000 this year, he said.

“The forces leading to foreclosure are hard to offset in most cases and impossible in many,” Robert Hall, a Stanford University professor and chairman of the National Bureau of Economic Research committee that calls the beginnings and ends of recessions, wrote in an e-mail. “Job loss is a major source of defaults at all times, and job losses are running at extreme levels now.” Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=au1wYjy9hoSE

-Half of rescued borrowers default anyway. Top federal regulator says many mortgages that are modified end up in default within 6 months. Read more here-

http://money.cnn.com/2008/12/08/news/economy/mortgage_summit/index.htm or http://www.bloomberg.com/apps/news?pid=20670001&refer;=home&sid;=aZfUsedWrv5o

-Tenants victimized by foreclosures. Many renters have no clue that their homes are in any danger at all – until a sheriff comes to evict them. Read more here-

http://money.cnn.com/2008/12/08/real_estate/tenant_foreclosure_victims/index.htm?postversion=2008120909

GEOPOLITICAL NEWS

-A potential suicide bomber and 13 other terrorist suspects with links to al-Qaeda were arrested as EU leaders arrived for their summit in Brussels, Belgian police said Thursday. Read more here-http://www.timesonline.co.uk/tol/news/world/europe/article5326082.ece

-Obama’s atomic umbrella: U.S. nuclear strike if Iran nukes Israel. Read more here-http://haaretz.com/hasen/spages/1045687.html

-’Iran wants to devour the Arab world.’ Read more here-http://www.jpost.com/servlet/Satellite?cid=1228728151219&pagename;=JPost%2FJPArticle%2FShowFull

-Iran tests new missile from warship: reports. Read more here-http://www.reuters.com/article/idUSTRE4B60CO20081207

-Talks on dismantling North Korea’s nuclear program ended without an agreement on how to verify the extent of its atomic work, possibly denying the U.S. administration a chance to complete the task before President George W. Bush leaves office.

The latest round of negotiations with North Korea, also involving South Korea, China, Japan and Russia, broke up after a fourth day of discussions in Beijing yesterday. The government in Pyongyang rejected a document drafted by China’s delegation that would allow international inspectors to remove soil and waste samples from North Korea’s Yongbyon reactor. Read more here-http://www.bloomberg.com/apps/news?pid=20670001&refer;=&sid;=aUEuuYF2.0Lg

The GoldBugg Report – December 17, 2008
Posted by Worldwide Precious Metals on Wednesday, December 17, 2008

The GoldBugg Report – December 09, 2008

December 9, 2008

WORLD FINANCIAL REPORT ON RADIO DEC 5 2008 SHOW

A Memo from Precious Metals International

In all of our Memos since early September 2008, we have suggested Four Major Factors relative to the Precious Metals Markets.

The lower prices we have experienced have been synthetically created and there is no relationship to the continuing short supply of above ground inventories.

The only long term solution to the ultimate salvation of the current Credit and Financial crisis must be the devaluation of the US Dollar which equals “Inflation”.

That volatility in all Markets should be expected to continue.

That Precious Metals Investors should be conservatively pro-active without overextending their ability to stay the course.

We have seen prices as low as $680.00 Gold and $8.40 Silver with rallies back up over $800.00 Gold and $10.70 Silver, only to see the prices retrace back to $745.00 Gold and $9.10 Silver.

Although “one day does not a market make”, once again we are seeing prices move sharply higher in the AM trading this morning.

This price activity is indication of having seen the ultimate bottom, which supports our suggestion that Investors should now become aggressive towards accumulation of both Gold and Silver, with the objective of much higher prices throughout 2009.

Remember “if you don’t buy the weakness you can’t sell the strength”.

Trading Department – Precious Metals International, Ltd

GOLD

Gold Backwardation…What Does it Mean? Watch clip from BNN: http://watch.bnn.ca/#clip119809

-Citigroup says gold could rise above $2,000 next year as world unravels. Gold is poised for a dramatic surge and could blast through $2,000 an ounce by the end of next year as central banks flood the world’s monetary system with liquidity, according to an internal client note from the US bank Citigroup. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3526645/Citigroup-says-gold-could-rise-above-2000-next-year-as-world-unravels.html or http://www.gata.org/files/CitiFXGoldReport-11-26-2008.pdf

-Speaking from Zurich to Bloomberg TV, Marc Faber the Swiss fund manager and Gloom Boom & Doom editor and publisher said on Tuesday that investors must be caeful to be in assets that will appreciate both in foreign currency and in US dollars. “When I look around the world, the most precious asset going forward will be gold,” said Faber.

“I only buy physical gold. I don’t trust derivative products, I don’t trust ETFs and I advise every American to hold his gold outside the US,” Faber warned. Faber said he is less interested in industrial commodities because they depend on global production and capital spending. He thinks that capital spending will decline next year as projects are cancelled, reducing demand for commodities and limiting any recovery in prices.

The global economy is “imploding” and central banks have “become asylums for economies that have gone insane.” Faber urged investors to act as their “own central banker” and invest in physical gold assets. Read more here-http://www.bi-me.com/main.php?id=28006&t;=1&c;=35&cg;=4&mset;=1011 Watch video interview here-http://news.goldseek.com/PeterCooper/1228147200.php

-HSBC Fund Returns to Buying Gold to Hedge against Inflation. HSBC Investment Management’s $2.6 billion Absolute Return Service started buying gold again on expectations that inflation will accelerate. Gold now accounts for 3 percent of the portfolio, “Gold is the best supported of all commodities,” said fund manager Charlie Morris. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a_eGHXcUf5Z8

-The Aden Sisters answer the question why isn’t gold rocketing up when the government is printing $700+ billion? That’s what a lot of you have been wondering, especially considering the massive bailouts, which are now actually more than $1 trillion and counting. But at the same time, recession has taken over and the risk of deflation has increased.

This put downward pressure on all of the markets as most assets were sold to cover losses, which caused the dollar to rise and gold to fall. In fact, in September-October it was hard to find anything that was going up, which is very unusual. We feel this is a temporary situation.

The election alone is beginning to ease some of the uncertainty that’s been hanging overhead. And once the markets calm down some, which is already starting to happen, investors will again focus on the fundamentals. These remain very bullish for gold because all the excess money being created and spent to keep the economy from going over the edge is going to be extremely inflationary, further down the road, and that’s when gold will really shine. Read more here-http://www.321gold.com/editorials/aden/aden112808.html

-J.P. Morgan report likes gold. “Gold has been competing with the dollar as a relatively safe haven for investors as stock markets have fallen. Initially, gold and the dollar performed well, but it’s wrong to compare dollar strength with the performance of the dollar-denominated gold price since, as the dollar rises, it slows the upward movement of dollar gold. In the less volatile Swiss franc, gold achieved a new all-time high about one month ago.

Until the fear-driven flows into the dollar slow, the dollar could continue to rise, but gold’s improved visibility may be preparing gold for strength into the year end. We would like to see gold perform in absolute terms, but we are very happy with gold’s outperformance of the S&P; 500.” Read report here-http://www.gata.org/files/JPMorganGoldReport-11-25-2008.pdf

-Inflation is coming. In an environment of soaring inflation, precious metals are poised to soar alongside. Nick Barisheff-Read more here-

http://news.goldseek.com/GoldSeek/1228057500.php

-2009 Dow to equal gold. If you have to pick one investment class that will shine in 2009 then choose gold, and probably silver. My prediction is that this will be the year when the Dow Jones to gold ratio goes to one.

That is to say the Dow Jones Index will plunge again, way beyond the 7,000 limit target I suggested long ago for 2008, and head to 4-5,000, while at the same time the price per ounce of the yellow metal will tip the $4-5,000 an ounce level, way above the $2,000 now mooted by Citigroup. Peter Cooper-Read more here-http://news.goldseek.com/PeterCooper/1228402356.php

-Is China Ready to Buy Gold at Last? Read more here-http://news.silverseek.com/GoldIsMoney/1227122206.php

-A Successful Test of Support for gold. In the last alert I referred to “the growing body of evidence” indicating that “the correction in gold that began after making a new record high in March above $1020 is ending.” Importantly, this point is confirmed by the following monthly chart presenting gold’s rate of exchange against the US dollar. To explain this key development in technical terms, after making a new record high this past March, gold retraced back toward its previous record (marked in the above chart by the dashed line).

Gold did the same thing back in 1978 after breaking above $200 in July that year (marked by the red circle), its previous record high. Gold climbed another 17% through October 1978, and then corrected the following month by testing $200. Support at that level held. From there gold never looked back. It began a stellar advance that took it to $681.50, its month-end close in January 1980, the level that was just successfully tested.

The big difference between now and back then is the time needed to re-test support. The correction lasted only one month in 1978, but is now already eight months old. There are a number of reasons for this different result, but one is not the gold cartel. It was active back in the late 1970s too, dishoarding 775 tonnes from the International Monetary Fund in a vain and useless attempt to make the dollar look better by trying to cap the gold price.

The clear conclusion is that governments, even when they coordinate their effort, cannot in the end stop the market from bidding up the price of gold. So it is logical to expect a new record high for gold soon against the US dollar. It is noteworthy that gold closed this past month at new record highs against the British pound, Canadian dollar, Indian rupee and South African rand. The driving force to exit national currencies and to buy gold is the same now as it was in the 1970s. Gold is better money than national currencies. James Turk-Story here-

http://goldmoney.com/en/commentary.php

-Investors opt to stash gold at home. The UAE is experiencing a gold rush. With the credit crunch shaking the foundations of the financial world an increasing number of investors are buying bullion bars to stash in their homes rather than deposit cash in banks, according to jewelers.

Falling gold prices have led to a flurry of sales of ingots, with some shops reporting a 300 per cent leap in demand. Dilip Popley, the managing director of Popley jewelers, said sales for October and November were the highest in the Dubai store’s 15-year history. “Nobody wants to invest in stocks and shares at the moment,” he said. “Banks across the world are having problems and people do not feel it is safe to keep their money in banks.

It is better to keep their money close. “As least with gold bricks you can put them in your cupboard and sleep well at night.” The trend has taken hold in Europe and America as well. Read more here-http://www.thenational.ae/article/20081202/NATIONAL/126132184/1042/NEWS

-’Structural deficit’ in gold supply could send prices higher. Based on the assumption that current strong physical gold demand highlights an existing supply deficit, Toronto’s Wellington West Capital Markets forecasts that, “if the increased structural deficit in gold supply continues, gold prices should adjust higher.” Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=73950&sn;=Detail

-WGC says crisis has shown gold is insurance policy rather than safe haven. The World Gold Council says considering the safe haven motive as the only driver of gold is a too simplistic approach. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=73994&sn;=Detail

-Gold again touted as ’safe haven’. Read more here-http://www.financialpost.com/story-printer.html?id=08d965bd-b2ae-43d8-af43-9946f84bc1dd

-Gold Buyers Smash Records. Some highlights:

Dollar demand for gold in Q3 was a record US$32 billion, 45% higher than the previous record, set in 2Q2008.
.

Identifiable investment demand, which incorporates demand for gold through exchange-traded funds (ETFs), bars and coins, rose to $10.7 billion (12.3 million ounces), double year-earlier levels.
.

Retail investment demand rose 121% to 7.5 million ounces, with strong bar and coin buying in the Swiss, German, and U.S. markets. Europe as a whole saw an all-time record 1.64 million ounces of bar and coin buying. France became a net investor in gold for the first time since the early 1980s.
.

Gold ETFs posted a record quarterly inflow of 4.8 million ounces in Q3. After the collapse of Lehman Brothers in late September, ETF inflows shot higher by an unprecedented 3.6 million ounces in only five days.
.

Demand for gold jewelry hit a record $18 billion. Leading the way was India, which witnessed a rise of 65% in dollar value (1.3 million ounces) compared with 3Q2007. The Middle East, Indonesia, and China all experienced increases of more than 40% in value or 10% in weight, year over year. Read more here-http://www.321gold.com/editorials/casey/casey120408.html

-South African gold production continues to plunge. South Africa’s 3Q gold output fell 16.2 percent in the third quarter compared with 3Q 2007 as the world’s former top gold producer begins to move down the production ladder. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=74069&sn;=Detail

-Shock and Awe at COMEX. This past Friday, Nov. 28, 2008, was first notice day for delivery of the December COMEX a division of NYMEX gold and silver futures contracts which trade on the New York Mercantile Exchange. The chart appended below shows that on Friday, 8,600 gold futures contracts @ 100 ounces per contract and 3,040 silver futures contracts @

5,000 ounces per contract were delivered. To try to give some perspective to these numbers the previous delivery month for gold futures was October, 2008 when there were 11,554 deliveries for the entire month a “big” number by historical standards. Read more here-http://www.financialsense.com/Market/kirby/2008/1201.html

-Is The End Of The COMEX Nigh? Read more here-http://news.goldseek.com/GoldSeek/1228061100.php

SILVER

-”Key Factors in Silver’s Bull Market.” James Turk-Watch all four videos here-http://www.silversummit.co.uk/jamesturk.htm

-Silver and the credit crisis. David Morgan-Watch all four videos here-http://www.silversummit.co.uk/davidmorgan.htm

-”Silver, Bailouts & Big Government.” Ned Naylor-Leyland-Watch two videos here-http://www.silversummit.co.uk/nednaylorleyland.htm

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1228248628.php

DEFINITIONS-QUOTES-QUICK HITS

-Monetize debt. Debt monetization occurs when a nation’s central bank (e.g. the Federal Reserve in the United States) buys government bonds. If a government’s expenses exceed its tax revenue, if nothing is done the government will draw resources (capital) out of the private market.

Since there is a limited amount of capital available in the market, there will be less available to fund business growth if the government takes out a substantial portion. If the debt is monetized, the capital is thereby returned to the private market. Debt monetization can be seen as a flat tax because the ultimate result is that the government acquires additional funds and the currency decreases in value.

However, monetization helps the government temporarily to meet its short term commitments at the beginning. Debt monetization has the drawback of increasing the twin deficit. That is, when government financing is increased, along with interest rates and foreign capital, the trade deficit also goes up along with the budget deficit. Read more here-http://en.wikipedia.org/wiki/Monetize

-Fed ready to monetize debt, Bernanke says. Federal Reserve Chairman Ben S. Bernanke said he has “obviously limited” room to lower interest rates further and may use less conventional policies, such as buying Treasury securities, to revive the economy. Read more here-http://www.gata.org/node/6942

-Monetizing the Debt. Axel G. Merk-Read more here-http://news.goldseek.com/MerkInvestments/1228243227.php

-”It will therefore be crucial that you see the world anew. That means looking from the outside in to reanalyze much that you have probably taken for granted. This will enable you to come to an understanding. If you fail to transcend conventional thinking at a time when conventional thinking is losing touch with reality, then you will be more likely to fall prey to an epidemic

of disorientation that lies ahead. Disorientation breeds mistakes that could threaten your business, your investments and your way of life.” James Dale Davidson and Lord William Rees-Mogg, the Sovereign Individual, 1997

-The 2009 year will be one of titanic shocks and changes to the global order of a scale perhaps not experienced in the past five centuries. This is why we should speak of the end of the American Century and its Dollar System. F. William Engdahl, 26 November 2008

-I believe somewhere between today and 2020, the banking system will break. We’re on the eve of financial destruction, and that’s why it’s in gold I trust. I’d rather be a victor than a victim. Robert Kiyosaki-Read more here-http://finance.yahoo.com/expert/article/richricher/124339

-By 2020, the biggest of bailout of all will probably occur: Social Security and Medicare, which will cost at least a $100 trillion. Robert Kiyosaki

-Even if we find more oil and produce more food, prices will continue to rise because the value of the dollar will continue to decline. The dollar has lost over 90 percent of its value since the Fed was created. The U.S. dollar will continue to decline. Robert Kiyosaki

-What are your thoughts on the bullish break out for the U.S. dollar? The dollar surged due to a number of unusual factors related to the credit crisis. But the fundamentals for the dollar remain very weak. Plus, the dollar is the most overbought it’s ever been. The dollar now appears to be forming a top and it’s likely headed lower while the other markets rebound. That’s the current outlook, but over the long-term there’s no question that the dollar will continue its long road down, like it’s done over the past 35 years. In other words, the dollar’s bullish breakout will end up being a temporary phenomenon. Aden Sisters

-James Turk, the founder of GoldMoney.com, remains optimistic, seeing a rise above $900 in the near term. “People want physical gold,” Turk says. “They don’t want paper gold. It’s basically a question of inflation, which I expect to surge next year. People will want gold to avoid counterparty risks because of the uncertainty of the banking system.” Casey Daily Resource

-”Gold is digesting its recent sharp gains,” said Peter Grandich, chief commentator at Agoracom, but he predicted rising prices in December. Casey Daily Resource

-”With the flood of liquidity, that’s going to float the boats and sink the dollar,” said Ron Goodis, of Equidex Brokerage Group in Closter, New Jersey. “Commodities look set to stage a comeback on the dollar weakness. The real strength is likely to be in gold.” Casey Daily Resource

-The buck is “going to lose its status as the world’s reserve currency,” says Jim Rogers. “It will be devalued and it will go down a lot. These guys in Washington, they want to debase the currency.” Casey Daily Resource

-Dan Norcini, writing on jsmineset.com, looks at the hedge fund liquidation going on, and observes that, “These guys were the ones that drove prices north when they first came in to buy as investors were clamouring for commodity exposure in their portfolios and now they are the ones driving prices south as those same investors sour on world of tangibles.

Assuming there are any of them left when the dust settles, they will also be the ones driving prices back up again once the fallout from this quantitative easing begins and the Dollar gives up the ghost.” Norcini is cautiously optimistic. He notes that gold open interest is “now down to levels last seen in August 2005,” and concludes that, “I am beginning to think that the bulk of the index fund liquidation is coming to an end.” Casey Daily Resource

-Glitnir banki hf, the 104-year-old Icelandic bank taken over by the country’s financial regulators, sought bankruptcy protection from its U.S. creditors. The Reykjavik-based company listed debt and assets of more than $1 billion each in Chapter 15 documents filed last week in U.S. Bankruptcy Court in Manhattan. Read more here-

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

-A Visual Guide to the Financial Crisis, click here for chart. Chart here-http://blog.mint.com/blog/wp-content/uploads/2008/11/visualguidecrisis2.jpg

-A Lotus sports car featured in the James Bond movie “The Spy Who Loved Me” sold tonight for 111,500 pounds ($166,000) with fees in London. The white 1976 Lotus Esprit had been expected to fetch as much as 120,000 pounds by Bonhams in the auction house’s 520-lot sale of collectors’ cars, motorcycles and automobilia at Olympia, west London. It was sold on the telephone to a collector from Atlanta, who described himself as “a Lotus and James Bond aficionado.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=a0eY1BLLIauQ

-Record number of Americans using food stamps: report. Read more here-http://www.reuters.com/article/domesticNews/idUSTRE4B28CB20081203?feedType=RSS&feedName;=domesticNews

-Partridge, pear tree, etc.: $86,609. Index of ‘Twelve Days’ song items’ cost rises 10.9% in 2008. Read more here-http://money.cnn.com/2008/12/01/news/economy/bc.na.us.twelvedays.cos.ap/index.htm

RARE COLORED DIAMONDS

-Diamond Prices Hold Up While Jewellery Commodities Fall. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=31578

-Strong Diamond Prices Help Christie’s Yield $34M at Hong Kong Jewels Sale. Diamonds performed well at the Christie’s Hong Kong jewels sale on Tuesday, as price points proved resilient in the face of the current economic trend. “Diamonds brought exceptional prices at the Hong Kong auction of December 2, despite the ever-challenging financial environment,”

said Vickie Sek, director of the jewelry and jadeite department at Christie’s Asia. “This auction demonstrates that when the right selection is offered for sale at the correct price, buyers are still very active.” Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=24324 or http://www.idexonline.com/portal_FullNews.asp?id=31576

-Miner Gem Diamonds Ltd and the government of the southern African Kingdom of Lesotho said on Tuesday they have sold a 478-carat diamond for $18.4 million to a unit of the UK-based Graff Diamonds. The diamond, named the Light of Letseng, is the 20th largest rough diamond ever recovered, Gem Diamonds said.

It was sold in Antwerp at an “extraordinary” price of $38,400 per carat against a global average diamond price of $90 per carat, the company said. The diamond was recovered from a mine in Lesotho controlled by Letseng Diamonds, a 30-70 partnership between the government of Lesotho and Gem Diamonds.

The Letseng mine has produced four of the world’s 20 largest rough diamonds, of which three, including the Light of Letseng, have been bought by Graff Diamonds. Graff Diamonds Chairman Laurence Graff holds an 8.2 percent stake in Gem Diamonds. Reuters

-”To the best of our knowledge this is the most valuable rough diamond ever to be sold,” Graff Diamonds Chairman Laurence Graff said. “With our significant expertise in large diamonds we expect to produce an exceptionally beautiful polished diamond of at least 200 carats. This investment is indicative of our commitment to the diamond industry and our faith in the long term value of diamonds.” Read more here-http://www.idexonline.com/portal_FullNews.asp?id=31569

COMMODITIES-OIL

-Mike Schneider of Bloomberg interviews Jim Rogers on Commodities. Watch interview here-http://www.youtube.com/results?search_query=jim+rogers+mike+snider&search;_type=&aq;=f

-OPEC Defers Output Decision to December 17, Seeks $75 Oil Price. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aJWUVURs.PKo&refer;=home

-Saudi king says oil should be $75 per barrel. Read more here-http://apnews.myway.com/article/20081129/D94OJCMG0.html

-Iraq says 80 dollars a ‘reasonable’ price for oil. Read more here-http://www.breitbart.com/article.php?id=081128210731.c9t7wc9j&show;_article=1

-Oil prices have become so oversold that they will stifle investment in new production and eventually lead prices back up near $100 (U.S.) a barrel, said Bank of Nova Scotia commodities expert Patricia Mohr. However, it may take a couple of years to get there. Read more here-http://business.theglobeandmail.com/servlet/story/RTGAM.20081128.wrcommodities28/BNStory/SpecialEvents2/home

-Oil May Fall Below $25 Next Year, Merrill Lynch Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=acgAzpwrcUfQ

U.S. BAILOUT

-The federal government committed an additional $800 billion to two new loan programs on Tuesday, bringing its cumulative commitment to financial rescue initiatives to a staggering $8.5 trillion, according to Bloomberg News. That sum represents almost 60 percent of the nation’s estimated gross domestic product. Read more here-

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/26/MNVN14C8QR.DTL&type;=printable or See a chart break down here-

http://www.sfgate.com/cgi-bin/object/article?f=/c/a/2008/11/26/MNVN14C8QR.DTL

-Calls for $1 Trillion Stimulus Package Grow as Economy Tumbles. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=afWnxP9Dzv0M

-States Seek Aid as Budget Gaps May Hit $200 Billion. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aKRBaPdU1tiQ&refer;=home

-Governors May Seek $100 Billion in U.S. Social Aid. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a6jD2cjWwSEo&refer;=worldwide

-California Governor Arnold Schwarzenegger, saying his state is going broke, declared a fiscal emergency and ordered the incoming class of lawmakers into a special session to fix a widening $11 billion deficit. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aqVCjxJnPH38

-U.S. Cities cut back, expecting shortfalls. Salaries, jobs, services face the chopping block. Read more here-http://www.usatoday.com/printedition/news/20081201/1acities_st.art.htm

-Roubini Says Obama Needs $700 Billion Stimulus Package. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T;=Roubini%20Says%20Obama%20Needs%20%24700%20Billion%20Stimulus%20Package&clipSRC;=mms://media2.bloomberg.com/cache/vQKBYoLPyDhk.asf

-Krugman Says U.S. Hasn’t Done Enough to Aid Economy. Read more here-http://www.bloomberg.com/avp/avp.htm?N=av&T;=Krugman%20Says%20U.S.%20Hasn%27t%20Done%20Enough%20to%20Aid%20Economy&clipSRC;=mms://media2.bloomberg.com/cache/vBnuOfxxO8L8.asf

-Significant U.S. government expenditures from history link here-http://4.bp.blogspot.com/_H2DePAZe2gA/STAqqdE8CfI/AAAAAAAAGks/WrursaMDRIM/s1600-h/expend.png

or http://asianenergy.blogspot.com/2008/12/us-government-expenditure-comparsions.html

U.S. RECESSION

-The U.S. economy entered a recession a year ago this month, the panel that dates American business cycles said today, making this contraction already the longest since 1982. The declaration was made by a committee of the National Bureau of Economic Research, a private, nonprofit group of economists based in Cambridge, Massachusetts. The last time the U.S. was in a recession was from March through November 2001, according to NBER.

Federal Reserve Chairman Ben S. Bernanke today said the economy “will probably remain weak for a time” and the Fed may use unconventional methods, such as buying Treasury securities, to spur growth. Should the recession persist for another five months, consistent with Fed and private forecasts, it would become the longest since the Great Depression. “It is clearly not going to end in a few months,” Jeffrey Frankel, a member of the NBER committee and a professor at Harvard University, said in an interview. “We would be lucky to get done with it in the middle of next year.”

The NBER designation means the U.S. was the first country to have slipped into a contraction. While definitions differ, the economies of both the euro area and Japan fell into a slump in the second quarter of this year, making it the first simultaneous recession in the three regions in the postwar era. The loss of 1.2 million jobs so far this year was the biggest factor in determining the starting point of the U.S. recession, the NBER said. By that measure, the contraction probably deepened last month. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ae0zA06bsei4

-More Americans are collecting jobless benefits than at any time in the last 26 years as companies rush to cut costs in a sinking economy. The number of people on unemployment benefit rolls rose to 4.09 million in the week ended Nov. 22, the most since December 1982, the Labor Department said today in Washington. A separate report showed orders at U.S. factories tumbled in October by the most in eight years as demand collapsed at home and abroad. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUITnqdqAtm4&refer;=home

-Companies in the U.S. eliminated an estimated 250,000 jobs in November, the most since November 2001, a private report based on payroll data showed today. The drop was larger than forecast and followed a revised 179,000 decrease in October that was more than previously estimated, ADP Employer Services said. Read more here-

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

-Sales at U.S. retailers tumbled in November, the worst monthly performance in almost four decades, after the Wall Street meltdown caused consumers to postpone shopping until the Black Friday holiday-sales kickoff.

J.C. Penney Co., Nordstrom Inc. and Gap Inc. all reported sales drops of 10 percent or more at stores open at least a year. The decreases were less than some analysts estimated after 50 percent-off discounts lured customers grappling with the U.S. recession. Wal-Mart Stores Inc. posted a 3.4 percent gain, beating its forecast. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUYE9gPMdo9k&refer;=home

-Spending by U.S. consumers dropped in October by the most since the 2001 contraction, signaling the economy is sinking into a deeper recession. The 1 percent decline in purchases followed a 0.3 percent drop in September, the Commerce Department said today in Washington. A separate report from Commerce showed business investment also tumbled last month. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=arImKeG53bCI&refer;=home

-U.S. holiday retail sales increased 3 percent yesterday from a year earlier, the smallest gain for a “Black Friday” in three years, research firm ShopperTrak RCT Corp. said. Sales rose to $10.6 billion, the Chicago-based company said in a statement. The increase was the smallest since a decline of 0.9 percent in 2005 and compares with a jump of 8.3 percent last year. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aBvgyrY3aNPg&refer;=home

-Holiday sales: Outlook gets bleaker. Despite strong Black Friday sales, analysts say overall November results and the holiday season will be dismal. Read more here-

http://money.cnn.com/2008/12/03/news/economy/holidayforecast_revisions/index.htm?postversion=2008120313

-Manufacturing in the U.S. contracted in November at the steepest rate in 26 years, leading Europe and Asia into a global industrial slump as the credit crisis deepened. The Institute for Supply Management’s factory index dropped to 36.2, below economists’ forecasts, and its gauge of raw-material costs plunged to the least in six decades, the Tempe, Arizona-based group reported today. Factory indexes in China, the U.K., euro area, and Russia all fell to record lows. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=ap89sv4Q3TjE&refer;=home

-More Americans call recession ’serious’. Poll finds four in 10 believe the economy is worsening, but fewer believe depression is likely within next 12 months. Read more here-

http://money.cnn.com/2008/12/04/news/economy/recession_poll/index.htm?postversion=2008120416

U.S. DOLLAR-EURO-YUAN

-UN economists warn that US dollar faces hard landing. The team, which foresaw a year ago that the global economy would slow to a near-standstill in 2008, says in its annual report that the dollar’s rebound was driven mainly by a flight to the safety of the currency as the global crisis intensified.

The overall trend remained downward, however, reflecting perceptions that the US debt position was approaching unsustainable levels, and an accelerated fall of the dollar could bring new turmoil to financial markets. Read more here-http://www.thepeninsulaqatar.com/Display_news.asp?section=Business_News&subsection;=market+news&month;=December2008&file;=Business_News200812012932.xml

-For now (though we believe it a temporary state of affairs) the markets seem to believe that cash is king. They are still content to own paper in times of trouble, particularly US dollars and US Treasuries. But such confidence is misplaced, for many reasons. In the current environment, deflation à la the Great Depression is highly unlikely. Ben Bernanke, the head of the Federal Reserve, is already on record as saying deflation cannot happen, using the helicopter drop analogy to prove his point.

Under a fiat currency system this is true enough, and made abundantly clear with the central banks assuming the role of buyer and guarantor of last resort. But regardless of what the central bank does, we believe the fundamentals have never looked worse for the US dollar. On top of the money to be spent bailing out the financial system (at least $1 trillion likely $2 trillion and more), there is also the recession to deal with.

Even during the best of times the US government ran sizable deficits, in the worst of times these deficits will go through the roof. Going forward they could easily exceed $1 trillion per year. Then there are the social security and medicare payments the US government has promised to baby boomers that will begin to escalate exponentially as they begin to retire starting this year.

The present value of these obligations, according to the 2007 Financial Report of the United States Government, is $41 trillion using a 75-year horizon and $90 trillion using an infinite horizon. We stress that this is present value, which is like compounding backwards. It is the amount of money that needs to be set aside today in order to meet the obligation in the future. It’s not a long run problem anymore. It’s here and now. For the above reasons, we believe the current flight to US dollars is a knee jerk reaction that won’t have staying power. Eric Sprott-Sprott Asset Management

-Britain is considering joining the eurozone as a direct consequence of global financial turmoil, European Commission President Jose Manuel Barroso said Sunday. “We are now closer than ever before.

I’m not going to break the confidentiality of certain conversations, but some British politicians have already told me: ‘If we had the euro, we would have been better off’,” Barroso told a weekly French news programme, referring to the fall in the pound’s value since markets and liquidity meltdown earlier this year. Read more here-

http://www.breitbart.com/article.php?id=081130204959.yq2a770m&show;_article=1

-China has begun to devalue the yuan for the first time in over a decade, raising fears that it will set off a 1930s-style race to the bottom and tip the global economy into an even deeper slump. The central bank has shifted the central peg of its dollar band twice this week in a calculated move that suggests that Beijing aims to offset the precipitous slide in Chinese manufacturing by trying to gain further export share abroad.

The futures markets are pricing in a 6 percent devaluation over the next year. “This is clearly a big shift in policy and we are now on alert,” said Simon Derrick, currency chief at the Bank of New York Mellon. The move follows a Politburo speech by President Hu Jintao warning that China is “losing competitive edge in the world market.” Read more here-

http://www.gata.org/node/6949

INTEREST RATES

-Financial markets notched up another historic milestone on Wednesday as the yield on 10-year US Treasury debt fell below 3 per cent for the first time in 50 years. Read more here-

http://www.ft.com/cms/s/0/eb677540-bbe3-11dd-80e9-0000779fd18c.html?nclick_check=1

-The ECB lowered its benchmark by three quarters of a percentage point to 2.5 percent. Trichet declined to give clues on further moves, saying only that the ECB shouldn’t get “trapped” by cutting rates too low.

The ECB’s decision came after the Bank of England Thursday cut its key rate by one percentage point to 2 percent and Sweden’s central bank lowered borrowing costs by the most since 1992. The Federal Reserve’s benchmark rate now matches a five-decade low as central banks rush to respond to the global recession. Read more here-

http://www.bloomberg.com/apps/news?pid=20601068&sid;=aJkqZZqsJ2c0&refer;=home

-New Zealand’s central bank cut its benchmark interest rate by a record 1.5 percentage points to 5 percent and signaled more reductions to come as it attempts to steer the economy out of it worst recession in 18 years. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aGD8RN0Sn4rQ&refer;=home

-Australia’s central bank cut its benchmark interest rate by one percentage point, extending the biggest round of reductions since the nation was last in a recession in 1991. Governor Glenn Stevens lowered the overnight cash rate target to a six-year low of 4.25 percent in Melbourne today, the fourth reduction in as many months. Four of 21 economists surveyed by Bloomberg News forecast today’s move and 15 tipped a three-quarter point cut. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aitHEadOufrs&refer;=home

STOCK MARKET

-So let us not delude each other: the U.S. and global recession train has left the station; the financial and banking crisis train has left the station. This will be a long and severe and protracted two year recession regardless of the best intentions and good policies of the new U.S. administration. For 2009 the consensus estimates for earnings are delusional: current consensus estimates are that S&P; 500 earnings per share (EPS) will be $90 in 2009 up 15% from 2008. Such estimates are outright silly and delusional.

If EPS fall as most likely to a level of $60 then with a multiple (P/E ratio) of 12 the S&P500; index could fall to 720, i.e. 20% below current levels; if the P/E falls to 10 as possible in a severe recession, the S&P; could be down to 600 or 35% below current levels. And in a very severe recession one cannot exclude that the EPS could fall as low as $50 in 2009 dragging the S&P500; index to as low as 500.

So, even based on fundamentals and valuations, there are significant downside risks to U.S. equities. So the brief sucker’s rally is over and a reality check is now dawning on markets and investors. Expect this financial crisis and economic recession to get much worse in the next 12 months before it gets any better. We are nowhere near a bottom for housing, the U.S, economy, the global economy and financial markets. The worst is ahead of us rather than behind us. Nouriel Roubini, RGE Monitor

-Most Dividends Cut Since 1950s as Banks Conserve Cash. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=az9lE5nZUy9Q&refer;=home

-The S&P;’s dividend yield now higher than the 10-year T-note’s. Read more here-http://www.marketwatch.com/news/story/first-time-50-years-stocks/story.aspx?guid={E072D0B2-0A01-47FD-9FA9-7A2CB6DFD1EE}&siteid;=yahoomy

-Bill Gross, manager of the world’s biggest bond fund, said stocks aren’t as cheap as they appear given that the era of deregulation, low borrowing costs and tax cuts is over. “Stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing and even lower corporate tax rates,” Pacific Investment Management

Co.’s Gross wrote in a market commentary posted on the Newport Beach, California-based company’s Web site. “That world, however, is in our past not our future.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=a7XsZc_xbKpM&refer;=home

-’Astonishing’ Stock Swings May Last 7 More Months, Futures Show. U.S. stock swings will be more than triple the average for the next seven months as investors contend with a global recession and the worst returns since the 1930s, volatility futures show.

May contracts on the Chicago Board Options Exchange Volatility Index, or VIX, closed yesterday at 43.80, while futures expiring before then trade at higher levels, showing investors expect the Standard & Poor’s 500 Index to rise or fall at least 2.8 percent a day through June 17, according to data compiled by Bloomberg.

The last time the benchmark index for U.S. stocks moved that much during the same amount of time was 1932. “It’s astonishing,” said Jeremy Wien, a volatility trader at Societe Generale SA in New York. “It’s beyond even what were considered worst-case scenarios just last year.” Read more here-

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

-Investors pull more cash out of mutual funds, sparking fear for RRSP season. Read more here-http://www.globefund.com/servlet/story/GFGAM.20081203.RIFIC03/GFStory/

-U.S. investors drain $12B from mutual funds. Investment research firm says money flowed out of both stock and bond based mutual funds last week. Read more here-

http://money.cnn.com/2008/12/04/markets/mutual_funds/index.htm

-In tough times many dip into retirement savings. Bank of America survey says 18% withdrew funds from retirement accounts prematurely. Read more here-

http://money.cnn.com/2008/12/04/news/economy/retirement_survey/index.htm?postversion=2008120403

CREDIT CARDS

-The U.S. credit-card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted. “In other words, we expect available consumer liquidity in the form of credit-card lines to decline by 45 percent.” Read more here-http://www.reuters.com/article/newsOne/idUSTRE4B01HI20081201

-The subprime mortgage crisis is giving department and convenience stores and gas stations a new argument in asking Congress for power to negotiate the fees banks charge them to process credit-card transactions.

Retailers such as Target Corp. say banks make so much money from the fees that they give credit cards to people who can’t pay their debts, just as they provided mortgages to homeowners who can’t afford them.

“It’s another version of subprime lending,” said Mallory Duncan, chairman of the Merchants Payment Coalition representing trade groups for 2.7 million gas stations, drug stores, supermarkets and other retailers. “The system should be fixed before we are in a position of having to bail out more banks.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aOD5I8T6SQLM&refer;=home

AUTO MAKERS

-U.S. Auto Chiefs Appeal to Congress for Emergency Aid. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aFge1c_sdz9s&refer;=home

-General Motors Corp., Ford Motor Co., Toyota Motor Corp. and Chrysler LLC said November U.S. sales tumbled more than 30 percent as the recession and Detroit automakers’ aid pleas kept buyers away from showrooms. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=avqIUcruoRX8&refer;=home

-Detroit’s auto bubble pain. Automakers are suffering because sales were artificially boosted by cheap credit and the Big Three thought this could last forever. Read more here-

http://money.cnn.com/2008/11/30/news/companies/auto_bubble/index.htm?postversion=2008120110

-Pelosi Says Bankruptcy by Automakers ‘Not an Option.’ Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aBkUNf9lHUKo&refer;=home

-Auto Dealerships Teeter as Big Three Decline. The National Automobile Dealers Association predicts that roughly 900 of the nation’s 20,770 new-car dealers will go out of business this year, and automobile analysts say the number of failed dealerships could rise into the thousands next year.

In October alone, 20,000 employees of auto dealerships lost their jobs nationwide, more than half of those who were newly unemployed in the retail trade, according to the Labor Department. The auto dealers association estimates that new-car dealers produce a $54 billion annual payroll for 1.1 million workers and nearly 20 percent of the retail sales and sales taxes in small and large communities alike. Read more here-http://www.nytimes.com/2008/11/30/business/30dealer.html?pagewanted=print

-Six in 10 oppose auto bailout, poll shows. Read more here-http://www.cnn.com/2008/POLITICS/12/03/auto.poll/index.html

REAL ESTATE-FORECLOSURES-RISKY MORTGAGES

-U.K. House prices fall at fastest rate in 25 years. British house prices tumbled at a record 16.1 per cent in November, marking the sharpest drop in property values for a quarter of a century. Read more here-http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5284863.ece

-Luxury-home values in central London, the world’s most expensive location for prime real estate after Monaco, fell for an eighth month in November as fewer sellers held out over prices.

The estimated average value of a house or apartment in the city’s nine most expensive neighborhoods fell 3.6 percent from October, according to an index compiled by Knight Frank LLP.

It was the second-largest drop since the index started in 1976. Property values declined 14 percent from a year earlier, the broker said today. The index covers homes mostly valued at more than 1 million pounds ($1.54 million). Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aCC1TRXWDDxI&refer;=home

-New-home sales in the U.S. fell in October to the lowest level in 17 years as the credit crunch deprived potential buyers of needed financing. Purchases dropped 5.3 percent to an annual pace of 433,000, lower than forecast and the fewest since January 1991, the Commerce Department said today in Washington. The median sales price decreased to a four-year low.

Other Commerce reports today showed consumer and business spending tumbled last month. The housing downturn is likely to extend into a fourth year, shackling an economy that’s already sliding into a deeper slump. Foreclosures will worsen the glut of unsold properties and drive down prices further, while stricter borrowing rules and mounting job losses will keep depressing demand.

“The new home market remains extremely weak,” said Steven Wood, president of Insight Economics in Danville, California. “A substantial inventory overhang still exists. This is pressuring home prices lower.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aBRSRlsnpVG4&refer;=home

-Manhattan Awash in Open Office Space. Read more here-http://www.nytimes.com/2008/12/03/business/03blocks.html?pagewanted=print

-Toll Brothers Inc., the largest U.S. luxury homebuilder, reported its worst annual results since going public more than two decades ago and gave a bleak forecast for next year. Revenue in fiscal 2009 will be “significantly” below the previous year and the company may deliver only 2,000 to 3,000 homes for the period, Toll said today in a statement.

That compares with the 4,743 homes it sold this year. “Obviously there are enormous challenges in our industry,” Chief Executive Officer Robert Toll said in the statement. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ay6i7EOuAj3Y

-An Australian academic predicting a collapse in house prices has made a bet with Macquarie Group Ltd. economist Rory Robertson that commits the loser to walk from Canberra to the top of the nation’s highest mountain.

A forecast by University of Western Sydney Associate Professor Steve Keen that house prices will collapse by 40 percent, double the current plunge in the U.S., has a 1 percent chance of being correct, Sydney-based Robertson said today.

Keen, who made headlines in Australia and overseas with his forecast that the nation may be facing a depression, and last month sold his inner-Sydney home, accepted Robertson’s challenge. If house prices fall by less than 20 percent, he will embark on the 230 km (143 mile) hike from the nation’s capital to Mount Kosciuszko, a 2,228-meter peak that is snowcapped for much of the year. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aBGpZWYKLiWE

-Bernanke Says U.S. Must Step Up Foreclosure Efforts. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a8QEwRkHQ0fk&refer;=home

-Home sellers suffer amid wave of foreclosures. Ordinary home sellers have a hard time competing against the cut-rate bank owned properties that are currently dominating the market. Read more here-http://money.cnn.com/2008/12/02/real_estate/REOs_tough_on_sellers/index.htm

-Orange County California, foreclosures 45% of inventory. Read more here-http://latimesblogs.latimes.com/laland/2008/12/orange-county-f.html

-Wayne County Michigan Foreclosures Nov2008. Watch video here-http://www.youtube.com/watch?v=ufexZnViDiU&ref;=patrick.net

-Diary of a repossession: One U.K. couple describes the agony of losing their luxury £400,000 home in the credit crunch. Read more here-http://www.dailymail.co.uk/femail/article-1089408/Diary-repossession-One-couple-describes-agony-losing-luxury-400-000-home-credit-crunch.html

-Government warned of mortgage meltdown. Regulators ignored warnings about risky mortgages, delayed regulations on the industry. Read more here-

http://money.cnn.com/2008/12/01/news/ignored_warnings.ap/index.htm?postversion=2008120106

GEOPOLITICAL NEWS

-Israel ‘prepared to attack’ Iran nuclear plants. Read more here-http://www.timesonline.co.uk/tol/news/world/middle_east/article5284173.ece

-The IDF is drawing up options for a strike on Iranian nuclear facilities that do not include coordination with the United States, The Jerusalem Post has learned. While its preference is to coordinate with the US, defense officials have said Israel is preparing a wide range of options for such an operation.

“It is always better to coordinate,” one top Defense Ministry official explained last week. “But we are also preparing options that do not include coordination.” Israeli officials have said it would be difficult, but not impossible, to launch a strike against Iran without receiving codes from the US Air Force, which controls Iraqi airspace. Israel also asked for the codes in 1991 during the First Gulf War, but the US refused. Read more here-http://www.jpost.com/servlet/Satellite?cid=1227702421218&pagename;=JPost%2FJPArticle%2FShowFull

-Experts warn Barack Obama of a nuclear Iran. Read more here-http://www.timesonline.co.uk/tol/news/world/us_and_americas/us_elections/article5275647.ece

-WMD Commission: Terrorists Likely to Detonate Biological Bomb in US by 2013. Watch video here-http://www.breitbart.tv/?p=233553 or http://www.cnn.com/2008/US/12/02/terror.report/index.html or http://www.reuters.com/article/newsOne/idUSTRE4B11EG20081202

-The U.S. military expects to have 20,000 uniformed troops inside the United States by 2011 trained to help state and local officials respond to a nuclear terrorist attack or other domestic catastrophe, according to Pentagon officials.

The long-planned shift in the Defense Department’s role in homeland security was recently backed with funding and troop commitments after years of prodding by Congress and outside experts, defense analysts said. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/11/30/AR2008113002217_pf.html

-Al Qaeda’s Zawahri says U.S. wars behind financial crisis. Read more here-http://www.reuters.com/article/topNews/idUSTRE4AR1LZ20081128?feedType=RSS&feedName;=topNews

-Russian Prime Minister Vladimir Putin hinted on Thursday that he may return to his old job in the Kremlin, but not before his ally President Dmitry Medvedev’s term expires in 2012. Read more here-http://www.kyivpost.com/world/31631

-Russia to help Venezuela develop nuclear energy. Read more here-http://www.breitbart.com/article.php?id=D94NBROO0&show;_article=1

-Russia to complete Iran nuclear plant in 2009. Read more here-http://in.reuters.com/article/worldNews/idINIndia-36735220081127

-Russian warship to cross Panama Canal. A Russian warship will sail through the Panama Canal this week for the first time since World War II, the navy announced Wednesday, pushing ahead with a symbolic projection of Moscow’s power in a traditional U.S. zone of influence.

The destroyer Admiral Chabanenko will arrive Friday at a former U.S. naval base in Panama’s Pacific port of Balboa for a six-day visit after carrying out joint maneuvers with the Venezuelan navy in the Caribbean Sea, navy spokesman Capt. Igor Dygalo said in a telephone interview. Read more here-

http://www.breitbart.com/article.php?id=D94REPNO1&show;_article=1

The GoldBugg Report – December 09, 2008
Posted by Worldwide Precious Metals on Tuesday, December 9, 2008

The GoldBugg Report – December 02, 2008

December 2, 2008

WORLD FINANCIAL REPORT ON RADIO NOV 26 2008 SHOW

-Swamped by gold demand, Perth Mint stops taking orders. Fears of the unknown long-term effects from the global financial crisis have sparked a new gold rush.

-Platinum Tipped For Rally Next Year.

-Ted Butler silver commentary.

GOLD

-Swamped by gold demand, Perth Mint stops taking orders. Fears of the unknown long-term effects from the global financial crisis have sparked a new gold rush. With retail and wholesale clients around the world stocking up on the precious metal, the Perth Mint has been forced to suspend orders. As the World Gold Council reported that the dollar demand for gold reached a quarterly record of $US32 billion (A$50.73 billion) in the third quarter, industry insiders said the race to secure physical gold had reached an intensity that had never been witnessed before.

Perth Mint sales and marketing director Ron Currie said the unprecedented demand had forced the Mint to cease orders until January, with staff working seven days a week, 24-hour days, over three shifts to meet orders. He said Europe was leading the demand, with Russia, Ukraine, Middle East, and US all buying making up 80 per cent of its sales. One European client purchased 30,000 ounces for $33 million.

“We have never seen this before and are working right at capacity. And we are seeing it from clients in the shop buying one ounce, right up to 30,000 ounces from overseas clients,” Mr. Currie said. Robert Jaggard, manager of bullion and rare coins dealer Jaggards, said business had picked up strongly and he expected it to increase further.

“All around the world there has been a heavy run on physical gold and there is a shortage of supply,” he said. Mr. Jaggard, who has been dealing in gold for 40 years and is an agent for the Perth Mint, said some clients were buying up to $1 million worth of gold, paying a premium above the spot price. Read more here-http://www.gata.org/node/6910

-Gold soared $50 this past Friday Nov 21. It began the day at $748 and was trading at $800 when the day ended. It is rare for gold to achieve such a huge one-day gain. In fact, I checked my records for the past twenty years and found only one other instance when gold climbed $50 or more in a day. Interestingly, the other occurrence was on September 17, 2008, barely two months ago.

That rally also took gold back above $800. That these two rallies unique and rare in their magnitude occurred so near to one another is significant. Is there a message from these two events? Yes, indeed! Gold itself is telling us two things. First, there is an enormous short position in gold. Huge rallies occur for a reason, and short covering is always a factor. In order to limit their losses, shorts will bid up the market in a desperate attempt to cover their position.

The rule of thumb is straightforward the bigger the short position, then the bigger the rally. Second, and more importantly, these huge rallies are signalling that gold under $800 is too cheap. A higher price is needed to bring supply and demand back into balance. There is other, more than ample evidence to support this same conclusion. The demand for physical metal remains strong. James Turk-Read more here-http://www.goldmoney.com/en/commentary.php

-’I still like gold,’ says Marc Faber. “I still like gold,” Faber said, because it is cash and not the liability of someone else. Read more here-http://www.bi-me.com/main.php?c=3&cg;=2&t;=1&id;=27713

-Marc Faber Says Global Economy ‘Imploding,’ Favours Gold. Watch video here-http://www.bloomberg.com/avp/avp.htm?N=av&T;=Marc%20Faber%20Says%20Global%20Economy%20%60Imploding%2C%27%20Favors%20Gold&clipSRC;=mms://media2.bloomberg.com/cache/vhU1YsklcydQ.asf

-The real story of precious metals’ returns. Read more here-http://www.greenfaucet.com/?q=node/2048

Asset Performance (1970 Through July 2008)

-Got Gold Report-COMEX Commercial Short Positions Still Low For Gold, Silver. While equity markets were once again bludgeoned unmercifully this week, gold and silver fared relatively better. Perhaps that is in part because the largest of the largest futures traders continued to have the lowest COMEX futures net short positioning in years. Read more here-

http://www.resourceinvestor.com/pebble.asp?relid=48202

-Bring back the link between gold and the dollar. Read more here-http://www.ft.com/cms/s/0/ba673d22-b977-11dd-99dc-0000779fd18c.html?nclick_check=1 or http://www.gata.org/node/6916

-Keep Your Eye on the Prize! Buy gold. Read more here-http://www.321gold.com/editorials/degraaf/degraaf112408.html

-Elliott Wave Gold Update from Alf Field. Read more here-http://news.goldseek.com/AlfField/1227596760.php

-Gold Pressure near Breaking Point. The demand pressure slowly yet consistently building over the last year has created some remarkable pressure to the upside on the price of gold. With recent announcements by Iran that their foreign reserve holdings are being converted to gold, and the record purchase of $3.5 billion by unidentified Saudi Arabians over a two week period, it seems remarkable that gold continues range-bound trading in the low 700’s.

Recent coverage of the gold market by mainstream financial stations such as CNBC and Fox News indicate that the discrepancy between the COMEX spot price and the average price for gold bars and coins (US$900+ on Ebay, for example) is starting to make even the most stalwart feeble-minded news anchors see what two plus two equals.

So the forces building that will take gold through $1500 within the year and likely much further are compounding with every day that the global economy slides deeper and deeper into depression. The United States must continue its desperate efforts to saturate the economy with USD while its value is high because when the repatriation of those same dollars ebbs on the conclusion of the widespread and ongoing deleveraging-induced asset selling, the crash of the dollar will begin.

In my estimation, that will probably not occur until the New Year, because the Bush administration will be in full gear trying to salvage a favorable conclusion to 8 years of ham-fisted fiscal mismanagement. James West-Read more here-http://news.goldseek.com/GoldSeek/1227291310.php

-Australia’s 2008 gold output may fall to lowest level since ‘89. Read more here-http://www.miningweekly.com/article.php?a_id=148236

-The first significant fresh gold hedge of the year. Société Générale’s latest hedge book points out that the current financial environment will make it difficult for some miners further to reduce hedge cover by any means other than by delivery of mine production; also the complexion of the dehedging activity changed slightly in the third quarter. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=73693&sn;=Detail

-The superiority of returns on Gold to investors over the miserable returns on paper equities would seem at some point to become an embarrassment to the purveyors of Stock Certificates of Negative Return. While US$ Gold is down from the high, so many other investors, living in other currencies, around the world have witnessed their Gold trading at all time highs. And now the message of financial salvation is spreading further. Stories of shortages of Gold coins are now widespread. Public participation in a market is sign of Wave V, which now may be unfolding.

Central banks, led by the Federal Reserve, are busy monetizing every item of debt possible. The balance sheet of the Federal Reserve, adjusted for circular transactions, is now 95% larger than prior to the financial meltdown. U.S. Congress, with encouragement from Obama’s team, is now talking about a $500-700 financial stimulation plan. Deficit of U.S. government over the past year is already in excess of $1.5 trillion. The additional debt necessary to finance a stimulus plan can only be financed by (1) gullible foreign investors, (2) foreign central banks, or (3) by Federal Reserve.

With foreign central banks needing to refinance their own institutions and stimulate their own economies, they may have little appetite for more U.S. government paper. Paper that may soon be downgraded to AA. As a consequence, the Federal Reserve will have little choice but to monetize most of this additional half trillion dollars of debt. The ramifications of further expansion of the Federal Reserve’s balance sheet should not be ignored.

With the Fed’s balance sheet approaching a double in size, U.S. money supply, M-1 SA, is already growing at a 25-30% annual rate. “Printing money” at that rate can only lead to a loss of purchasing power. Anyone expecting an increase in general purchasing power of the dollar, monetary deflation, is simply on the wrong track. Gold is the only historical defense against the coming dollar debacle. The financial risks combined with the most populist President in U.S. history, and perhaps the most inept since Wilson a hundred years ago, make Gold an absolute necessity for protecting wealth.

Some weeks ago the above chart was introduced in somewhat different format. The red line, using the left axis, is the inflationary component of U.S. money supply growth over the past six months. The green line is price of $Gold, and uses the right axis. Black triangles are buy signals on $Gold created from the inflationary money supply growth rate. Those signals occur when the inflationary money growth is negative and then turns positive.

These signals, while from a model not intended to be a precise timing model, suggest another good time ahead for Gold investors. In the past four plus years it has only given three other signals. Investors should not ignore the coming threat of excessive money creation, and buy Gold on all price weakness or dips. Wealth once lost to the tyranny of money, is never regained! Ned W. Schmidt-Story here-http://news.goldseek.com/NedSchmidt/1227624614.php

SILVER

-Total silver fabrication demand will drop as much as 10 percent in 2009 on tumbling photography and industrial uses as the global economy slows, a top official at precious metals research firm GFMS said. Philip Klapwijk, GFMS’s executive chairman, said he expected silver to rise to $13 an ounce next year as the metal will benefit from gold because of rising inflationary pressure and a weakening dollar. Read more here-http://www.forbes.com/reuters/feeds/reuters/2008/11/21/2008-11-21T181946Z_01_N21479729_RTRIDST_0_SILVER-DEMAND-OUTLOOK-INTERVIEW.html

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1227634141.php

-Silver market update from Adam Hamilton. Read more here-http://www.zealllc.com/2008/silvcris.htm

PLATINUM-PALLADIUM

-Platinum Tipped For Rally Next Year. Market forecasters remain confident of a recovery in the platinum price to more than $1,000/oz next year despite wild gyrations in the price in the past week after good and bad news. Read more here-http://www.resourceinvestor.com/pebble.asp?relid=48228

-Despite spectacular fall, platinum has good long term outlook. Although souring sentiment caused PGMs to fall from grace, ScotiaMocatta foresees a good long term outlook for the precious metals. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=73542&sn;=Detail

-Platinum price could rise “modestly” VM Group. The platinum price could rise slightly if further supply problems occur or economic gloom starts to lift. There is also hope for palladium as carmakers appear to have entered the market again. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=73690&sn;=Detail

DEFINITIONS-QUOTES-QUICK HITS

-’Bailout’ is 2008 word of the year. The word was looked up on Merriam-Webster’s online dictionary so frequently during the financial crisis that the publisher says it was an obvious choice. Read more here-http://money.cnn.com/2008/11/25/news/funny/bc.wordoftheyear.ap/index.htm

-Disinflation. A slowing of the rate at which prices increase. Typically, this occurs during a recession as sales drop and retailers are not able to pass on higher prices to customers. Disinflation is not to be confused with deflation, where prices actually drop. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Disinflation_(economics)

-Stagnation. A period of little or no growth in the economy. Economic growth of less than 2-3% is considered stagnation. Sometimes used to describe low trading volume or inactive trading in securities. A good example of stagnation was the U.S. economy in the 1970s. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Stagnation_(economics)

-Great Depression. An economic recession that began on October 29, 1929, following the crash of the U.S. stock market. The Great Depression originated in the United States, but quickly spread to Europe and the rest of the world. Lasting nearly a decade, the Depression caused massive levels of poverty, hunger, unemployment and political unrest.

The NYSE crashed on October 24, 1929, a day known as Black Thursday. Thousands of people lost nearly the entire value of their investments, leaving them with next to nothing. The trend continued and the following Tuesday, Black Tuesday, the DJIA dropped 12%, marking the start of the great depression. International trade declined, along with personal income, tax revenues and product prices.

Many economists believed the Great Depression was evidence that capitalism, when left unchecked, is a dangerous ideology. This caused some nations to change their political structures, such as Germany, who adopted fascism. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Great_Depression

-Recession. A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s gross domestic product (GDP).

Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis events can often trigger the onset of a recession. A recession generally lasts from six to 18 months. Interest rates usually fall in recessionary times to stimulate the economy by offering cheap rates at which to borrow money. Investopedia.com-Read more here-

http://en.wikipedia.org/wiki/Recession

-Depression. A severe and prolonged recession characterized by inefficient economic productivity, high unemployment and falling price levels. In times of depression, consumers’ confidence and investments decrease, causing the economy to shut down. The classic example of this occurred in the 1930s, when the Great Depression shook the global economy. Investopedia.com-Read more here-http://en.wikipedia.org/wiki/Depression_(economics)

-The ultimate result of shielding men from the effects of folly is to fill the world with fools. Herbert Spencer, English Philosopher

-The massive inflation which will result from the Treasury having to print, print, print and the increase to the unemployment rolls provides us with the right scenario to signal the beginning of the next Bull Market phase for Precious Metals. Its time to be aggressively pro-active but do not overextend your ability to stay the course as the volatility day to day should be expected to continue. Precious Metals International

-Lets not forget the US Dollar. Now that US Treasuries are approaching a 0 to negative yield you can look for the Dollar’s recent strength to reverse and reverse sharply. Precious Metals International

-Make certain you don’t buy holiday Gift Cards or Gift Certificates from any Retailers that may not be there when your recipient goes to use them. Precious Metals International

-”The dollar is getting its teeth kicked in,” said Matt Zeman, of LaSalle Futures Group in Chicago. “You have big money flowing back into gold. The risk appetite is returning, and the dollar is getting decimated.”

Frank McGhee, of Integrated Brokerage Services in Chicago, pushed that analysis further, saying that, “The overall impact of what the bailout is going to cost will ultimately become very negative for the dollar. All this money that ran into Treasuries with no yield, and the government still has to go out and borrow money.” Casey Daily Resource

-”Hard assets for hard times,” said Frank McGhee, of Integrated Brokerage Services in Chicago. “Even with all the money central banks have thrown at the financial system, it’s not enough to stop systemic risk. People are looking for something that’s going to go up, and that’s gold.” Casey Daily Resource

-”Any steps to avert deflation would be bearish for the dollar and a signal for gold to rally in 2009,” analysts at Deutsche Bank wrote this week. “In the 1930s, a relatively quick solution to deflation in the U.S. was a significant depreciation in the U.S. dollar.” Casey Daily Resource

-The titanic struggle between massive deleveraging of speculative players and unleveraged buyers of physical bullion continues. The leveraged speculators won the first round with the unprecedented wholesale liquidation selling in futures markets but unleveraged physical buyers who are unencumbered by debt are showing themselves as very strong hands.

As the strong supply and demand fundamentals reassert themselves, physical buyers who shun the casino of the leveraged futures market and remain properly diversified will likely be handsomely rewarded in the coming months. Particularly if the increasing rumours of a default on the COMEX in the coming months come to pass. Gold.ie

-There are now potentially 100% more US dollars for each gold ounce than there were in total in 2003, and here’s the scariest part: there are now 50% more US dollars in the monetary base than there were seven weeks ago. Joanne Nova-Read more here-http://www.321gold.com/editorials/nova/nova112508.html

-Recession’s Grip Forces U.S. to Flood World With More Dollars. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aCqvVS7Zk7ZQ

-Whether it is “To be a Depression, or not to be a Depression” we clearly have a lot more adjustments to make in our lifestyles. For years we have been living in a world of illusion built on a sea of debt. The piper has now arrived and the payment will be steep. But as been shown so many times in the past Gold and bullion will once again be a panacea for global economic stress.

It has been demonstrated so many times in the past that when upheaval occurs as Europe has experienced in the past century or even as parts of Asia has experienced many times as well the one thing you take with you when you are uprooted is the Gold. Gold has been a currency for 3 thousand years. We expect it to be around once again through this crisis. David Chapman-Read more here-http://www.321gold.com/editorials/chapman_d/chapman_d_112408.html

-Buy one car get a second car for 1 dollar. Watch video here-http://www.youtube.com/watch?v=YGSFDT3UqP4

RARE COLORED DIAMONDS

-De Beers Group managing director Gareth Penny, whose company controls 40 percent of the global diamond trade, said company research showed that diamonds remained the most popular gift at Christmas in the U.S. market which represents 43 percent of all worldwide sales. “All our research shows that the consumer, particularly in America, wants diamonds more this Christmas than our research has ever shown, for us that’s very encouraging,” said Penny. AP

-Laurence Graff, chairman and founder of Graff Diamonds, which bought a 4.5 per cent stake in Gem Diamonds this month, is confident about the future of the diamond market. The billionaire, who has a necklace called the Lesotho Promise on sale for $75 million, said: “Top-quality gems are rare, hard to find and polish.

There will always be a demand for these high and top-quality diamonds, both to be worn and in which to invest. In the short term, their prices may fluctuate, but in the long term they retain their quality, unlike other commodities.” Business.timesonline.co.uk

-Christie’s Stresses Strong Demand for Colored Diamonds to auction off 35 Ct rare Wittelsbach Diamond in London. Christie’s expressed its confidence in the colored diamond market ahead of its London jewels sale in December. “The diamond market as a whole, like the international jewellery market, continues to be strong,” the auction house said in a statement about the upcoming event on December 10.

In particular, it explained demand for colored diamonds is high, citing a recent record sale it made in Geneva of a 13.39 carat fancy intense blue diamond for $8.9 million. Christie’s is hoping to emulate that feat when it presents the Wittelsbach Diamond, a rare 35.56 carat grayish blue diamond, VS2 clarity, at ‘Jewels: The London Sale’ on December 10. The stone, which dates back to Austrian royalty of the 17th century and is now part of a private collection, has an estimated value of about $15 million (EUR 11.3 million), a Christie’s spokesperson told Rapaport News.

While general demand for diamonds has waned in the past month or two on the back of the global financial crisis, exceptional stones have offered some sparkle in the rough. Rio Tinto recently reported strong interest at its annual Argyle Pink Diamond Tender which concluded in October, and Petra Diamonds said last week it sold a 39.19 carat special blue diamond for $8.8 million on tender.

The Wittelsbach diamond earned esteem in 1664 when King Philip IV of Spain selected it to be part of his daughter, Infanta Margarita Teresa’s, dowry upon her engagement to Leopold I of Austria, who later became the Holy Roman Emperor. Christie’s hopes that the romance of the diamond’s history combined with current demand for rare colored diamonds, will generate high interest in the stone amongst buyers. Story here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=23967

-In 1817, R.J. Hauy an eminent French mineralogist wrote “Gems are the flowers of the mineral kingdom fancy color diamonds are the orchids.” “Fancy color diamonds, like orchids, are truly exotic and rare beauties of nature.” Jewelryexpert.com

-”I have come to the realization that colored diamonds, or other gemstones, should first be considered as a unique and individual work of art, and second as a commodity to be analyzed, computerized, and categorized.” Stephen Hofer, 1998

-”Exceptionally fine colored diamonds have no fixed price, and as with fine paintings set rules do not hold.” S.H. Ball

-”Diamonds are nature’s art, nature’s most beautiful art. Every stone is a story, every stone tells a story.” Diamond DVD-PBS Nature Series

-”A colored diamond is a touch stone of the universe, a little something God created that man can’t always find, they are the last frontier of collectibles.” R. Winston

-”I remember that stone it was an incredible color, it had its own personality I have never seen another one quite like it.” R. Winston

-”After all, it really is an investment.” “It is only when the thing I buy creates a show for those around me that I get my money’s worth.” Evalyn Walsh McLean “Queen of Diamonds” Early owner of the Hope diamond

COMMODITIES-OIL-WIND

-Rogers Says Dollar to Be ‘Devalued,’ Buys Commodities. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aP5uFzsclsDQ or watch video here-

http://www.bloomberg.com/avp/avp.htm?N=av&T;=Jim%20Rogers%20Sees%20Dollar%20%60Devalued%2C%27%20Likes%20Commodities&clipSRC;=mms://media2.bloomberg.com/cache/vJzshG4o708g.asf

-BMO forecasts weak near-term metals price with recovery in H2/09. BMO Capital Markets predicts that the sharpest commodity crash in 36 years won’t be easing in the short term, but markets could re-energize late next year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=73653&sn;=Detail

-Oilman’s oil-free dream is blown off course by a nightmare on Wall Street. Read more here-http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article5192145.ece

WORLD FINANCIAL CRISIS

-Worst of financial crisis yet to come: IMF chief economist. The IMF’s chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010, a report said Saturday. Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem. “The worst is yet to come,” Blanchard said in an interview with the Finanz und Wirtschaft newspaper, adding that “a lot of time is needed before the situation becomes normal.”

He said economic growth would not kick in until 2010 and it will take another year before the global financial situation became normal again. The International Monetary Fund on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan. But Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity. Withdrawals of capital leading to problems of liquidity “can be so significant that the IMF alone cannot counter them,” he said, adding that massive withdrawals of investments from emerging countries could represent “hundreds of billions of dollars.

“We do not have this money. We never had it,” he said. The IMF had spent a fifth of its 250 billion dollar (200 billion euro) fund in the last two weeks, Blanchard added. He also urged central banks around the world to cut interest rates, after the Swiss National Bank made a surprise one percentage point rate cut Thursday. The central banks “should lower interest rates to as close to zero as possible,” he said. Story here-http://www.breitbart.com/print.php?id=081122230427.xqkurulg&show;_article=1

-IMF Loans Total $41.8 Billion in November, ‘Busiest’ Month Ever. The International Monetary Fund this month lent more money to cash-strapped governments than it has in the past five years combined.

The IMF agreed this month to $41.8 billion in loans, approving $16.4 billion for Ukraine, $15.7 billion for Hungary, $2.1 billion for Iceland and $7.6 billion for Pakistan. Financing is in the works for Serbia, Turkey, Belarus and Latvia, turning eastern Europe into a regional ward of the IMF the way Southeast Asia was a decade ago. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&refer;=home&sid;=aSCYZI5nYCsk

-US seeks 300 billion dlrs from Gulf states: report. The United States has asked four oil-rich Gulf states for close to 300 billion dollars to help it curb the global financial meltdown, Kuwait’s daily Al-Seyassah reported Thursday. Quoting “highly informed” sources, the daily said Washington has asked Saudi Arabia for 120 billion dollars, the United Arab Emirates for 70 billion dollars, Qatar for 60 billion dollars and was seeking 40 billion dollars from Kuwait.

Al-Seyassah said Washington sought the amount as “financial aid” to face the fallout of the financial crisis and help prevent its economy from sliding into a painful recession. The daily said the United States plans to use the funds to help the ailing automobile industry , banks and other companies suffering from the global financial turmoil. The four nations, all members of OPEC, produce together 14 million barrels of oil per day, around half of the cartel’s production and about 17 percent of world supplies.

The four states are estimated to have amassed close to 1.5 trillion dollars in surplus in the past six years due to high oil prices that rocketed above 147 dollars in July before sliding to just above 50 dollars. The daily also said that the United States has asked Kuwait to forgive its Iraqi debt estimated at around 16 billion dollars. Story here-

http://news.yahoo.com/s/afp/20081120/bs_afp/financeeconomyusgulf_081120072928

-Bernanke says he erred in gauging mortgage fallout. Federal Reserve Chairman Ben Bernanke acknowledges he was wrong in believing that there would be limited fallout to financial markets from risky mortgages that soured after the housing market’s collapse.

“I and others were mistaken early on in saying that the subprime crisis would be contained,” Bernanke said in an article in the Dec. 1 issue of The New Yorker magazine. “The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,” he said in the piece titled “Anatomy of a Meltdown.” Read more here-http://apnews.myway.com/article/20081123/D94KRSM80.html

-Icelanders demand PM resign during violent protests. Thousands of Icelanders took to the street in violent protests in Rekjavik, demanding the resignation of Prime Minister Geir Haarde and central bank governor David Oddsson in the wake of the country’s complete financial collapse. Read more here-http://www.france24.com/en/20081123-protests-geir-haarde-resignation-financial-crisis-iceland or watch video here-http://wjno.com/cc-common/news/sections/newsarticle.html?feed=244038&article;=4635529

-Shame, Shame, Shame: Lehman Brothers Collapse. This report shows a side of the Lehman Brothers bankruptcy that hasn’t been told yet. While CEO Richard Fuld is walking away with millions of dollars, some former employees say they’ve been left with nothing but broken promises. Read and watch video here-http://www.myfoxny.com/myfox/pages/Home/Detail;jsessionid=90BB69B49DB497102045B7F2F9A3A35E?contentId=7939247&version;=1&locale;=EN-US&layoutCode;=VSTY&pageId;=1.1.1&sflg;=1

U.S. FINANCIAL BAILOUT

-The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis. Read more here-http://bloomberg.com/apps/news?pid=20601109&sid;=arEE1iClqDrk&refer;=home

-The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion. The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements today in Washington.

With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation. Read more here-

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

-Citigroup Gets $306 Billion U.S. Rescue From Toxic Assets, Cash Infusion. Citigroup Inc. received a U.S. government rescue package that shields the bank from losses on toxic assets and injects $20 billion of capital, bolstering the stock after its 60 percent plunge last week. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aoAIRJWrcnO4&refer;=home

-Tracking the $700 Billion Bailout. Dozens of banks and a handful of insurers have applied for funds from the Treasury Department as part of the $700 billion Troubled Asset Relief Program. The Treasury has transferred capital to 30 of these companies and to A.I.G. More are expected to announce their participation in the coming weeks. See the companies and dollar amounts here-http://projects.nytimes.com/creditcrisis/recipients/table

-The Truth about Bailouts. As the Federal bailout bonanza prepares to spread beyond the mortgage and financial sectors to fill Detroit’s depleted coffers, few economic or policy analysts have spared a thought for the destitution of the U.S. government itself. Put simply, our government doesn’t have enough spare cash to bail out a lemonade stand let alone a bloated and failing industry that is losing tens of billions of dollars per month.

Washington can only offer funds that it has borrowed from abroad or printed. Unfortunately, the nation is in the grips of a delusion that money derived from these sources has the power to heal. But history has clearly shown that borrowed or printed money only has the power to destroy. Our standard of living must decline to reflect years of reckless consumption and the disintegration of our industrial base.

Only by swallowing this tough medicine now will our sick economy ever recover. By accepting a lower standard of living today, we will eventually be rewarded with a higher one tomorrow. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff112408.html

-The Fed Is Out of Ammunition. A discredited dollar is a likely outcome of the current crisis. With an estimated $4 trillion in housing wealth and $9 trillion in stock-market wealth destroyed so far in the United States, there is little doubt that we are witnessing a classic debt-deflation bust at work, characterized by falling prices, frozen credit markets and plummeting asset values.

Those who want to understand the mechanism might ponder Irving Fisher’s comment in 1933: When it comes to booms gone bust, “over-investment and over-speculation are often important; but they would have far less serious results were they not conducted with borrowed money.” Read more here-

http://online.wsj.com/article/SB122748912533552007.html

U.K. FINANCIAL BAILOUT

-Prime Minister Gordon Brown pledged the biggest round of tax cuts and spending increases in two decades to counter the U.K.’s first recession since 1991. The 25.6 billion-pound ($38.8 billion) package over two years will swell the budget deficit to 118 billion pounds in the 12 months through March 2010, Chancellor of the Exchequer Alistair Darling said today. At 8 percent of gross domestic product, the shortfall is the largest since at least 1970 and the biggest among the Group of Seven nations.

“I want to take fair and responsible steps to protect and support businesses and people now,” Darling said. ”My central objective is to respond to the consequences of this global recession on our country.” Brown is going further than counterparts in the U.S., Europe and Asia as he tries to limit the impact of the worst global slump in three decades. Britain’s fiscal package, which includes reducing the rate of sales tax by 2.5 percentage points to 15 percent, comes as Brown prepares for an election within 18 months.

The plans will force the U.K. to sell a record 146.4 billion pounds of bonds, or gilts this year, the Debt Management Office said today. That’s an 83 percent increase from the 80 billion pounds planned eight months ago. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3zONhd6×9Ak&refer;=home or http://www.telegraph.co.uk/finance/financetopics/budget/3513516/Pre-Budget-report-National-Insurance-rise-adds-to-high-earners-woes.html

-Is Britain going bankrupt? Read more here-http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2008/11/24/is_britain_going_bankrupt

U.S. FEDERAL DEFICIT COULD HIT 1 TRILLION THIS YEAR

-The federal government’s ledger has gone from a surplus just seven years ago to facing a prospect of a $1 trillion deficit next year. Given those dire financial straits, President-elect Barack Obama said at a news conference Tuesday, “Budget reform is not an option. It’s a necessity.” But unlike his predecessor President George W. Bush, who in better economic times talked about returning to surpluses by 2012, “balanced budgets” were not in Obama’s vocabulary.

The government’s first obligation, he said, was to spark an economic recovery and put people back to work. To do that, the Democratic-led Congress is expected to have a new stimulus package, costing in the $500 billion range, ready to go when Obama takes office in January.

That’s on top of the hundreds of billions already spent or committed by Treasury and the Federal Reserve to revive the moribund financial markets. On Tuesday the government announced two new programs providing $800 billion to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available.

All that, in the short term, will send the deficit into the stratosphere. Budget hawks were stunned when the federal deficit hit a record $455 billion in fiscal 2008, which ended Sept. 30, more than double the previous year’s deficit. But now, even the fiscally conservative say another doubling, to $1 trillion or more, may be inevitable if the economy is to be rescued. Read more here-http://www.breitbart.com/article.php?id=D94M4T580&show;_article=1

3 MORE U.S. BANKS FAIL-MORE ADDED TO PROBLEM LIST

-Three banks in California, Georgia fail. Regulators close down two California thrifts and Community Bank of Loganville, Ga., raising the toll in the financial crisis to 22 banks. Read more here-http://money.cnn.com/2008/11/21/news/companies/bank_failure/index.htm or http://www.washingtonpost.com/wp-dyn/content/article/2008/11/21/AR2008112104099_pf.html

or http://www.latimes.com/business/la-fi-banks22-2008nov22,0,2185538.story

-FDIC adds 54 more banks to its ‘problem list’. The Federal Deposit Insurance Corp. said Tuesday the list of banks it considers to be in trouble shot up nearly 50 percent to 171 during the third quarter yet another sign of escalating problems among the institutions controlling Americans’ deposits.

The 171 banks on the FDIC’s “problem list” encompass only about 2 percent of the nearly 8,500 FDIC-insured institutions. Still, the increase from 117 in the second quarter is sharp, and the current tally is the highest since late 1995. “We’ve had profound problems in our financial markets that are taking a rising toll on the real economy,” said FDIC Chairman Sheila Bair in a statement, adding that Tuesday’s report “reflects these challenges.”

Banks across the country have been hurt and in some cases, devastated by the collapse of the subprime mortgage market and subsequent problems across the lending spectrum. As the FDIC report shows, the number of hobbled institutions is rising at a quickening pace, a trend that has already begun to reshape the banking industry.

The FDIC said total assets held by troubled institutions climbed from $78.3 billion to $115.6 billion a figure that suggests that the nation’s top 20 banks aren’t on the list, even though they are getting slammed, too, by the growing credit crisis. The FDIC does not reveal the names of the institutions it deems troubled. Read more here-

http://www.breitbart.com/article.php?id=D94M5AMG0&show;_article=1

STOCK MARKET

-S&P; 500 Index Drop Leaves 64 Industries With Losses. The worst annual decline in the Standard & Poor’s 500 Index since 1931 has dragged down every industry in the benchmark gauge and 96 percent of its stocks.

All 64 of the S&P; 500’s so-called level-three categories, groups such as “distributors” and “leisure equipment” with as few as one company, dropped in 2008. Four hundred eighty-two companies slipped as the 500-stock index slumped 46 percent, poised for its biggest yearly retreat in eight decades.

“There seems to be no bottom,” Laszlo Birinyi, who oversees more than $350 million as president of Birinyi Associates Inc. in Westport, Connecticut, said on Bloomberg Television. ”We have no tools that tell us where to go now.”

More stocks decreased in the current bear market than in the 49 percent rout after the technology bubble burst in 2000. The breadth of declines this year is leaving investors without defensive strategies to protect against losses that erased more than $8 trillion from U.S. equities in 2008. Read more here-

http://www.bloomberg.com/apps/news?pid=20601213&sid;=am1FNznC.tNE&refer;=home

-Bears Overwhelm Bulls With S&P; 500 Cheapest Since ‘88. Buying the cheapest U.S. stocks since Ronald Reagan’s presidency may be a sucker’s bet. Investors are paying $9.24 per dollar of operating profit forecast in 2009 for Standard & Poor’s 500 Index companies, half the two-decade median of $18.10, data compiled by Bloomberg show.

While that may suggest shares will bounce from the worst annual drop since 1931, managers at Key Private Bank, Morgan Keegan and the Hartford say equities may keep falling as earnings trail Wall Street estimates for 14 percent growth next year. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=af6beaKUbQ_4&refer;=home

-Louise Yamada: We are in structural bear market for years! Watch video here-http://www.youtube.com/watch?v=M2HIM3HFXXI

-Hedge funds are about halfway done selling securities to reduce their use of borrowed money and may unload $200 billion more to complete the process, according to managers surveyed by Sanford C. Bernstein & Co. The survey found that 63 percent of hedge-fund managers said the sale of assets to cut leverage was at least half completed. Twenty-three percent said the process was three- quarters finished, New York-based Bernstein said.

Hedge funds, which borrow money in an effort to increase trading profits, have been forced to unload assets to meet client withdrawals and tighter lending requirements. That has amplified losses in the stock and bond markets. The Standard & Poor’s Index 500 Index fell 38 percent this year through October, while hedge funds lost an average of 16 percent, according to data compiled by Hedge Fund Research Inc.

“We estimate that roughly $200 billion will be additionally unwound,” Adam Parker, an analyst at Bernstein wrote in a Nov. 21 report to clients. The survey was based on interviews in the first two weeks of November with managers of more than 65 hedge funds overseeing a combined $100 billion. The amount of gross leverage used by hedge funds fell to 142 percent of assets from 175 percent in 2006 and 2007, the report said. Read more here- http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3UlaRfevaA4&refer;=home

THE NEXT SUBPRIME CRISIS

-The Next Subprime Crisis Looms. The same people whose reckless practices triggered the global financial crisis are onto a similar scheme that could cost taxpayers tons more. As if they haven’t done enough damage. Thousands of subprime mortgage lenders and brokers many of them the very sorts of firms that helped create the current financial crisis are going strong. Their new strategy: taking advantage of a long-standing federal program designed to encourage homeownership by insuring mortgages for buyers of modest means.

You read that correctly. Some of the same people who propelled us toward the housing market calamity are now seeking to profit by exploiting billions in federally insured mortgages. Washington, meanwhile, has vastly expanded the availability of such taxpayer-backed loans as part of the emergency campaign to rescue the country’s swooning economy. For generations, these loans, backed by the Federal Housing Administration, have offered working-class families a legitimate means to purchase their own homes.

But now there’s a severe danger that aggressive lenders and brokers schooled in the rash ways of the subprime industry will overwhelm the FHA with loans for people unlikely to make their payments. Exacerbating matters, FHA officials seem oblivious to what’s happening or incapable of stopping it. They’re giving mortgage firms licenses to dole out 100-percent-insured loans despite lender records blotted by state sanctions, bankruptcy filings, civil lawsuits, and even criminal convictions. Read more here-

http://www.spiegel.de/international/business/0,1518,druck-591613,00.html

REAL ESTATE-FORECLOSURES

-Home Prices for 20 U.S. Cities Drop Most on Record as Foreclosures Mount. The decline in U.S. house prices accelerated in September and the economy shrank in the third quarter at a faster pace than first estimated as the grip of the credit crunch tightened.

The S&P;/Case-Shiller home-price index fell 17.4 percent from a year earlier. The Commerce Department said gross domestic product dropped an annual 0.5 percent as household spending slid the most since 1980. While consumer confidence rose this month, the Conference Board’s gauge remained near the lowest on record. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=agE8Sg.gs3l8&refer;=home

-Home prices keep plunging; L.A. sees some of the sharpest declines. Third-quarter figures show a 27.6% drop compared with a year ago. Phoenix, Las Vegas and San Francisco are also hard hit. Read more here-http://www.latimes.com/business/la-fi-homes26-2008nov26,0,4207973.story

-Home resales in the U.S. dropped in October and prices fell by the most on record, signaling a deepening housing recession going into 2009. Purchases of existing homes declined 3.1 percent last month to an annual rate of 4.98 million units, the National Association of Realtors said today in Washington. The median price fell 11.3 percent to $183,300 from a year earlier, the largest year-over-year decrease since records started in 1968.

Mounting foreclosures are pushing down home prices and adding to the inventory of unsold houses. Sales may slump further as the worst credit crisis in seven decades makes banks reluctant to offer mortgages. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aaVyYQi42_HA&refer;=home

-D.R. Horton Inc., the largest U.S. homebuilder, reported its sixth straight loss and cut its dividend as record foreclosures and tighter lending deepened the housing slump. The shares rose as much as 26 percent after the Federal Reserve took steps today to unfreeze credit for homebuyers.

The company’s fiscal fourth-quarter net loss widened to $799.9 million, or $2.53 a share, from $50.1 million, or 16 cents, year earlier, the Fort Worth, Texas-based company said today in a statement. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a4r1bEsMEbew

-Dutch Home Sellers Cut Prices in Market That Would ‘Never Fall’. Inge Fransen last month cut the asking price for her house in the Netherlands by 11 percent, as one of the final holdouts in Europe’s housing boom capitulates. “I’m concerned the whole market will come to a halt,” said Fransen, 45, who now wants 339,000 euros ($432,670) for her five- bedroom home in Zwanenburg, a town built on land reclaimed from the water seven miles from Amsterdam. “Everyone will stay put, not buying or selling.”

Eighteen months after real-estate markets in Spain and Ireland began to sputter, the Netherlands is following suit. Prices of properties including 17th century Amsterdam canal-side townhouses dropped in the third quarter for the first time since 1980 after doubling in the last decade.

The boom has left the Dutch saddled with the highest level of mortgage debt in the euro region just as the economy slides into a recession. As recently as the second quarter, the Netherlands was the only euro-area country among 11 surveyed by the Global Property Guide with rising property prices.

“In September, everyone still said the Dutch housing market would never fall,” said Klaske Woolthuis, 32, a communications adviser, who has been looking for a house outside Amsterdam for 18 months. “Now you see this changing. It’s becoming more of a buyer’s market.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601109&sid;=aOrLBJ1TNreY&refer;=home

-Shopping malls are running on empty. Shopping center owners are struggling to fill an increasing number of vacancies. Read more here-http://www.latimes.com/business/la-fi-malls24-2008nov24,0,6965079.story

-London, Tokyo, New York Office Rents Fall First Time Since 2002. Office rents in London’s West End, midtown Manhattan and Tokyo fell in the third quarter for the first time in almost seven years as the global financial crisis cut demand, CB Richard Ellis Group Inc. said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ahWcGGxOpen0&refer;=home

-Foreclosures, delinquencies skyrocketing among ‘prime’ borrowers. Nationwide, 3.07% of prime mortgages were in foreclosure or at least 60 days late in the second quarter of this year, easily topping the previous record of 1.97% set in 1985. Read more here-http://www.latimes.com/business/la-fi-prime24-2008nov24,0,6174050.story

GEOPOLITICAL NEWS

-Russian analyst predicts decline and breakup of U.S. A leading Russian political analyst has said the economic turmoil in the United States has confirmed his long-held view that the country is heading for collapse, and will divide into separate parts. Professor Igor Panarin said in an interview with the respected daily Izvestia published on Monday: “The dollar is not secured by anything. The country’s foreign debt has grown like an avalanche, even though in the early 1980s there was no debt.

By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse.” The paper said Panarin’s dire predictions for the U.S. economy, initially made at an international conference in Australia 10 years ago at a time when the economy appeared strong, have been given more credence by this year’s events.

When asked when the U.S. economy would collapse, Panarin said: “It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world’s financial regulator.”

When asked who would replace the U.S. in regulating world markets, he said: “Two countries could assume this role: China, with its vast reserves, and Russia, which could play the role of a regulator in Eurasia.” Read more here-http://en.rian.ru/world/20081124/118512713.html

-Report: U.S. Power Will Fade By 2025. Read more here-http://www.cbsnews.com/stories/2008/11/20/world/printable4622166.shtml

-Report Sees Nuclear Arms, Scarce Resources as Seeds of Global Instability. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2008/11/21/AR2008112100091_pf.html

-Russian Prime Minister Vladimir Putin will hold a live call-in show on national television next week, in what analysts say may signal the start of his campaign to regain the presidency. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=almi_GBAkMqc&refer;=home

-Russia’s Medvedev’s Tough Guy Act. New Russian President Seems To Be Reviving Adversarial Relations With The U.S. Read more here-

http://www.cbsnews.com/stories/2008/11/24/world/printable4631526.shtml

-Venezuela’s Chavez welcomes Russian warships. Russian warships arrived off Venezuela’s coast Tuesday in a show of strength aimed at the United States as Moscow seeks to expand its influence in Latin America.

The deployment is the first of its kind in the Caribbean since the Cold War and was timed to coincide with President Dmitry Medvedev’s visit to Caracas the first ever by a Russian president. Venezuelan President Hugo Chavez has eagerly welcomed the Russian ships for joint exercises with his navy, basking in the support of a powerful ally that has sold him billions of dollars in arms and has seen its own chill in relations with Washington.

Chavez wants Russian help to build a nuclear reactor, invest in oil and natural gas projects and bolster his leftist movement’s effort to limit U.S. influence in Latin America. Read more here-http://news.yahoo.com/s/ap/20081125/ap_on_re_la_am_ca/lt_venezuela_russia

-US to watch Russian-Venezuelan manoeuvres ‘very closely’. Read more here-http://www.breitbart.com/article.php?id=081124184807.xmj0nkq0&show;_article=1

The GoldBugg Report – December 02, 2008
Posted by Worldwide Precious Metals on Tuesday, December 2, 2008

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