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The Goldbugg Report – May 26, 2009

May 26, 2009

Memo from PMI

May 22^nd 2009

The Week in Review

This week saw another round of drastic swings in the stock market with the Fed saying the economic outlook was worse than previously expected and the US dollar continuing its decline.

The much discussed credit card bill passed this week. The statements made by those who saw this as a death blow to the already bottlenecked access to overall credit went largely ignored. What bank in their right mind would provide any form of credit to someone with even a minor issue on their credit report if the government is not going to allow that bank to hike the interest rate if that person misuses that credit and can’t pay it back on time? This bill could very well result in millions in lost revenues to the very banks that the government says need all the capital they can get! With this step, the government has essentially legislated its way into the financial decision making process of every American household. On an odd side note; the bill included a provision that now allows carrying concealed and loaded weapons into America’s national parks. Hard as we tried, we could not see how such a provision in any way shape of form aided in the economic recovery the legislature claims to be putting all their efforts into making happen.

Standard and Poor’s rating service cut the UK’s credit rating outlook to negative from stable this week. This move sparked speculation that the UK would lose its AAA credit rating. This also resulted in further speculation that the US could also lose its AAA rating.

Initial jobless claims were down by 12,000 this week, but the number of continuing claims rose again to another record level. With GM and Chrysler continuing their downward spiral, those numbers may continue to climb.

GM bond holders may be about to receive the same treatment that the Chrysler bondholders received in previous weeks, with the union getting the big piece of the pie and the investors left holding the empty bag.

Oil prices hung on to their 60 dollar trading range on news of two refinery fires in the US, and further attacks on pipelines in Nigeria.

The dollar continued its downward slide this week. Brazil’s leader was in China supposedly discussing dropping the dollar as a trade vehicle between them in favor of using their own currencies. China has replaced the US as Brazil’s biggest trading partner, so such a switch is not out of the realm of possibilities.

Gold, Silver, Platinum and Palladium continued to rise as we discussed in our April 30^th memo as the flight to quality is not only continuing but seems to be accelerating at faster rates than we originally anticipated (primarily due to major concerns over continuing weakness in the US dollar, which we also suggested in our April 30^th memo).

Friday to Friday Close

Here are your Short Term Support and Resistance Levels for the upcoming week.

Volatility should be expected to continue as surprises continue to upset the market and the weakness and uncertainty surrounding the dollar continues. We feel that current prices are very attractive for long term appreciation. Just remember not to over-extend your ability to stay the long term.

Trading Department – Precious Metals International, Ltd.

GOLD

-Gold the only asset that did its job. Bullion held fast when all others were plunging. Stock markets have seen some decent rallies in 2009 but many investors remain on the sidelines, convinced that the gains are short-term. They expect a correction and, with government spending on the rise, a primary cause for their worry is inflation.

As usual, economists have every conceivable opinion accompanied by caveats like, “Of course, if such-and-such happens.” I am not an economist, but I think that we can and should ask ourselves logical questions, draw conclusions, and act accordingly. The U. S. Federal Reserve Board is pumping liquidity into the markets, effectively diluting the value of existing dollars. While it seems a distant threat, such a move triggered inflation the 1970s.

To control inflation, the Fed may need to increase interest rates. However, that could be difficult to do when they require lower rates to manage the mortgage-backed securities they’ve been purchasing. Traditionally, gold has been viewed as a solid hedge against inflation. It has a very low correlation with other asset classes and, as a core holding, acts as a good buffer against volatility.

In 2008 gold took some criticism from those who felt that it underperformed expectations. Experts called for US$2,000 gold, but it only broke US$1,000 before returning to current levels. Since then, investors have been somewhat indifferent to it.

However, the reality is that gold was the only asset class that actually did its job. It maintained a low correlation to the markets and, as stock market indexes plummeted, it outperformed the broad markets and closed up about 4% on the year. Despite that, gold has maintained an underdog standing but, in my opinion, undeservedly so.

Investors should take a second look at gold bullion. As proven in 2008, bullion offers protection during uncertain economic times. Confidence in paper money and the U. S. dollar as a global reserve currency has dwindled, debt has risen to exceptionally high levels, and investment demand for gold has increased. In these conditions, gold should continue to outperform.

Investors should seek solid, tangible assets that can hedge against inflation, financial collapse, and currency devaluation. To quote Eric Sprott, “In the sea of financial assets and currencies that are being decimated the world over, the one true safe haven continues to be gold.” Kim Inglis-Read more here-

http://www.financialpost.com/story.html?id=1607619

-Gold purchases rose 38 percent in the first quarter, led by investment demand that exceeded usage by jewellers for the first time since at least 2004, according to the World Gold Council.

Global demand increased to 1,015.5 metric tons, from 733.9 tons a year earlier, the London-based council said today in a report based on figures from research company GFMS Ltd. Investment purchases more than tripled to 595.9 tons while jewellery demand fell 24 percent to 339.4 tons.

Gold rose to an 11-month high of $1,006.29 an ounce on Feb. 20 as governments spent trillions of dollars to fight recession, sparking speculation inflation will accelerate. In India, the world’s largest gold buyer last year, jewellery demand was the lowest in at least 20 years and net retail investment turned negative for the first time as holders sold metal for recycling, the council said.

Chinese demand was six times that of India. “In the current environment, investment demand is part of the diversification of assets in portfolios and therefore is less sensitive to price than jewellery demand,” said John Meyer, research director at Fairfax IS in London.

Investment demand for coins, bars and exchange-traded funds was the highest since at least 2004, when GFMS began tracking them, and “could well be” a record, GFMS senior metals analyst Philip Newman said. Jewellery demand had accounted for about two- thirds of gold demand in the past 30 years, he said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a9KLEjc7×2ww

-Gold: ‘It’s a bargain at $930 an ounce.’ The bullish outlook for gold rests on the increasing likelihood of accelerating US inflation. Read more here-

http://www.telegraph.co.uk/finance/personalfinance/investing/gold/5324628/Gold-Its-a-bargain-at-930-an-ounce.html

-Inflation or deflation gold will be king according to Clive Maund. In conclusion, this is a very tricky time for investors with the battle on between the forces of inflation and deflation. Because of the highly unusual combination of enormous debt that must unwind with rapid expansion of the money supply, we are likely to see extreme stagflation involving economic contraction, sometimes involving heavy and destructive bouts of deleveraging, accompanied by eventual high inflation that could morph into hyperinflation.

With Treasuries and other government paper becoming less and less attractive and more and more dangerous, investors seeking to preserve their capital will turn increasingly to gold. Gold will be king. Read more here-http://news.goldseek.com/CliveMaund/1242626820.php

-Gold finding support at prices around $900. Over the past couple of weeks the gold price has been resilient at a time when weakness might hav been anticipated. Buying on any weakness is recommended. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=83587&sn;=Detail

-Gold on the cusp $1,375 on the cards. The ‘Sell in May’ situation could arrive right on time this year, according to Roger Wiegand, who anticipates the next larger, extended rally in gold this fall. Interview with The Gold Report. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=83554&sn;=Detail

-GATA board member Adrian Douglas, publisher of the Market Force Analysis financial letter, was interviewed for a half hour yesterday by TheFinancialTube.com about the gold and silver market. Listen here-http://www.thefinancialtube.com/video/3551/Interview-with-Adrian-Douglas-marketforceanalysiscom

-Gold 2009: The Story So Far. Read more here-http://news.goldseek.com/BullionVault/1242406320.php

-Why Gold Looks Ready to Move Higher. Read more here-http://www.fxstreet.com/fundamental/analysis-reports/why-gold-looks-ready-to-move-higher-/2009-05-06.html

-German firm plans gold ATMs to feed explosive growth in physical gold demand. A German asset management firm plans to set up 500 gold automatic teller machines across Germany, Austria and Switzerland as appetite for physical gold surges. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=83555&sn;=Detail

-Gold headed to $10,000 part 2. Read more here-http://news.goldseek.com/EricHommelberg/1242397613.php

-Are the fundamentals for gold poor? Read more here-http://www.321gold.com/editorials/schwensen/schwensen052009.html

-2009 gold production in the world. Read more here-http://www.dani2989.com/gold/goldprod0509gb.htm

-Hedge Funds Making Big Bets on Gold. Read more here-http://www.smartmoney.com/breaking-news/on/?story=ON-20090518-000493-1519

-Richard Russell gold commentary. Read more here-http://www.321gold.com/editorials/russell/russell051809.html

-Gold Is About to Soar. Read more here-http://www.321gold.com/editorials/learton/learton052109.html

-Gold refiner responds to demand for gold bars. Read more here-http://www.research.gold.org/news/2009/05/19/story/12057/gold_refiner_responds_to_demand_for_gold_bars

-Beware of Exchange Trade Funds (ETFs) Bearing Gold. Read more here-http://blog.goldassets.co.uk/2009/05/20/beware-of-exchange-trade-funds-etfs-bearing-gold/

-Money Magazine’s ‘Advice’ Indicates It’s Still Early for Gold. Read more here-http://seekingalpha.com/article/137827-money-magazine-s-advice-indicates-it-s-still-early-for-gold

-AngloGold continues to slash gold hedgebook as swings back to profit. AngloGold Ashanti reported a return to quarterly profit as CEO Mark Cutifani sees gold price between $850-$1,000 this year and says company will continue to slash hedgebook. Read more here-http://mineweb.net/mineweb/view/mineweb/en/page34?oid=83336&sn;=Detail

-Mexican miner Penoles, which operates Latin America’s largest metals refinery, said on Monday it was lifting a declaration of force majeure following a strike that shut down its precious metals unit. Some 300 striking workers in the gold and silver refinery section of the sprawling MetMex metals complex in northern Mexico laid down tools on Feb. 8, demanding a salary increase of up to 9 percent.

Penoles said on March 13 it could not fulfill all contracts due to the strike. The strike ended a month later, with the union accepting a 6 percent wage hike, but the company said it will still take weeks for operations to return to normal. Read more here-http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSN1835561220090518?rpc=401

-Could President Obama ban U.S citizens from holding gold? Back in 1933, at a time of economic crisis, President Roosevelt forced U.S. Citizens to sell their gold at $20 an ounce – and then subsequently revalued the metal to $35. Could President Obama, a Roosevelt disciple, have similar plans in mind. Read more here-

http://www.mineweb.co.za/mineweb/view/mineweb/en/page72068?oid=83579&sn;=Detail

SILVER

Gold to silver ratio at 80 to 1 with gold at $2,200 the silver price would be $27.50

Gold to silver ratio at 70 to 1 with gold at $2,200 the silver price would be $31.43
Gold to silver ratio at 60 to 1 with gold at $2,200 the silver price would be $36.67

Gold to silver ratio at 50 to 1 with gold at $2,200 the silver price would be $44.00
Gold to silver ratio at 15 to 1 with gold at $2,200 the silver price would be $146.67

-Silver Poised for Rally to Eight-Month High: Technical Analysis. Silver futures likely will rally to the highest level since August on signs of increased investment demand, according to an analysis of historical prices by analysts including John Gross and Ralph Preston.

“July silver futures broke $14 an ounce resistance” on May 7 and again this week and may test $14.61, the 2009 high, said Gross, the president of J-E Gross & Co. in Newport, Rhode Island. “If the market is able to overcome that high, the next objective is $15, followed by $16.”

“To the extent the market can hold $14, I believe it will test the next important high at about $14.70,” Gross said yesterday in an e-mailed comment. He said $14 “was the previous important high going back to mid-March.” Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=aQLwNl0UdJQo&refer;=commodities

-Must see silver charts, resistance in $15.00 area with initial upside target upon successful breakout of $21-$22. Read more here-

http://www.silverstrategies.com/story.aspx?local=1&id;=16722

-Roland Watson silver update. Read more here-http://news.silverseek.com/SilverSeek/1242831600.php

-America lost 94% physical silver in 50 years. Here’s something you probably don’t know that 1959 would be the last year the U.S. government would be a buyer of silver, as it had been for decades, until 2001, when it began buying silver for the American Eagle and commemorative coin programs.

In 1959, when the U.S. government held 3.4 billion ounces of silver, the U.S. population was approximately 180 million. That means the U.S. government held almost 19 ounces of silver for every man, woman and child in the nation. Today it holds none.

Here’s another statistic that is just as troublesome. In 1959, there were about 5 billion ounces of silver physically held on U.S. soil. Today there are just 300 million ounces, including all 118 million ounces in COMEX-approved warehouses and privately held silver. Before you disagree, please remember that the more than 400 million ounces in ETF-type vehicles are held outside the U.S. That means the amount of physical silver held on U.S. soil is down about 94% in 50 years. Read more here-

http://www.commodityonline.com/news/America-lost-94-physical-silver-in-50-years-18009-3-1.html

-2009 price forecasts raised for silver, pgms and, to a lesser extent, gold. Mitsui Global Precious Metals has raised its 2009 price estimates for silver, platinum and palladium and also expects gold to rise, although wary on the yellow metal short term. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=83527&sn;=Detail or

http://www.reuters.com/article/marketsNews/idUSLJ50788220090519

-Ted Butler silver commentary. While the Silver Institute is reporting on record silver investment demand, they never predicted it. They have never made bullish predictions on silver, no matter what the facts. I, on the other hand, predicted the investment rush in silver http://www.investmentrarities.com/01-22-08.html I bring it up, not to pat myself on the back, but to explain why we should continue to see strong silver investment demand.

The silver story is so compelling, and the facts so clear, that more investors will learn of it as time passes. There will be lulls in investment buying and surges, as there has been in the past. But it will continue. The amount of silver coming out of the ground and through recycling is spoken for by fabrication and that’s not about to change. The amount of silver remaining in existing inventories and available for investment purchase is limited and not about to change.

The number of investors who will come to learn of the remarkable facts concerning the silver story, however, must change and their buying will tilt the equation against the manipulators. As more people become educated to the real silver story, they will buy. Phony stories about surpluses won’t prevent that. Read more here-http://news.silverseek.com/TedButler/1242674918.php

-Strong appetite for silver boosts coin production. Read more here-http://www.ft.com/cms/s/0/c63401da-3fd7-11de-9ced-00144feabdc0.html

PLATINUM-PALLADIUM

-Swiss fund looks for strength in commodities in general and platinum in particular. Head of Swiss fund, Best Asset Class, is looking for particular growth in the platinum price this year and details stocks he feels will do well. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=83485&sn;=Detail

-Platinum jewellery market strengthens, physical investment more than doubles. Johnson Matthey’s “Platinum 2009″ reports that net platinum demand in 2008 was down by 5% in 2008. The largest contraction was in the automotive sector. Net jewellery demand fell 6%, but the price slump brought about a sharp increase in Chinese purchases. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=83521&sn;=Detail

-Platinum outlook clouded but $1,350 a viable target Johnson Matthey. Johnson Matthey’s respected annual Review of the platinum group metals markets reports that platinum was in a deficit of 375,000 ounces in 2008.

Considerable uncertainty over the precise trajectory of the global economy in 2009 makes it unclear exactly how platinum demand will fare, but the prognosis for jewellery demand is strong and ETF investment is expected to exceed that of 2008. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page35?oid=83455&sn;=Detail

-Platinum and palladium the ‘other’ precious metals. Read more here-http://www.moneyweek.com/investments/precious-metals-and-gems/platinum-and-palladium-the-other-precious-metals-14770.aspx

DEFINITIONS-QUOTES-QUICK HITS

-In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also a decline in the real value of money a loss of purchasing power in the medium of exchange which is also the monetary unit of account in the economy.

A chief measure of general price-level inflation is the general inflation rate, which is the percentage change in a general price index (normally the Consumer Price Index) over time. Inflation can have adverse effects on an economy. For example, uncertainty about future inflation may discourage investment and saving. High inflation may lead to shortages of goods if consumers begin hoarding out of concern that prices will increase in the future. Economists generally agree that high rates of inflation and hyperinflation are caused by an excessive growth of the money supply.

Views on which factors determine low to moderate rates of inflation are more varied. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities, as well as to growth in the money supply. However, the consensus view is that a long sustained period of inflation is caused by money supply growing faster than the rate of economic growth. Read more here-http://en.wikipedia.org/wiki/Inflation

-Canadian inflation calculator-http://www.bankofcanada.ca/en/rates/inflation_calc.html

-U.S. inflation calculator-http://www.minneapolisfed.org/index.cfm

-Inflation is a disease, a dangerous and sometimes fatal disease that, if not checked in time, can destroy a society. Milton Friedman-Bio here-http://en.wikipedia.org/wiki/Milton_Friedman

-“As long as the value of money falls, the value of real assets will rise.” Angus Murray joint CEO of Castlestone Management-Read more here-

http://www.bloomberg.com/apps/news?pid=20603037&sid;=aKjcBvNK6J6M&refer;=home

-Regulation of derivatives transactions that are privately negotiated by professionals is unnecessary. Alan Greenspan July 30, 1998

-The dollar does look vulnerable. Pushing government steadily leftward, the Obama Administration has set up the possibility of a US dollar rout. This is especially so, noting that the US$ Index has now closed below its 200-day moving average for the first time in months. If this persists, commodity prices generally shall rise and rise materially, and gold shall too. The Gartman Letter, 20 May 2009

-“Gold cannot decline from its highs as it will be incorporated into the national and international monetary systems at that time.” Alf Fields, May 20, 2009

-“Investors are turning to gold because of fears of long-term inflation and major currency debasement due to fiscal deficits, government debt issuance and quantitative easing. All of these concerns are likely to continue for the next year or so.” UBS analyst John Reade

-“Gold has been the object of affection for hedge funds and also has paid increasing attention to the dollar lately. That helps explain why gold has rallied both when stocks have risen and fallen.” Tom Pawlicki MF Global

-Rumours that the Russian Central Bank may allow Russian banks to pledge gold as collateral are circulating in the market. Such a move should further increase the appetite for gold among financial institutions as its attractiveness as collateral outshines the traditional bonds in the eyes of the regulatory forces. Gold.ie

-Vietnam, gold traders have sought permission from the central bank to import up to $600 million worth of gold, calling for an end to a year-long ban. Casey Daily Resource

-China’s gold reserves may serve as backing for the yuan as Beijing promotes its use overseas, said Zheng Lianghao, managing director of the World Gold Council’s Far East division, the Shanghai Securities News reported Monday.

Zheng, who was speaking at a forum over the weekend, said increasing gold holdings would provide China with a useful hedge as the dollar faced the possibility of depreciation, according to the report. In late April, the official Xinhua News Agency quoted Hu Xiaolian, the head of China’s foreign exchange agency, as saying China’s gold reserves had risen 454 metric tons since 2003 to 1,054 tons. Read more here-http://www.gata.org/node/7430

-U.S. Needs More Inflation to Speed Recovery, Say Mankiw, Rogoff. What the U.S. economy may need is a dose of good old-fashioned inflation. So say economists including Gregory Mankiw, former White House adviser, and Kenneth Rogoff, who was chief economist at the International Monetary Fund. They argue that a looser rein on inflation would make it easier for debt-strapped consumers and governments to meet their obligations.

It might also help the economy by encouraging Americans to spend now rather than later when prices go up. “I’m advocating 6 percent inflation for at least a couple of years,” says Rogoff, 56, who’s now a professor at Harvard University. “It would ameliorate the debt bomb and help us work through the deleveraging process.”

Such a strategy would be risky. An outlook for higher prices could spook foreign investors and send the dollar careening lower. The challenge would be to prevent inflation from returning to the above-10-percent levels that prevailed in the 1970s and took almost a decade and a recession to cure. Read more here-

http://www.bloomberg.com/apps/news?pid=20601109&sid;=auyuQlA1lRV8&refer;=home

-Stock market optimists need to read a history of the Great Depression. The stock market may not have reached its bottom. After a sharp two-month rally, that may sound like a crazy thing to say. But history suggests as much.

The 57pc fall in the Standard and Poor’s 500 Index to its March low was jaw-dropping: larger than the 48pc decline of 1973-74, or the 49pc fall of 2000-02. This downward move was also faster: 17 months compared to 21 and 31 months in the previous two tumbles.

Still, there have been three worse bear markets in big economies. From 1929 to 1932, the US stock market dropped 89pc. UK shares fell 72pc in 32 months in 1972-75. Finally, Tokyo fell 48pc in only nine months in 1989-90, and 64pc over 30 months. It remains 76pc below its December 1989 high.

The drop during the Great Depression may be the most relevant to the current situation. It came after a similar long period of optimism, brought a similar degree of systemic financial distress, and was just about as rapid. There were also some big rallies on the way down. Read more here-http://www.telegraph.co.uk/finance/breakingviewscom/5312628/Stock-market-optimists-need-to-read-a-history-of-the-Great-Depression.html

-Rosenberg Says U.S. Stock Market May Test March 9 Low. The Standard & Poor’s 500 Index may fall beneath the 12-year low reached on March 9 because consumer spending hasn’t recovered from the longest recession since the 1930s, economist David Rosenberg said.

“We have to get confirmation the March lows are going to hold,” Rosenberg, the chief economist and strategist at Gluskin Sheff & Associates Inc. in Toronto, said in an interview with Bloomberg Television. “The conventional view was the November lows were going to hold. As we found out in the opening weeks of March, no, those lows didn’t hold.”

Rosenberg said he will “keep an open mind as to whether the lows from March will hold or not as we go into the second half of this year. I’m not sure where the buying power is going to come from.” Rosenberg is the former chief North American economist at Merrill Lynch & Co., the brokerage bought by Bank of America Corp. in January. He left the firm this month. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aG.qtbxYIK_E or http://www.businessinsider.com/david-rosenberg-the-short-covering-rally-is-finished-here-comes-the-leg-down-2009-5

-Another Bottom for Stocks Coming: Rogers. The stock market may hit new lows this year or the next as the current rally has been largely caused by the money printed by central banks and fundamental problems remain unsolved, legendary investor Jim Rogers told CNBC Wednesday.

His views echo those of renowned bear Marc Faber, who told CNBC last week that the rises in share prices did not mean the world was embarking on a path of sustainable economic growth. “I’m not buying shares if that’s what you mean. Not at all,” Rogers told “Squawk Box Asia.”

“The bottom will probably come later this year, next year, who knows when,” he added. Governments have not solved the essential problems that caused the crisis but instead they “flooded the world with money,” according to Rogers. Trying to solve the problem of too much consumption and too much debt with more consumption “defies belief” and will not work, he said. Read more here-http://www.cnbc.com/id/30838800

-”The Worst Is Yet to Come”: If You’re Not Petrified, You’re Not Paying Attention. Read more and watch video here- http://finance.yahoo.com/tech-ticker/article/248398/%22The-Worst-Is-Yet-to-Come%22-If-You

The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was “preposterous” to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.

“We’re in a complete mess and the consumer is smart enough to know it,” says Davidowitz, whose firm does consulting for the retail industry. “If the consumer isn’t petrified, he or she is a damn fool.”

Davidowitz, who is nothing if not opinionated and colorful, paints a very grim picture: “The worst is yet to come with consumers and banks,” he says. “This country is going into a 10-year decline. Living standards will never be the same.”

This outlook is based on the following main points:

With the unemployment rate rising into double digits – and that’s not counting the millions of “underemployed” Americans – consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity.

Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on not just mortgages but student loans and auto loans and credit card debt.

More consumer loan defaults will hit banks, which are also threatened by what Davidowitz calls a “depression” in commercial real estate, noting the recent bankruptcy of General Growth Properties and distressed sales by Developers Diversified and other REITs.

-IMF head says the global crisis is not over yet. Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), warned the global downturn was not over and more financial shocks were likely. Read more here-http://www.telegraph.co.uk/finance/financetopics/recession/5328718/IMF-head-says-the-global-crisis-is-not-over-yet.html

-The dollar declined Thursday to the lowest level against the euro since January and dropped versus the yen as an increase in Treasury yields and gold prices indicated inflation may accelerate while the U.S. budget deficit widens. “Selling the U.S. dollar is still the preferred play on the street,” said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York.

“The dollar’s weakness reflects growing concern about the fiscal sustainability of the policy response to the crisis,” Todd Elmer, a currency strategist at Citigroup Inc. in New York, wrote in a report today. “This provides for further dollar downside, which extends beyond the turn in the risk cycle.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aQ0RW2PhOwPQ&refer;=home

-Fed’s economic forecast worsens. Central bank now expects unemployment to rise to a range of 9.2% to 9.6% this year. Fed also predicts a sharper decline in GDP than it had forecast in January. Read more here-http://money.cnn.com/2009/05/20/news/economy/fed_minutes/index.htm

-Fed’s Rosengren Says U.S. Recovery to Be ‘Slow’ as Banks Heal. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUec114iGZhE&refer;=home

-We have come a long way from Dow 14,168 and we have just completed a strong bear market rally based on little but hopes, dreams and the assistance of the “Working Group on Financial Markets” under the guidance of the Treasury and the Fed. We believe the bear market has a substantial distance to fall as the debt sector is purged.

A 50% retraction of debt, which is far above GDP has to be completed, excess capacity has to be rung out of markets, consumer spending, which is now 70% of GDP, has to return to the long-term average of 64.5% of GDP. Once real estate bottoms in 2011 and 2012, we will probably be half way to the overall bottom. We have 2/3’s of the way to go before credit card debt is purged. We are just beginning to see failure of commercial and industrial loans and that could last another 3 to 4 years.

Presently we are about 40% to the bottom. Then the question arises how long do we bump along the bottom probably 5 years or longer dependent on how bad the structural damage is, whether we still have a Federal Reserve; how many banks are left; whether we have WWIII or whether we have revolution. America and the world are in for a difficult time. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1242627180.php and http://news.goldseek.com/InternationalForecaster/1242844473.php

-Day of reckoning looms for the U.S. dollar. The U.S. dollar’s day of reckoning may be inching closer as its status as a safe-haven currency fades with every uptick in stocks and commodities and its potential risks debt and inflation are brought under a harsher spotlight.

Ashraf Laidi, chief market strategist at CMC Markets, said Wednesday a “serious case of dollar damage” was underway. “We long warned about the day of reckoning for the dollar emerging at the next economic recovery,” Mr. Laidi said in a note.

Mr. Laidi said economic recovery would weigh on the greenback as real demand for commodities, coupled with improved risk appetite, caused investors to seek higher yields in emerging markets and commodity currencies. This would draw investment away from the U.S. dollar, which was dragged down by growing debt and the risk quantitative easing would eventually spark a surge in inflation. Read more here-http://www.financialpost.com/news-sectors/story.html?id=1612964

-The US dollar is not Russia’s basic reserve currency anymore. The euro-based share of reserve assets of Russia’s Central Bank increased to the level of 47.5 percent as of January 1, 2009 and exceeded the investments in dollar assets, which made up 41.5 percent, The Vedomosti newspaper wrote.

The dollar has thus lost the status of the basic reserve currency for the Russian Central Bank, the annual report, which the bank provided to the State Duma, said. Read more here-http://english.pravda.ru/business/finance/19-05-2009/107581-dollar_russia-0

-China’s yuan ’set to usurp US dollar’ as world’s reserve currency. The Chinese yuan is preparing to overtake the US dollar as the world’s reserve currency, economist Nouriel Roubini has warned. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5325805/Chinas-yuan-set-to-usurp-US-dollar-as-worlds-reserve-currency.html

-Brazil and China work together to replace dollar. Brazil and China will work toward using their own currencies in trade transactions rather than the US dollar, according to Brazil’s central bank and aides to Luiz Inácio Lula da Silva, Brazil’s president. The move follows recent Chinese challenges to the status of the dollar as the world’s leading international currency. Read more here-http://www.gata.org/node/7432

-China is pumping more money into US Treasury bonds, recent data show, despite concerns expressed in Beijing in recent months over the safety of dollar-linked assets. Mainland China’s holding of Treasury securities jumped to 767.9 billion US dollars in March from 744.2 billion US dollars the previous month, according to US Treasury data.

The figure does not include those of Hong Kong, China’s special administration region, which climbed to 78.9 billion US dollars from 76.3 billion US dollars. The statistics showed China sitting comfortably as the top purchaser of Treasury bonds despite years trying to diversify its reserves from the US dollar. Read more here-http://www.gata.org/node/7425

-Wary of U.S. debt, China shifts gears on investment. China has engineered a subtle yet significant shift in the investment of its foreign exchange reserves, a sign of how it is willing to act on concerns about financing an explosion of U.S. debt.

Beijing has been far and away the single biggest foreign buyer of Treasuries over the past year, but this apparent vote of confidence belies how it has turned its back on long-term U.S. debt in favor of shorter maturities.

China’s move to the shorter end of the U.S. debt spectrum is a defensive tactic adopted by the wider market as well on the view that the United States will have to raise interest rates down the road to control inflationary pressures when the economy recovers from the financial crisis. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE54I2H620090519?pageNumber=1&virtualBrandChannel;=0

-China is stockpiling commodities such as copper and iron ore as part of a reallocation of its sovereign wealth amid concern that the value of its dollar assets may decline, according to the Royal Bank of Canada.

“It’s part of an overall desire to decrease its exposure to dollar assets,” said Brian Jackson, senior strategist at Royal Bank of Canada in Hong Kong, in an interview today. China fears that the hundreds of billions of dollars the U.S. is spending on bank bailouts and stimulus will cause “higher inflation and a weaker dollar,” he said. Read more here-

http://www.gata.org/node/7429

-Adrian Douglas: Have China watchers never heard of a decoy? Read more here-http://www.gata.org/node/7428

-Britain may lose its AAA credit rating for the first time as government finances deteriorate in the worst recession since World War II. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=atmfAp9JUvz4&refer;=home

-Pimco’s Gross Says U.S. ‘Eventually’ Will Lose AAA. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=alV9gVA7BlZw

-U.S. Pension Insurer May Need Aid as Deficit Soars. Shortfall Fed by Flood of Corporate Bankruptcies. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2009/05/20/AR2009052000778_pf.html

-More Americans than forecast filed claims for unemployment insurance last week, and the total number of workers receiving benefits rose to a record, signs the job market continues to weaken even as the economic slump eases.

Initial jobless claims fell by 12,000 to 631,000 in the week ended May 16, from a revised 643,000 the prior week that was higher than initially estimated, the Labor Department said today in Washington. The total number of people collecting benefits rose to 6.66 million, a record reading for a 16th straight week, and a sign companies are still not hiring. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aQ7ajSHhUcCc#

-Michigan unemployment reaches 12.9 percent in April. Read more here-http://www.detnews.com/article/20090520/METRO/905200445/1409/METRO

-Consumer spending may have hit bottom, but America’s mountain of debt means the climb back up will be slow and painful. Read more here-

http://www.economist.com/finance/PrinterFriendly.cfm?story_id=13611284

-Berkshire Scales Back Stock Purchases as Cash Erodes. Warren Buffett’s Berkshire Hathaway Inc., the largest shareholder in Kraft Foods Inc. and Coca-Cola Co., is scaling back stock purchases after the firm’s cash holdings fell to their lowest in more than five years.

Berkshire is spending less as the firm comes closer to the $10 billion that Buffett says is the minimum he wants on hand to protect against calamity. The cash hoard, which had been at $47.1 billion in September 2007, fell below $20 billion in April after the company posted its worst loss in at least 20 years and Buffett directed funds to corporate debt and preferred stock.

“He’s tapped out,” said Jeff Matthews, author of “Pilgrimage to Warren Buffett’s Omaha” and founder of hedge fund Ram Partners LP. “He had to sell some of his stocks to buy stuff last fall. That’s why he’s not been making big stock purchases.”

Berkshire spent $624 million on equities including Wells Fargo & Co. in the first quarter, the smallest amount since at least 2005, according to regulatory filings by the Omaha, Nebraska-based company. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a0bkOEPxUVa8

-Crude oil may reach $73 a barrel after futures broke through $60 this week, according to technical analysis by Newedge Group. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZG9aI9nen_k

-The United Arab Emirates is rebelling against Saudi Arabia’s dominant role in the Gulf, pulling out of a single-currency project after the Saudis won the right to host the central bank.

Unless a compromise is found, the U.A.E. withdrawal will effectively end the Gulf Arab dream of creating a monetary union for a group with a combined gross domestic product of $1.1 trillion.

The dispute threatens to set back integration among the six nations of the Gulf Cooperation Council and their desire to adopt a monetary policy independent of the U.S. as they face the global financial crisis and a perceived threat from Iran. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aemjk9fpIplk&refer;=home

-The derivatives market shrank for the first time in the second half of 2008 as the global financial crisis curbed trading, the Bank for International Settlements said in a report. The amount of outstanding contracts linked to bonds, currencies, commodities, stocks and interest rates fell 13.4 percent to $592 trillion, the Basel, Switzerland-based bank said yesterday.

That’s the first decline in 10 years of compiling the data. The amount of credit-default swaps protecting investors against losses on bonds and loans fell 27 percent to cover a notional $41.9 trillion of debt. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aH8SyaUL.9H0&refer;=home

-GM bankruptcy seen as all but inevitable. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54H6AN20090518

-GM bankruptcy plan eyes quick sale to government. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54H6AN20090519

-GMAC Gets $7.5 Billion in Federal Funds for Car Loans. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aVQYJE8KCUVM&refer;=home

-Terminated Chrysler dealerships to challenge sale. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54J0EO20090520

-Letter from a Dodge dealer after receiving notice that his dealership was being shut down. Read more here-http://rense.com/general85/dealer.htm

-22 reasons why Obama will raise U.S. taxes soon! Read more here-http://www.marketwatch.com/story/story/print?guid=8938ACF5-2122-4364-B805-802261385BE4

-Jim Sinclair says this is without a doubt the most important piece of information he will present to you this year. Read more here-http://jsmineset.com/2009/05/20/it-is-now/

-Rick Santelli Says: Watch This Video Of A Clueless Fed Inspector General. Watch video here- http://www.businessinsider.com/rick-santellis-says-to-watch-this-video-of-clueless-fed-inspector-2009-5

-The financial meltdown’s unhappy anniversary. The crisis that began with the Bear Stearns debacle is about to enter year three. Read more here-

http://money.cnn.com/2009/05/15/news/economy/bear.stearns.fortune/index.htm

-The credit crisis explained in plain language in this short video. Watch video here-http://www.crisisofcredit.com/

-Police in New Zealand are searching for a couple who disappeared after a banking blunder deposited NZ$10m (£3.9m, US$6m) in their account. Read more here-

http://news.bbc.co.uk/2/hi/asia-pacific/8060681.stm

-President Mahmoud Ahmadinejad said Iran successfully launched its new surface-to-surface Sejil-2 missile and indicated the Persian Gulf country is working on more potent rockets. “Sejil-2, which has advanced technology, was launched from Semnan and hit its exact target,” the state-run Fars news agency cited Ahmadinejad as saying today. “In the near future, we will launch more powerful missiles with longer ranges.”

The solid-fuel missile is an adaptation of the Shahab rocket, which Iran says has a range of 2,000 kilometers (1,240 miles), putting Israel and U.S. forces based in the Persian Gulf within reach. A U.S. government official speaking on the condition he not be identified confirmed that the launch of a medium-range ballistic missile had taken place. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aQ9D81MW5U_4&refer;=home

-Leon Panetta’s mission to stop Israel bombing Iranian nuclear plant. America’s spy chief was sent on a secret mission to Israel to warn its leaders not to launch a surprise attack on Iran without notifying the US Administration. Read more here-http://www.timesonline.co.uk/tol/news/world/middle_east/article6289593.ece

-Swine Flu Extends to Tokyo; Global Cases Top 11,000. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aWlAw.TUYszo#

-Adults Older Than 52 May Resist Swine Flu, CDC Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZd5g0zwdguA

RARE COLORED DIAMONDS

-The Rare Colored Diamonds Historical Value Tracker system 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

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.youtube.com/watch?v=BWYMJnEz-n4

and http://www.rarecoloreddiamonds.com/articles/index.html

-Blue diamond fetches record price. A rare blue diamond has sold for a record 10.5 million Swiss francs ($9.5m; £6.2m) at auction in Geneva. It weighs 7.03 carats, is smaller than a penny piece, and is one of only a handful of blue diamonds in existence. The anonymous phone bidder has yet to name the gem, mounted on a platinum ring, auctioneers Sotheby’s said.

The diamond was found in Cullinan mine in South Africa last year, and its clarity was graded as flawless the highest designation. Auctioneer David Bennett said: “It is a new world record price for a blue diamond.” It had a pre-sale catalogue estimate of 6.8 million to 10 million francs, excluding commission. Read and watch video here-

http://news.bbc.co.uk/2/hi/europe/8047042.stm

-The Petra Diamonds important fancy vivid blue, internally flawless, cushion-shaped diamond weighing 7.03 carats, which sold at auction by Sotheby’s last week, was acquired by Joseph Lau Luen-Hung, renowned Hong Kong collector and connoisseur.

Lau bought the diamond for HK$74 million (US$9.48 million) and he has already exercised his right to name the diamond, which is now known as ‘Star of Josephine’. The exceptional blue diamond set two auction records at Sotheby’s Geneva on 12 May – the world record price per carat for any gemstone at auction and world record price for a fancy vivid blue diamond at auction.

The blue diamond ranks among the most important diamonds ever to be offered for sale by Sotheby’s. It was cut from a 26.58 carat rough discovered in 2008 at Petra Diamonds’ historic Cullinan diamond mine in South Africa, the world’s most consistently reliable source of blue diamonds. Read more here-

http://www.miningmx.com/news/diamonds/160887.htm and http://in.reuters.com/article/lifestyleMolt/idINTRE54J3JK20090520

-De Beers taking ’serious look’ at diamonds as investment. The drop in traditional demand for diamonds has De Beers taking a “serious look” at an alternative market for the stones–diamonds for investment, a company spokeswoman confirmed to National Jeweller.

De Beers spokeswoman Lynette Gould said over the last few months, a number of people both representatives of high-net-worth individuals and funds have approached De Beers expressing interest in investing in diamonds as an asset, likely due to the recent investment boom in commodities.

“These approaches,” she said, “have caused us to have a serious look at this opportunity.” Gould notes that while De Beers traditionally has not been interested in diamonds as an investment fearing that it would cause price volatility and speculation that could ruin the market for the stones as a luxury product the “changing business environment” has the diamond giant changing its tune. “Diamonds for investment could offer an, as yet untapped, further source of demand,” Gould said.

Gould’s response came after an article appeared on Friday in London’s Financial Times, stating that De Beers has launched a “global campaign” to convince investors that diamonds are on par with gold as a safe haven for investment. Gould, however, stopped short of calling De Beers’ current interest in diamonds as an investment a “campaign” on the same level as the enduring-value campaign it used to promote diamonds this past holiday season.

“It’s just something we’re looking into, very early days,” she said. She also noted that De Beers’ “core messages” around diamonds as the ultimate symbol of love and romance aren’t changing. “Diamonds are always in fashion, like the little black dress of jewellery,” she said. “They’re elegant and timeless. These are foundations on which our industry is built and should always be front of mind.” Read more here-http://www.nationaljewelernetwork.com/njn/content_display/diamonds/supply/e3ie1ce596d1213e2c2b674a103b3d509da and

http://www.ft.com/cms/s/0/3e4212f2-41b3-11de-bdb7-00144feabdc0.html

-Diamonds are an investor’s best friend. Move over bonds and cash precious rocks, avant-garde art and collectible cars are now gaining favour as “alternative” investments for some of the world’s richest high net worth investors. According to a London-based Datamonitor wealth investment analyst Susan Ellis, high net worth investors are taking advantage of uncertainty in global financial markets by investing in art and other tangibles.

“For the most defensive of investors there are still the safer investment options such as cash, deposits and government bonds,” said Ellis. “However there is still plenty of concern about the safety of banks, with the fear that individuals’ claims on investments may not be honored,” she said. For high net worth individuals, investing in tangible assets such as art, gold bullion, jewelry and antiques and collectable cars is “the equivalent of putting money under the mattress”. The trend is particularly prevalent now as certain tangible assets continue to have bargain prices attached to the items.

For example, the fine art market declined as much as 35 per cent this year. But as wealth investors see the increased attraction of collectable assets to safeguard their wealth, this is having a knock-on effect in the insurance industry which is witnessing climbing valuations. “In the past year we’ve insured more than [$2 million] to [$12 million-plus] fine art, jewelry and car collections than in the previous year,” said Jamie Kearney, ultra-high net worth underwriting manager for Chubb Insurance. Read more here-http://www.financialstandard.com.au/news/view/25793/

-Golden Eye Diamond Heading for Auction. U.S. authorities in Akron, Ohio have received the green light from a federal judge to auction off one of the largest and finest diamonds ever unearthed, known as the Golden Eye Diamond. The 43.5 carat diamond, believed to be the world’s largest, flawless, ‘perfect-cut’ Canary Yellow diamond, was seized several years ago by federal authorities during a money laundering sting in Ohio.

Federal prosecutors say that the diamond, which was confiscated from a man who tried to sell it to an undercover agent posing as a broker for a South American drug cartel, could be worth up to $20 million when brought up for auction. A date for the auction has not been announced yet.

Federal Judge John Adams said in his ruling this week that all proceeds from the auction will be going to the government. He also rejected ownership claims for the fine diamond by several parties, including the children of Paul Monea, who was the rock’s previous owner and was convicted of money laundering.

The goldeneyediamond.com website, dedicated solely to the story of this diamond, claims the diamond, which weighed 124.5 carats in its uncut form, was discovered in 1871 in the Kimberley area of South Africa and is considered the diamond which ignited the modern diamond industry there. Read more here-

http://www.israelidiamond.co.il/english/News.aspx?boneId=918&objid;=5058

-What’s a ‘57 Ferrari worth? $12 million. 1957 Italian racing car sets a record for a public auction. The 250 Testa Rossa is one of only 22 ever made. Read more here-

http://money.cnn.com/2009/05/18/autos/ferrari_sale/index.htm

BANKUNITED THE LARGEST U.S. BANK FAILURE THIS YEAR-BANKING CRISIS CONTINUES

-BankUnited Financial Corp., the ailing Florida lender, was shut by federal regulators and its assets were sold to private-equity firms including WL Ross & Co. and Carlyle Group in the largest U.S. bank failure this year.

The group’s purchase of the bank, deemed “critically undercapitalized” by the Office of Thrift Supervision, was the “least costly” resolution, the Federal Deposit Insurance Corp. said today in a statement. The closing will cost the insurance fund $4.9 billion, pushing the total cost of 34 seizures so far this year to more than $10 billion.

BankUnited, based in Coral Gables with 86 branches on Florida’s southeast coast, will open tomorrow under an ownership group that includes Blackstone Group LP and Centerbridge Capital Partners LLC and will be led former North Fork Bancorp Chief Executive Officer John Kanas, 62, the FDIC said. Read more here-

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

-600 Banks Fail Stress Test. The Wall Street Journal has run its own version of the the Fed’s stress test on 900 small and midsize institutions, and it claims they’ll see losses of about $200 billion by the end of next year.

In such a scenario, at least 600 of the banks would see their capital levels shrink to a level that would be deemed unsafe by regulators. The biggest culprate? You guessed it, commercial real estate, which could contribute about $100 billion in losses. Continued home loan losses is next, at about $49 billion. Read more here-

http://www.businessinsider.com/small-banks-face-200-billion-in-coming-losses-2009-5

-Greenspan Says Banks Still Have a ‘Large’ Capital Requirement. Former Federal Reserve Chairman Alan Greenspan signaled that the financial crisis has yet to end even as borrowing costs tumble, warning that U.S. banks must raise “large” amounts of money.

“There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded,” Greenspan said in an interview yesterday in Washington. He also said that “until the price of homes flattens out we still have a very serious potential mortgage crisis.”

Greenspan’s comments suggest he sees a bigger capital shortfall in the banking system than reflected in regulators’ stress tests on the 19 biggest U.S. lenders. Treasury Secretary Timothy Geithner told lawmakers yesterday that banks have issued more than $56 billion in new stock or debt since the tests found 10 firms needed to raise about $75 billion.

A lack of capital at banks may inhibit lending to consumers and businesses, tempering any economic recovery. The former Fed chief, who left the central bank in 2006, said that the continued slump in home prices is putting at risk millions of borrowers. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a25ocYh4V5vI&refer;=worldwide

-Is the new love affair with bank shares wise? U.S. banks have been able to raise many billions of dollars in the past few weeks by selling shares to investors, but the jury is still out on whether this is the savviest of “smart money” or just plain dumb. For the past year, banks were hard pressed to squeeze even a dime out of investors amid worries of mounting credit losses, failures and even nationalization.

Fast forward to this year, when U.S. financial services companies sold more than $34 billion of common stock, according to Thomson Reuters data, including $26.2 billion in the 13 days since regulators announced their stress-test results for the largest banks. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE54K0B420090521

S&P; EARNINGS DOWN 90 PERCENT

-While the stock market is up sharply since early March, the economy as well as corporate earnings continue to suffer. Today’s chart helps provide some perspective as to the magnitude of the current economic decline.

Today’s chart illustrates that 12-month, as-reported S&P; 500 earnings have declined over 90% over the past 20 months (with over 90% of S&P; 500 companies having reported for Q1 2009), making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P; 500 earnings are negative. Chartoftheday.com

Source: http://www.chartoftheday.com

RECESSION HITS THE U.S. TREASURY

-The magnitude of the recession was underscored by the latest numbers from the U.S. Treasury: last month’s individual income tax receipts dropped 44% and corporate tax revenue plunged 65% compared to April 2008. Alarming news, as April is historically the biggest collection month of the year and usually results in a sizable budget surplus for the month.

As Casey Research Chief Economist Bud Conrad correctly predicted back in January, the initial $1.2 trillion deficit for 2009 was grossly underestimated. The Congressional Budget Office estimate is not only riddled with low-ball expenditure figures and accounting trickery, it also failed to anticipate a precipitous collapse in tax revenues. Casey Charts

-Tax Revenues Tanking. While everyone else has been focused on the banks’ stress tests and how much government is spending to bail out troubled “too big to fails,” a disturbing trend on the other side of the equation is now emerging: how much (or rather, how little) the U.S. government is receiving in tax revenues.

After combing through the past 25 editions of the “Monthly Treasury Statement of Receipts and Outlays of the United States Government,” which is compiled and published by the Treasury Department’s Financial Management Service, we created the following chart. Read more here-http://news.goldseek.com/GoldSeek/1242671362.php

REAL ESTATE-FORECLOSURES-MORTGAGES-RENTS

-Housing Bubble Has Almost Completely Burst! But No Recovery In Sight. Here are the conclusions from Deutsche Bank Securitization Head Karen Weaver’s latest look at the housing market. Read more here-http://www.businessinsider.com/henry-blodget-housing-bubble-almost-over-but-no-recovery-in-sight-2009-5

The “bubble” has almost completely burst. In many markets, prices are now almost back to 2000-2003 levels on an affordability basis. However…

Rising unemployment, rising delinquencies, tight credit, and over-supply will keep pressure on house prices for a good long while. Prices will probably significantly overshoot fair value on the downside and they’ll stay down. This would be in keeping with the aftermath of every other bubble we’ve ever studied.

Nationally, prices will likely fall another 17%, for a peak-to-trough decline of 40%.

There’s no recovery in sight.

-New York City Real Estate Prices To Fall At Least Another 35%. Read more here-http://www.businessinsider.com/henry-blodget-new-york-city-real-estate-prices-to-fall-at-least-another-35-2009-5

-Hamptons Homes Decline Most Since Realtors Kept Records in 1982. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=apbLGZzGvHkQ&refer;=home

-U.S. Housing Starts Drop on Apartments, Condominiums. Builders broke ground on the fewest homes on record in April as a plunge in work on condominiums and apartment buildings overwhelmed the second straight gain in starts on single-family properties.

Housing starts slid 13 percent to an annual rate of 458,000, a lower level than forecast, Commerce Department figures showed today in Washington. The drop was led by a 46 percent tumble in multifamily starts, a category that tends to be more volatile.

The slump in homebuilding has brought the supply of new properties below the rate that new households are being created, offering prospects of a recovery in the second half of 2009, analysts said. Surging unemployment and the continuing credit crunch mean the recovery is likely to be weak, they added. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=asWLID20AM08&refer;=home

-Southern California Home Prices Fall on Foreclosures. Southern California house and condominium prices fell 36 percent in April from a year earlier as foreclosures accounted for more than half of all sales, MDA DataQuick said. The median price dropped to $247,000 from $385,000 a year earlier and is now 51 percent below the peak reached two years ago, the San Diego-based research company said today in a statement. Sales rose 31 percent last month from a year ago.

“Whatever price stability is out there is tenuous at best,” said Andrew LePage, an analyst with MDA DataQuick. “It’s going to come down to how much worse job losses and foreclosures are going to get for the balance of the year.”

Sales of foreclosed homes accounted for 54 percent of all transactions involving previously owned properties in April. That marks the seventh consecutive month such properties were more than half of resales, MDA DataQuick said. The median price was down 1.2 percent from March, the research company said. A total of 20,514 new and existing homes sold last month in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties, up from 15,615 a year earlier, the company said.

Absentee buyers, including investors requesting that their property-tax bills be sent to a different address, bought almost 19 percent of Southern California homes purchased in April. That’s up from 17 percent a year ago and compares with a 15 percent monthly average since 2000, MDA DataQuick said. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&refer;=top_news&sid;=aTgmas5Ypd58

-Rich Default on Luxury Homes Like Subprime Victims. Chuck Dayton put down a quarter of the $950,000 purchase price when he bought his house in Newport Beach, California, in 2004. He was making $500,000 a year with his drywall company and he expected home values to keep rising.

Then the mortgage market collapsed, new construction stopped and builders no longer needed his services. Dayton, 43, went into default four months ago because he couldn’t afford payments on the three-bedroom home, located within a block of the Pacific Ocean. He hopes his lender will agree to sell the seven-year-old house for less than he owes to avoid a foreclosure.

“It’s just wait and see right now,” Dayton said. Borrowers such as Dayton, whose 2004 compensation was almost 10 times the median U.S. household income, are becoming trapped by the same issue facing the poorest subprime homeowners: falling home prices erase equity and make it impossible to sell or refinance without losing money.

The number of U.S. homes valued at more than $729,750, the jumbo-loan limit in the most affluent areas, entering the foreclosure process jumped 127 percent during the first 10 weeks of this year from the same period of 2008, data compiled by RealtyTrac Inc. of Irvine, California, show. The rate rose 72 percent for homes valued at less than $417,000 and 78 percent for all homes, RealtyTrac said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&refer;=top_news&sid;=a5750zUcnEEs

-UK repossessions up 50% in a year. The number of homes repossessed in the UK rose to 12,800 in the first three months of the year, the Council of Mortgage Lenders (CML) has said.

This was up 23% from the 10,400 in the previous three months and 50% up on the 8,500 in the same period last year. The CML has predicted that 75,000 homes will be repossessed in 2009, almost double the 40,000 of last year. Read and watch more here-http://news.bbc.co.uk/2/hi/business/8051510.stm

-Hussman: Mountain of Mortgage Resets Still Ahead. Read more here-http://moneynews.newsmax.com/economy/mortgage_resets_ahead/2009/05/19/215818.html

-Fannie and Freddie in ‘critical’ condition. Regulator says companies still suffer from severe operational and financial weaknesses. Recruiting executives also tough. Read more here-

http://money.cnn.com/2009/05/18/news/economy/fannie_freddie_critical/index.htm

-Rents Crashing in London to 1991 Prices Le Gavroche Shows Gone. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a6DMLSwbH.aQ

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The Goldbugg Report – May 26, 2009
Posted by Worldwide Precious Metals on Tuesday, May 26, 2009

The Goldbugg Report – May 19, 2009

May 19, 2009

WORLD FINANCIAL REPORT ON RADIO MAY 15 2009 SHOW

-Gold will reach $3000 before this chapter of U.S. history is fully written. Silver will reach $100 before the last chapter is written. Jim Willie

-Rising gold price a “virtual certainty” Adrian Day

-Be wary of the markets gold still offers the best insurance.

-The Week in Review from PMI

May 15^th 2009

The Week in Review

This week the stock market started showing signs that the Bear Market Rally we’ve been discussing may be finally coming to an end.

US Retail data was down this week, showing that there is still much uncertainty out there on the part of the consumer.

Monday amid statements from the company that bankruptcy has become more and more probable, 6 GM executives, including Vice Chairman Bob Lutz, sold what was left of their stock. The collective total value of the sale of 205,000 shares was only $315,000. Later in the week, GM actually touched $1.00 a share.

Initial jobless claims rose more than expected and continuing job claims hit yet another record. As the “Big Three” automakers continue their struggle to survive, you can expect to see further increases in unemployment. Many plants are shutting and some 1100 GM and 789 Chrysler dealerships are already being told that they are being cut and will be losing their businesses. With job openings at their lowest levels in 8 years, the outlook for the consumer to get out and start “spending to save the economy” as the US government wants them to do is pretty grim.

Insurance companies have been lobbying to receive TARP funds. It looks like the Insurance companies are going to get their wish. Here is the preliminary list of those insurers that need money: Allstate, Hartford, Lincoln Financial, Principal, Ameriprise, and finally can you believe even Prudential needs money from the TARP? (So much for “The Rock”)

Crude oil and gasoline inventory numbers came out much lower than expected this week, surprising the market and pressuring the price of oil to rise above $60. Demand forecast reductions by both OPEC and the IEA, however, forced the price back below that level again on Thursday. Venezuela seized the assets of an oil services company this week, with Chavez saying “private companies were no longer needed in the country’s oilfields.” He went on to say “We’re going to bury capitalism in Venezuela”. This, combined with Russia increasing its posturing to lay claim to a large chunk of the Arctic for the purpose of oil and mineral exploration, and the constant and increasing tension in the Middle East, should continue to keep oil at volatile price levels.

Gold and Silver both pushed through and held above the first resistance levels we gave you in our May 8^th memo.

The dollar continued its plummet against the euro and yen the first part of the week on fears that the US was going to lose its AAA credit rating. It climbed back out of its nosedive against the euro in the latter half of the week but not against the yen and closed down against both currencies. The continued weakening of the dollar could lead to further price increases in Precious Metals as the flight to quality is expected to continue.

Friday to Friday Close

Here are your Short Term Support and Resistance Levels for the upcoming week.

The continuing invasion by the US government into the decision making process of the American business world are leading to more and more uncertainty in the markets. Volatility should be expected to continue as more and more “hammers” fall. Next in the sights of the US Government guns are the credit card companies and following that, the battle for the American healthcare system will begin. We feel that current prices are very attractive for long term appreciation. Just remember not to over-extend your ability to stay the long term.

Trading Department – Precious Metals International, Ltd.

GOLD

-Rising gold price a “virtual certainty” Adrian Day. Adrian Day and Martin Murenbeeld are positive on gold at the New York Hard Assets Investment meeting, but conservative on their growth estimates. Ian McAvity warned the audience to be careful what they wished for. In separate talks to the New York Hard Assets meeting analysts Adrian Day and Martin Murenbeeld concurred in many aspects on their view of where the gold price was likely to go in the short to medium term and both were positive, but not inordinately so.

Day chose to compare the current global financial recession with the Great Depression and with Japan’s more recent problems, pointing out that recovery in each case took many years not months. He felt that monetary authorities have little idea of what they are doing and that measures to bring the world out of recession are experimental at best. At least the Europeans have a plan, he said, but they don’t know where to find it!

The crux of Day’s talk was that we are indeed in for a period of long and protracted economic weakness, and in such circumstances there were two of what he called virtual certainties ahead. The first was that the US dollar would lose purchasing power and the second was that the price of gold will rise not necessarily sharply, or immediately, but over a two to three to five-year period.

Martin Murenbeeld of Dundee Wealth Economics who has a pretty good track record on gold price forecasting in recent years largely concurred, despite noting that recession was generally bad for gold. But in the current environment the bull points for the yellow metal outweighed the bearish ones, with policies which had not been with us before like quantitative easing being very positive.

Looking at gold’s cyclical pattern, with cycles generally lasting ten years, he felt that gold would reach $2300 at some stage in the current cycle, but this might still be some way ahead. In the near term the weighted average of his price predictions were for an average price this year of $952, $1005 next year and $1058 in 2011.

Speaking earlier in the day, Ian McAvity, who edits the Deliberations newsletter and is very much a technical analyst, pointed out that if gold followed the 1980 peak pattern in real terms it would hit $5400 an ounce in 2011. But he, commented, this was an observation, not a prediction – although not beyond the bounds of possibility. He further warned his largely pro-gold audience to be careful what they wished for. The circumstances which could bring gold to this kind of level would not be pleasant! Read more here-

http://www.mineweb.net/mineweb/view/mineweb/en/page33?oid=83197&sn;=Detail

-Henderson multi-manager Mark Harris: Gold will go ‘a lot higher’. Watch video here-http://www.citywire.co.uk/selector/-/news/fund-manager-interviews/content.aspx?ID=340119

-Be wary of the markets gold still offers the best insurance. Past major bear markets have seen false new dawns which have tended to be short lived and the recent big uptick in stock markets could be another of these, so don’t disinvest from gold yet. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=83043&sn;=Detail

-Schmidt’s Gold Thoughts. The summer of 2009 may be the last great buying opportunity for Gold. What we mean is that the prices that develop in the next few months, or weeks, may not be revisited. In the next leg of the structural Gold bull market, US$1,000 is more likely to be a floor than a ceiling. Waiting to buy Gold till the next announcement of purchases by the People’s Bank of China may be too late. Read more here-http://news.goldseek.com/NedSchmidt/1242108300.php

-Gold bracing for return to long upward march. US gold guru, Jeff Nichols, reckons that gold is a bargain at recent prices in the $900 to $930 an ounce range looking long term, and will remain so even as it begins to moves to higher levels. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=83298&sn;=Detail

-Long Gold During Deflation? Read more here-http://news.goldseek.com/GoldSeek/1242306000.php

-The Basics: Gold. “Gold is a very effective hedge against uncertainty because even as investors are watching the value of their equity investments plummet, gold still has value. In that way, gold can help diversify away some of the risks in an investor’s portfolio,” said Tom Pawlicki, a precious metals and energy analyst at MF Global. Read more here-

http://www.financialpost.com/story.html?id=1588801

-DMCC vault may store region’s gold reserves. Read more here-http://www.business24-7.ae/articles/2009/5/pages/12052009/05132009_4d115a2aa5da4d69b8e7350a8875bd9d.aspx or

http://www.gata.org/node/7421

-James Turk-The US Dollar Breaks Down. Read more here-http://goldmoney.com/en/commentary/2009-05-10.html

-Today’s chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow-gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 9.2 ounces of gold to “buy the Dow.” This is considerably less that the 44.8 ounces it took back in 1999. When priced in gold, the Dow is down 79% from its 1999 peak and the scale of the current two-month rally has not distinguished it from the many bear market rallies that have occurred over the past decade. Chartoftheday.com

-Murray Pollitt: The gold monetization scheme is ending. Read more here-http://www.gata.org/node/7415

-Is U.S. buying back gold pledged to IMF for $100 billion? Read more here-http://www.gata.org/node/7413

-Likening GATA to terrorists, GFMS exec refuses debate. Read more here-http://www.gata.org/node/7420

-Paul Mylchreest: GATA tells the real gold story in London. Read more here-http://www.gata.org/node/7418

-Minesite reports on GATA’s expedition to London. Read more here-http://www.gata.org/node/7417

-On Tuesday April 7th, 2009 Sprott Asset Management presents a speaker series with guests Eric Sprott, Meredith Whitney of Meredith Whitney Advisory Group, Nouriel Roubini of New York University and Ian Gordon, author of The Long Wave Anaylst newsletters. Watch video here-http://www.sprott.com/night_with_the_bears.php

-Gold: Does Gordon Brown’s regret selling half of Britain’s gold reserves 10 years ago? A decade ago Gordon Brown started to sell-off Britain’s gold reserves at the time the price of gold was $282 an ounce, today it is $900-plus. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/5296526/Gold-Does-Gordon-Browns-regret-selling-half-of-Britains-gold-reserves-10-years-ago.html

SILVER

Gold to silver ratio at 80 to 1 with gold at $2,100 the silver price would be $26.25

Gold to silver ratio at 70 to 1 with gold at $2,100 the silver price would be $30.00
Gold to silver ratio at 60 to 1 with gold at $2,100 the silver price would be $35.00

Gold to silver ratio at 50 to 1 with gold at $2,100 the silver price would be $42.00
Gold to silver ratio at 15 to 1 with gold at $2,100 the silver price would be $140.00

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1242061902.php

-Silver hedge book at just four weeks mine supply. The silver mine hedge book has never been as significant as the gold book is to the gold mining industry, but the underlying shifts last year make interesting reading. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=83221&sn;=Detail

-Robust silver investment shows no sign of waning this year-World Silver Survey. The robust investor demand that drove silver’s price up 12% last year to an average of $14.99/oz shows few signs of abating, the Silver Institute’s World Silver Survey 2009 advises. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=83219&sn;=Detail

-Massive silver shipments to India raise borrowing rates. Indian bar and coin investment now the largest sector in the Indian silver market. The Silver Institute’s World Silver Survey 2009 describes borrowing patterns in the silver market in 2008, and notes that the financial markets’ liquidity drainage was not the only factor at work behind silver lease rates last year.

DEFINITIONS-QUOTES-QUICK HITS

Calgary 2009: Worldwide Precious Metals – Rob McInerney, Lucas R. Bugg http://www.metalsnews.com/picturegalleries/PicturePopUp.aspx?ID=58451

-The diamond from the ancient Greek ἀδάμας adamas meaning invincible, is one of the best-known and most sought-after gemstones. Diamonds have been known to mankind and used as decorative items since ancient times; some of the earliest references can be traced to the Indians. Diamond’s hardness and high dispersion of light make it useful for industrial applications and jewellery. Read more here-http://en.wikipedia.org/wiki/Diamond_(gemstone) or http://en.wikipedia.org/wiki/Diamond or http://www.youtube.com/watch?v=BWYMJnEz-n4

-”The great merit of gold is precisely that it is scarce; that its quantity is limited by nature; that it is costly to discover, to mine, and to process; and that it cannot be created by political fiat or caprice.” Henry Hazlitt-Bio here-http://en.wikipedia.org/wiki/Henry_Hazlitt

-”If we didn’t live in a tolerant society, the chairman and the rest of the board would be hanging by their necks with piano wire out on the road.” AIB shareholder, Gary Keo-Read more here-http://newsvote.bbc.co.uk/2/hi/uk_news/northern_ireland/8047657.stm

-Do I think there’s manipulation going on? You bet I do. I wouldn’t put anything past Wall Street and the Fed. I think gold is being manipulated down. I think the Dow is being manipulated UP to cover up the weakness in the dollar. Put the public’s attention on the Dow as long as the Dow is rising, “everything must be all right.” And we know that the Fed is buying bonds. Isn’t it time for the IMF to remind us that they’re thinking of selling a load of gold? Richard Russell, 12 May 2009

-In his latest newsletter Howard Ruff focuses both in his own writing and in a long interview with John Williams of Shadowstats.com, on when the inflation he expects to follow Obama’s monetary expansion will actually show up. The answer, in Williams’ words: “We will see inflation levels not seen in our lifetime by as early as the end of this year.” Read more here-

http://www.marketwatch.com/story/story/print?guid=24C0763F-AE5E-4D03-A97A-8C3385D985FC

-“Gold can go to $1,500 an ounce in the next two to three years,” Aaron Smith, a managing director at Superfund Financial Singapore, said in a Bloomberg Television interview. “Much of that is based on the erosion of the value of the dollar because of the increasing money supply.” Bloomberg

-James Steel, of HSBC Securities in New York, says that platinum, palladium and silver are catching up with gold because of the outlook for reduced supply. He notes that platinum producers have halted expansion plans and eliminated jobs, while silver output may be affected by cutbacks at non- ferrous metals mines. Casey Daily Resource

-The optimism is beginning to seem a bit overblown, as some are thinking like this: “The global recession and the U.S. recession probably is over this month, maybe next month,” said Jan Loeys, of JPMorgan Chase & Co. in Hong Kong. “Commodities, materials in particular, are going to be benefiting right now as investors start to get a bit worried about future inflation.”

But whether or not the recession is coming to an end, Loeys is likely correct in saying that, “Over the next year or so, we think we are going to be crossing $1,000, probably go ultimately to $1,200, $1,300 just for inflation hedging and lack of supply.”

Loeys concluded that clients “are very worried about inflation in two, three years time. The buying we are seeing now in commodities is really hedging, hedging off the potential risk that we will see a spike in inflation.” Casey Daily Resource

-The real story of the year, of course, is with silver, which is up over 25% on the year vs. gold’s near +5% performance. It’s not explainable in terms of industrial demand, which is bound to be off in the downturn. More likely, investors are increasingly coming to treat silver as an investment, like gold, only cheaper. Casey Daily Resource

-With the credit ratings of the US and UK under threat and the cost of insuring UK government debt now higher than chocolate manufacturer, Cadbury’s, gold’s safe haven appeal looks set to increase in the coming months. Especially as the issuance and supply of government bonds is set to surge as budget deficits balloon internationally while gold supply remains anaemic at best (news today that South African gold production fell 7.6% for the year in March). With inflation likely to rise in the coming months, those saving for a rainy day may soon turn to the finite inflation hedge that is gold. Gold.ie

-The dollar has fallen not due to an increase in risk appetite but rather due to an increase in risk aversion due to the dawning realization that the very credit worthiness of the US is at risk due to the global financial and economic crisis. The former US Comptroller General, David Walker, warned in an op-ed article in the Financial Times that “America’s Triple A Rating is at Risk”.

This is because the US has an accumulated negative net worth of US$11 trillion, additional off-balance sheet obligations of US$45 trillion and a current year budget deficit forecast at US$1.8 trillion (a massive nearly 13% of GDP). These daunting fundamentals mean that America is at risk of losing its AAA credit rating for the first time since 1917. This would have massive implications for the international financial and monetary system as it would likely lead to the dollar’s dominance as the global reserve currency being diminished and consequently gold’s role greatly enhanced.

The Chinese government and overnight the Japanese opposition have voiced their concerns regarding their dollar assets (Chief Finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar and if elected Japan would not buy US dollar denominated bonds).

The deteriorating financial condition of Uncle Sam is a long term fiscal and economic challenge that should result in gold remaining in a bull market for the foreseeable future. Indeed, it means that the inflation adjusted high of $2,400/oz reached in 1980 (when the US fiscal situation was positively benign compared to today) is a more than plausible target in the coming years. Gold.ie

-Japan’s opposition party says it would refuse to buy American government bonds denominated in US dollars, if elected. The chief finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar. Read more here-http://news.bbc.co.uk/2/hi/business/8046599.stm

-People’s Bank of China deputy governor Hu Xiaolian said on the 10th during the second Sino-British economic and financial dialogue held on the eve of the official media briefing that China would regularly publish the reserves of gold. QuamNews

-Gold will reach $3000 before this chapter of U.S. history is fully written. Silver will reach $100 before the last chapter is written. Jim Willie CB-Read more here-

http://news.goldseek.com/GoldenJackass/1242333710.php

-According to Eric Sprott, what we’re seeing isn’t a recession or a depression, but an outright collapse of the postwar economic order. “I’m a CA, and I’m seeing a lot of questionable financial assets on the balance sheets of banks,” says Sprott. “I think it will take 10 years to get this off the books of the banks.”

Demographic forces, meanwhile, will conspire to work against any government action. “There was a net withdrawal from U.S. Social Security the first time this year, the first year the baby boomers could collect,” Sprott notes. “And so it’s going to get worse. And I don’t even think the promises to the elderly are going to be met. We know that the United States has an accrued liability of US$55 trillion. There is no way to maintain that.” Read more here-http://www.canadianbusiness.com/markets/stocks/article.jsp?content=20090518_10004_10004

-Courtesy of the global stimulus, the price of precious metals and other tangibles should appreciate over the following years. However, over the short-term, if seasonal trends remain intact, gold is likely to correct over the summer months. Same applies to other precious metals. Therefore, nimble traders may want to sell out of bullion with the intention of buying back in a few weeks time. Long-term investors should ignore the action and simply go for a nice summer holiday. Puru Saxena-Read more here-

http://www.321gold.com/editorials/saxena/saxena050809.html

-We continue to believe that gold will be the best hedge against the problems to come. This is not because gold is always a good hedge against monetary inflation, because it isn’t. For example, there have been many times when gold has fared poorly in response to rapid money-supply growth.

It is, instead, more appropriate to think of gold as a hedge against government stupidity and the negative economic effects of that stupidity, and rarely in history have the governments of ‘free’ and developed countries acted as stupidly as they are today. As a result of the way governments are acting and have committed to act in the future, economic and monetary conditions over the next few years are likely to come together to create the ideal environment for gold-related investments.

Specifically, we are likely to get the combination of rapid money-supply growth, economic weakness, a strong desire by the public to increase its savings in terms of something stable, low financial-market liquidity (liquidity and money are different things), and, eventually, rising goods and services prices. Steve Saville-Read more here-

http://www.321gold.com/editorials/saville/saville051209.html

-The 19th century was dominated by the British Empire, the 20th century by the United States. We may now be entering the Asian century, dominated by a rising China and its currency. While the dollar’s status as the major reserve currency will not vanish overnight, we can no longer take it for granted.

Sooner than we think, the dollar may be challenged by other currencies, most likely the Chinese renminbi. This would have serious costs for America, as our ability to finance our budget and trade deficits cheaply would disappear. Read more here-http://www.nytimes.com/2009/05/14/opinion/14Roubini.html

-Chrysler bankruptcy may take up to two years: report. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54C0XY20090513

-GM Now Sees Bankruptcy as ‘Probable,’ Henderson Says. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aT7c_fzK.ECk

-GM, Chrysler to cut up to 3,000 dealers: sources. Read more here-http://www.reuters.com/article/newsOne/idUSTRE54C64K20090513 or http://www.bloomberg.com/apps/news?pid=20601110&sid;=an4YZQ5UeAJc

-Marc Faber economic forecast part 1. Watch video here- http://www.youtube.com/watch?v=bMtfTuIgsB0&eurl;=http%3A%2F%2Fgoldismoney.info%2Fforums%2Fshowthread.php%3Ft%3D374408&feature;=player_embedded

-Marc Faber economic forecast part 2. Watch video here-http://www.youtube.com/watch?v=kkKO_k7UBjQ&feature;=related

-Pimco says slow global growth the “new normal.” Higher unemployment, slow global growth and persistent government intervention in financial markets and companies will become the “new normal” for world economies, the chief executive of top bond fund Pimco said on Tuesday.

Mohamed El-Erian of Pacific Investment Management Co wrote in the firm’s “Secular Outlook” report that Pimco’s three- to five-year “baseline” investment strategy favors the front end of government yield curves in many countries, as central banks will opt to keep negative real interest rates.

“Relative to where it is coming from, the financial system will be de-levered, de-globalized, and re-regulated,” said El-Erian, who helps oversee more than $800 billion in assets. “Global growth will be lower and unemployment higher, notwithstanding the continued rotation of dynamism away from industrial countries and toward emerging economies.” Read more here-

http://www.reuters.com/article/businessNews/idUSTRE54B3UA20090512?feedType=RSS&feedName;=businessNews

-America threatens trade war with China. The United States government is planning to revive a bill that will punish China for artificially boosting its trade through “currency manipulation”. Read more here-http://www.telegraph.co.uk/news/worldnews/asia/china/5316145/America-threatens-trade-war-with-China.html

-Shortages stir coffee and sugar prices. Read more here-http://www.ft.com/cms/s/0/64955332-3d90-11de-a85e-00144feabdc0.html

-Kremlin: Battles over energy may lead to wars. Read more here-http://news.yahoo.com/s/ap/20090513/ap_on_re_eu/eu_russia_security_strategy_2

-’Iran deploys missile batteries after reports Israel, US planning attack.’ Iran’s Revolutionary Guard Corps has deployed mobile ground-to-air and ground-to-sea missile batteries in the Strait of Hormuz and other areas in the Persian Gulf, an Iranian source was quoted by Al Watan as saying on Tuesday. The source told the Saudi-based newspaper that the move was made after Iran received reports that the US and Israel were preparing to attack the Islamic republic’s nuclear facilities. Read more here-

http://www.jpost.com/servlet/Satellite?cid=1242029504871&pagename;=JPost%2FJPArticle%2FPrinter

-Pakistani president: Osama bin Laden is dead. Read and watch video here-http://rawstory.com/08/news/2009/05/10/pakistani-president-believes-osama-bin-laden-is-dead/

-Pakistan conflict map. Read more here-http://news.bbc.co.uk/2/hi/south_asia/8047504.stm

-Scientist arrested for smuggling vials used in Ebola research into US. Read more here-http://www.breitbart.com/article.php?id=CNG.1eb625e36e305c62ccc14e75288e023d.6f1&show;_article=1

-Swine Flu May Be Human Error, Scientist Says; WHO Probes Claim. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=afrdATVXPEAk&refer;=home

-Swine flu could affect third of world’s population, says study. Researchers say swine flu will spread around world within nine months, as UK confirms three more cases. Read more here-

http://www.guardian.co.uk/world/2009/may/12/swine-flu-report-pandemic-predicted

-The swine flu strain that has sickened people in 30 countries rivals the severity of the 1957 “Asian flu” pandemic that was as much as four times deadlier than typical seasonal flu, scientists said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aK_YmSVuTa_w

-Shadowy Bilderberg group meet in Greece and here’s their address. Read more here-http://www.timesonline.co.uk/tol/news/world/europe/article6283373.ece

-Update, What Does $1 Trillion Look Like? Read more here-http://www.cnbc.com/id/30108264/

WWW.RARECOLOREDDIAMONDS.COM

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.youtube.com/watch?v=BWYMJnEz-n4

and http://www.rarecoloreddiamonds.com/articles/index.html

-Rare blue diamond sells for record $9.5 million. A flawless vivid blue diamond weighing 7.03 carats sold on Tuesday for a record 10.5 million Swiss francs (6.2 million pounds), the highest price paid per carat for any gemstone at auction, Sotheby’s said. The rectangular-shaped blue stone, the rarest to enter the international market this year, went to an anonymous buyer bidding by telephone after hectic bidding see-sawed between two callers for 15 minutes.

It was the centrepiece of its semi-annual sale in Geneva, conducted by David Bennett, chairman of Sotheby’s jewellery department in Europe and the Middle East, who said the results showed the market’s resilience despite the economic downturn. “This is already a new world record price for a fancy vivid blue diamond and a new world record per carat for any gemstone at auction,” Bennett told reporters.

“It is fantastic in this market and shows that these rare things are very much in demand,” he said. The final price includes a commission paid by the buyer to the auction house. The stone sets a record price per carat for any gemstone sold at auction of $1,349,752, (890, 275 pounds) Sotheby’s said.

The previous record price for a fancy vivid blue diamond was $7.9 million, including commission, for a stone weighing 6.04 carats at sale in Hong Kong in October 2007, also by Sotheby’s.

The new owner will have the right to name the stone, which is mounted in a platinum ring. The pre-sale catalogue estimate was 6.8 million to 10 million francs, excluding commission. The hammer price excluding commission was 9.3 million francs. Read more here-http://uk.reuters.com/article/topNews/idUKTRE54C0S620090513 or

http://www.bloomberg.com/apps/news?pid=20601088&sid;=a5rFLItKsMuc&refer;=home

-Christie’s Geneva Jewels Sale Tops $19M, here are the top colored diamonds sold at the auction.

-LOT 357, IMPORTANT AND RARE FANCY VIVID BLUE DIAMOND RING. The fancy vivid blue modified rectangular brilliant-cut diamond weighing 7.03 carats, on a plain platinum mount, size 51, illustrated unmounted. 6,850,000-10,000,000 CHF. Lot Sold. Hammer Price with Buyer’s Premium: 10,498,500 CHF. Accompanied by GIA report no. 1102633475 stating that the diamond is Fancy Vivid Blue, Natural Colour, Internally Flawless. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?lot_id=159536313

-LOT 314A, RARE FANCY INTENSE PINK DIAMOND RING. The fancy intense pink pear-shaped diamond weighing 5.29 carats, flanked by shield-shaped stones, mounted in platinum, size 51½, illustrated unmounted. 2,100,000-3,100,000 CHF. Lot Sold. Hammer Price with Buyer’s Premium: 2,266,500 CHF. Accompanied by GIA report no. 17451666 stating that the diamond is Fancy Intense Pink, Natural Colour, VS2 Clarity. Further accompanied by a GIA diamond type classification report stating that the diamond is Type IIa. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE0902&live;_lot_id=314A

-LOT 306, FANCY INTENSE YELLOW DIAMOND RING. The fancy intense yellow round-cornered square mixed-cut diamond weighing 31.06 carats, set between triangular diamond shoulders, mounted in yellow gold, size 54. 290,000-400,000 CHF. Lot Sold. Hammer Price with Buyer’s Premium: 554,500 CHF. Accompanied by GIA report no. 2105595081 stating that the diamond is Fancy Intense Yellow, Natural Colour, VS2 Clarity. Read more here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE0902&live;_lot_id=306

-LOT 323, MAGNIFICENT UNMOUNTED FANCY VIVID YELLOW DIAMOND. The unmounted fancy vivid yellow marquise modified brilliant-cut diamond weighing 18.13 carats.

620,000-920,000 CHF. Lot Sold. Hammer Price with Buyer’s Premium: 1,178,500 CHF. Accompanied by GIA report no. 1102595075 stating that diamond is Fancy Vivid Yellow, Natural Colour, VVS2 Clarity, together with a GIA worksheet stating that the diamond may be Potentially Flawless after repolishing. Read more here-

http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=GE0902&live;_lot_id=323

-LOT 57, FANCY LIGHT YELLOW DIAMOND RING. The fancy light yellow oval diamond weighing 10.06 carats, the shoulders and frame set with brilliant-cut stones, mounted in gold and platinum, size 52. 105,000-145,000 CHF. Lot Sold. Hammer Price with Buyer’s Premium: 127,300 CHF. Accompanied by GIA report no. 16387962 stating that the diamond is Fancy Light Yellow, Natural Colour, SI1 Clarity.

-Christie’s will hold its spring auction in Hong Kong on May 26, offering a selection of white and colored diamonds as well as jadeite jewelry. Other items include rare period pieces, signed jewels and a wide range of jewels offered at no reserve.

Leading the May sale is a pear-shaped 20.70 carats, D color and Flawless clarity diamond pendant. The diamond, graded excellent polish and excellent symmetry, is mounted with a 10.07 carats pear-shaped D color and Internally Flawless clarity diamond. Both stones are Type IIa.

Also on the block is a necklace boasting 56 colored diamonds, including stones certified fancy deep, vivid and intense pink as well as blue, yellow and green diamonds. Estimated at $1.35-1.9 million, the total weight of the diamonds in this unusual jewel is 14.67 carats. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=32328 or http://www.diamonds.net/news/NewsItem.aspx?ArticleID=26315

OIL

-BP CEO Tony Hayward said on Wednesday solar power technology was unlikely to ever be competitive with more conventional energy sources. “I think solar is probably the most challenged of all of BP’s alternative energy interests,” Hayward said. “It is not going to make the transition to be competitive with more conventional power, the gap is too big if solar is going to make a breakthrough, there will be a technology disintermediation step,” he added. Reuters

-OPEC Cuts Forecast for Oil Demand as Economy Shrinks. The Organization of Petroleum Exporting Countries cut its 2009 forecast for the ninth straight month, predicting oil demand will fall as consumption shrinks in the U.S., the world’s biggest energy consumer.

OPEC lowered its estimate for global demand this year by 150,000 barrels a day to 84.03 million. Demand will contract by 1.57 million barrels a day this year, or 1.8 percent, the Vienna-based producer group said today. Read more here-http://www.bloomberg.com/apps/news?pid=20601072&sid;=a2XTXg5kzGiY&refer;=energy

-OPEC Raised Oil Output for the First Time Since July. The Organization of Petroleum Exporting Countries boosted oil production last month for the first time since July, exceeding its quota by 967,000 barrels a day and backtracking its implementation of supply cuts intended to stem falling prices.

The 11 OPEC members bound by targets implemented 77 percent of planned output cuts of 4.2 million barrels a day, down from a revised 82 percent for March, the Vienna-based organization said in a monthly report today.

Those 11 nations, which exclude Iraq, pumped 25.812 million barrels a day in April, the report said, citing secondary sources, which include estimates from analysts and news organizations. That compares with 25.587 million a day in March. Those 11 nations have a target of 24.845 million barrels a day that took effect from Jan. 1.

“There is too much revenue on the table to not produce” as crude prices rise, said Paul Tossetti, director of oil market analysis at PFC Energy in Washington. “This is as far as we will see the cuts come.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a6NTm7qxfBK4

-Oil Companies May Wait for Hedges to End to Go Bargain Shopping. Quantum Energy Partners, the Houston private-equity firm that put together a $3.5 billion bankroll to go bargain-hunting for acquisitions after oil and natural-gas prices plunged, is waiting for a better time to pounce.

Buyers will accelerate acquisitions late this year and in early 2010 as the hedging contracts that shielded potential takeover targets from tumbling prices expire, said Wil VanLoh, Quantum’s chief executive officer.

“By the first quarter of next year, we’ll be pretty darn active,” VanLoh said in an interview at his downtown office. “Many companies are very well hedged for 2009, so the squeeze hasn’t happened yet. The point of capitulation probably will arrive in the fourth quarter or the first quarter of 2010.”

The record drop in crude prices from 2008’s all-time high hasn’t triggered a surge in takeovers because would-be sellers are demanding mid-2008 valuations, said Michael Bodino, director of research at Sanders Morris Harris Inc. in Dallas. That will change, Bodino and VanLoh said, as hedging contracts drop off, forcing the weakest producers to sell or face bankruptcy.

The number of oil and gas deals last month fell 35 percent from a year earlier, and the value of transactions dropped 60 percent to $5 billion, according to data compiled by Bloomberg. UTS Energy Corp. of Calgary repulsed a third and final takeover bid of C$830 million ($680 million) by Total SA last month, saying the company is worth more. Read more here-

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

U.S. BUDGET DEFICIT TO TOP $1.8 TRILLION-TRADE DEFICIT UP-MEDICARE AND SOCIAL SECURITY

-US red ink to top $1.8 trillion, 4 times record; gov’t borrows 46 cents for every dollar spent. The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates.

Budget office figures released Monday would add $89 billion to the 2009 red ink increasing it to more than four times last year’s all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.

The unprecedented deficit figures flow from the deep recession, the Wall Street bailout and the cost of President Barack Obama’s economic stimulus bill as well as a seemingly embedded structural imbalance between what the government spends and what it takes in.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps. Read more here-

http://finance.yahoo.com/news/White-House-Budget-deficit-to-apf-15199183.html?.v=8 or http://www.bloomberg.com/apps/news?pid=20601110&sid;=aD98UaT9kVGw

-The U.S. reported the first budget deficit for April in 26 years, recording a shortfall in the month that usually sees a jump in individual tax payments before the Internal Revenue Service’s mid-month deadline. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aWODuis.QTU8

-US Government Receipts Collapse. Read more here-http://jsmineset.com/2009/05/12/us-government-receipts-collapse/

-The Federal Reserve Can Not Account For $9 Trillion In Off-Balance Sheet Transactions. Read and watch video here-http://zerohedge.blogspot.com/2009/05/federal-reserve-can-not-account-for-9.html

-President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries. “We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque.

“We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.” Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, Obama said. “It will have a dampening effect on our economy.”

The president pledged to work with Congress to shore up entitlement programs such as Social Security and Medicare and said he was confident that the House and Senate would pass health-care overhaul bills by August. “Most of what is driving us into debt is health care, so we have to drive down costs,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJsSb4qtILhg

-Is America about to go broke? Read more here-http://articles.moneycentral.msn.com/RetirementandWills/InvestForRetirement/is-america-about-to-go-broke.aspx?page=all

-U.S. Trade Deficit Widens First Time in Eight Months. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=atoIyhSDXGB4

-Medicare, Social Security Funds Worsen in Recession. The financial health of Social Security and Medicare, the two main safety nets for American retirees and the elderly, is declining as the recession cuts payroll tax contributions just as the baby-boom generation begins to retire.

The Social Security trust fund will run out of assets in 2037, four years sooner than previously forecast, the trustees said today. Spending on Medicare, the health insurance plan for the elderly, will reach a legal limit by 2014, the same year predicted in 2008, the trustees’ report said.

The deteriorating position of the two funds puts pressure on Congress and President Barack Obama to come up with ways to cut costs and boost revenue for both. Obama yesterday said fixing the nation’s health-care system is an “imperative for America’s economic future.”

“After we have passed health-care reform that puts our nation on a path to lower growth in health-care costs and expanded affordable coverage, this president will work to build a bipartisan consensus to ensure the long-term solvency of Social Security,” Treasury Secretary Timothy Geithner said in a statement. The trustees’ annual report also estimated that Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=amTqW1OAHXl8&refer;=home

DAVID WALKER-U.S. TRIPLE A RATING IS AT RISK

-Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us. That warning from Moody’s focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades.

The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding. Prices have risen on credit default insurance on US government bonds, meaning it costs investors more to protect their investment in Treasury bonds against default than before the crisis hit. It even, briefly, cost more to buy protection on US government debt than on debt issued by McDonald’s.

Another warning sign has come from across the Pacific, where the Chinese premier and the head of the People’s Bank of China have expressed concern about America’s longer-term credit worthiness and the value of the dollar. The US, despite the downturn, has the resources, expertise and resilience to restore its economy and meet its obligations. Moreover, many of the trillions of dollars recently funneled into the financial system will hopefully rescue it and stimulate our economy.

The US government has had a triple A credit rating since 1917, but it is unclear how long this will continue to be the case. In my view, either one of two developments could be enough to cause us to lose our top rating. First, while comprehensive healthcare reform is needed, it must not further harm our nation’s financial condition. Doing so would send a signal that fiscal prudence is being ignored in the drive to meet societal wants, further mortgaging the country’s future.

Second, failure by the federal government to create a process that would enable tough spending, tax and budget control choices to be made after we turn the corner on the economy would send a signal that our political system is not up to the task of addressing the large, known and growing structural imbalances confronting us. For too long, the US has delayed making the tough but necessary choices needed to reverse its deteriorating financial condition.

One could even argue that our government does not deserve a triple A credit rating based on our current financial condition, structural fiscal imbalances and political stalemate. The credit rating agencies have been wildly wrong before, not least with mortgage-backed securities. Read more here-http://www.ft.com/cms/s/0/5534bd04-3f27-11de-ae4f-00144feabdc0.html

INFLATION

-Former official slams Fed for inflation risk. A sharp critic of the Federal Reserve and prominent authority on monetary policy on Tuesday slammed the U.S. central bank for risking inflation and warned that government action had “caused, prolonged and worsened” the country’s financial crisis. John Taylor, a former undersecretary of the Treasury for international affairs and author of the widely cited Taylor Rule of central banking, ran his own numbers for the U.S. economy and said the Fed’s monetary stance was way too loose.

“My calculation implies that we may not have as much time before the Fed has to remove excess reserves and raise the rate,” he said in remarks prepared for a financial markets conference hosted by the Federal Reserve Bank of Atlanta. “We don’t know what will happen in the future, but there is a risk here and it is a systemic risk,” he said.

He noted a recent Financial Times report of internal Fed estimates using the Taylor Rule. This found interest rates should be minus 5 percent at the moment to compensate for the headwinds on the U.S. economy. But Taylor said that his own analysis suggested a rate of 0.5 percent, indicating that the Fed could have a lot less time to raise interest rates than it may currently think.

In addition, the Fed has pumped hundreds of billions of dollars into the economy to support credit markets in the face of a severe U.S. recession, and may find it very hard to remove this expansion by shrinking its balance sheet in the future. “While Federal Reserve officials say that they will be able to sell newly acquired assets at a sufficient rate to prevent these reserves from igniting inflation, they or their successors may face political difficulties in doing so.

“That raises doubts and therefore risks. The risk is systemic because of the economy-wide harm such an outcome would cause,” Taylor said. Taylor used these cases to illustrate examples of where government intervention had magnified market failures and turned them into system-wide problems. However, he saw much more risk coming from the planned U.S. government budget deficits, which could place the Fed under extreme pressure to allow inflation, as this would diminish the debt burden. Read more here-

http://www.reuters.com/article/newsOne/idUSTRE54B7HF20090513

-Billionaire Rupert Says Crisis May Provoke Unrest, Inflation. South African billionaire Johann Rupert said the financial crisis may lead to inflation and social unrest as savers find they’re too poor to retire, while pension-fund managers deserve to be jailed for incompetence.

Rupert, speaking at the annual presentation for Cie. Financiere Richemont SA, the luxury-goods company he controls, said he doesn’t see any “green shoots” of economic recovery. He said governments may resort to inflation to reduce the burden of increased debt from stimulus programs, such as U.S. President Barack Obama’s $787 billion package.

“If this thing carries on, my generation will have to work until they are 75,” the 58-year-old Rupert said. Governments are “going to have to find the capital in the markets, which will crowd out the private sector, or they’re going to have to tax the living hell out of consumers, or inflate their liabilities to oblivion. There are not too many other options.”

Rupert told analysts at the meeting that they’re too young to remember Red Brigade terrorism in Italy or the 1968 Paris uprisings, when the French state sent tanks into the streets.

“Things can get volatile very quickly,” he said. “This is a very turbulent situation. It could flat-out turn into big inflation if not managed properly over the next two or three years. The saver is going to start rebelling.” Spain needs to reduce unemployment from its current rate of about 20 percent to avoid future social problems, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a4X0Co5HSGYE&refer;=home

-This is not the 1930’s and that means a Whole Lot of Inflation to Come, Truly Different this Time. Part 1 here-http://www.321gold.com/editorials/pollaro/pollaro051209.html

-This is not the 1930’s and that means a Whole Lot of Inflation to Come, How Big is this Inflation. Part 2 here-http://www.321gold.com/editorials/pollaro/pollaro051209a.html

-Hyperinflation May Be Over hyped. Read more here-http://online.barrons.com/article/SB124182237497802079.html?mod=googlenews_barrons

-Ecoflation: coming to a market near you. Optimistic stock markets are betting that the Great Recession may have hit bottom despite the devastation in American banking and auto sectors. But punters have yet to build into price forecasts inflation and the newly-coined phenomenon of “ecoflation”. It is a clever pun used by Reuters’ environmental reporter and describes the rising cost of doing business due to a “changing climate”.

Whether that refers to global warming (hotly disputed) or the increasing overhead involving government regulations and environmental compliance is anyone’s guess. But the facts are that these enhanced business costs will end up being passed along mostly to consumers then taxpayers. Consumers will pay more for everything, a form of green inflation, notably in developed countries where environmental activitists and laws are demanding better remediation, recycling or responsiveness to concerns.

They will also pay more for commodity scarcities which will result in higher prices as economic growth resumes and Chinese, Indians and others strive toward indoor plumbing and a US$2,000 Nano car by Tata Motors. Read more here-http://network.nationalpost.com/np/blogs/francis/archive/2009/05/07/ecoflation-coming-to-a-market-near-you.aspx

ROGERS-U.S. DOLLAR RALLY WILL END IN CURRENCY CRISIS

-Dollar Rally Will End, Rogers Says; May Short Stocks. The dollar’s rally is set to end in a “currency crisis,” investor Jim Rogers said, adding that he may bet on a slide in equities after nine weeks of gains. The advance in the U.S. currency has been driven by investors covering their short sales, Rogers, 66, said in an interview with Bloomberg Television in Singapore. He may consider adding to his holdings of the yen and prefers the euro to the dollar or the pound, the investor added.

“We’re going to have a currency crisis, probably this fall or the fall of 2010,” Rogers said. “It’s been building up for a long time. We’ve had a huge rally in the dollar, an artificial rally in the dollar, so it’s time for a currency crisis.” The dollar has climbed against all of the so-called Group of 10 currencies except the yen over the past 12 months, according to data compiled by Bloomberg.

Rogers joins “Black Swan” author Nassim Nicholas Taleb in avoiding the U.S. currency. Taleb told a May 7 conference in Singapore he preferred gold and copper to the dollar and the euro as the global economy faces a “big deflation.” Gains in U.S. stocks also signal a “correction,” Rogers said. He’s avoiding equities for the next two to three years because prospects haven’t changed, he added. Read more here-http://www.bloomberg.com/apps/news?pid=20601100&sid;=a3YnR0N8LgpQ&refer;=germany

BANKING CRISIS MAY LAST UNTIL 2013-CREDIT CARDS-STRESS TESTS-THIRD WAVE OF CRISIS IN U.K.

-U.S. banking crisis may last until 2013: S&P.; A day after saying big U.S. banks probably needed to raise only one-fourth the capital demanded by the government, Standard & Poor’s said the nation’s banking crisis has “merely entered a new phase” and might not end before 2013.

The credit rating agency said the industry is being propped up by hundreds of billions of dollars of government support, especially for lenders considered too important to the financial system to fail.

While efforts to spur lending, take bad assets off banks’ balance sheets, and restart the market for packaging and selling securities may help the sector, S&P; said banks will have a tough time surviving absent a bigger capital cushion than regulators require.

“There’s nothing to say that this banking crisis can’t go on for another three or four years,” S&P; Managing Director Tanya Azarchs said. Read more here-

http://www.reuters.com/article/ousiv/idUSTRE54C6XL20090513

-Banks Brace for Credit Card Write-Offs. It used to be easy to guess how many Americans would have problems paying their credit card bills. Banks just looked at unemployment: Fewer jobs meant more trouble ahead. Read more here-http://www.nytimes.com/2009/05/11/business/11credit.html

-Banks Won Concessions on Tests. Read more here-http://online.wsj.com/article/SB124182311010302297.html and http://www.reuters.com/article/businessNews/idUSTRE5481F520090509?feedType=RSS&feedName;=businessNews&rpc;=23&sp;=true

-Bank of England braced for third wave of financial crisis. Surprise £50bn cash injection is attempt to avert new phase of credit crunch. Read more here-http://www.guardian.co.uk/business/2009/may/08/bank-england-recession-economy

-Why the Banks Still Aren’t Fixed. Read more here-http://www.usnews.com/blogs/flowchart/2009/05/11/why-the-banks-still-arent-fixed.html

33^RD U.S. BANK FAILURE OF THE YEAR

-Westsound Bank in Bremerton, Washington, was seized by a state regulator today, bringing the tally of failed U.S. banks to 33 this year. Kitsap Bank of Port Orchard, Washington, will assume almost all deposits of the closed bank and will open its nine branches on May 11, the Federal Deposit Insurance Corp. said in a statement on its Web site. Westsound Bank had total assets of $334.6 million and deposits of $304.5 million.

The FDIC estimates the seizure of Westsound will cost the government’s deposit insurance fund $108 million. Bank failures have drained money from the fund, which fell 45 percent in the fourth quarter to $18.9 billion. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aIzmG53WwDqE or http://money.cnn.com/2009/05/08/news/economy/bank_failure.reut/index.htm

BEWARE OF SUCKERS STOCK RALLY

-Charles Napier, author of Anatomy of the Bear, tells FT.com that a rise in treasury yields will cause a cataclysmic bear market within two years. Watch video here-

http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html?_i_referralObject=4883575&_i_referrer=mrss

-Volatility Too High to Signal Bull Market, Bank of America Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5XHNVI3_8Yc

-Analysts Turning Bearish on S&P; 500 After 14% Rally. The biggest earnings-season rally since 2002 has pushed 34 percent of the companies in the Standard & Poor’s 500 Index above analysts’ price targets for the next year, raising concerns about the pace of the recovery. The S&P; 500 was within 5 percent of the combined price projections of more than 1,700 securities analysts last week after gaining 14 percent since Alcoa Inc. reported first-quarter results on April 7. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=algJ_1hrRxrE&refer;=home

-Enjoy the rally while it lasts but expect to take a sucker punch. Our delicious spring rally is nearing the limits. The 40pc rise on global bourses since March assumes that central banks have conjured away the debt overhang by slashing rates to zero and printing money. Nothing of the sort has occurred. Two thirds of the world economy will be in deflation by July. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5301123/bEnjoy-the-rally-while-it-lasts—but-expect-to-take-a-sucker-punchb.html or http://www.gata.org/node/7414

-On Wall Street: Beware of the sucker’s rally. The market is a cruel mistress indeed. Compounding the pain of big swoons, it kicks investors when they are down by luring them into sucker’s rallies typically sharp but fleeting bounces in the middle of a bear market. Read more here-http://www.ft.com/cms/s/0/158f174a-3bed-11de-acbc-00144feabdc0.html

U.S. ECONOMY

-U.S. Economy: Jobless Claims Increase on Impact From Chrysler. Initial jobless claims rose by 32,000 to 637,000 in the week ended May 9, the Labor Department said today in Washington. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5aNqahBpCaA

-Number of layoffs since Nov. 1, 2008, at America’s 500 largest public companies: 558,087. Read more here-http://www.forbes.com/2008/11/17/layoff-tracker-unemployement-lead-cx_kk_1118tracker.html

-Retail sales in the U.S. unexpectedly dropped in April for a second month, indicating that rising unemployment is prompting consumers to boost their savings. The 0.4 percent decrease followed a revised 1.3 percent drop in March that was larger than previously estimated, the Commerce Department said today in Washington. Excluding auto dealers, sales fell 0.5 percent.

Fewer jobs, falling home values and the biggest loss of household wealth on record may limit consumers’ ability to spend for years, analysts said. As long as the biggest part of the economy is constrained, any recovery from the worst recession in at least half a century is likely to be subdued.

“The second quarter is going to be tough,” Bill Cheney, chief economist at John Hancock Financial Services Inc. in Boston, said in a Bloomberg Television interview. “Consumers are losing their jobs, concerned about losing their jobs and losing wealth.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aLqc3woGnzWE&refer;=home

-U.S. risks “lost decade” due to half-steps: Krugman. The United States risks a Japan-style lost decade of growth if it does not take aggressive action to stimulate its economy and clean up its banking system, Nobel Prize-winning economist Paul Krugman said on Monday. “We’re doing half-measures that help the economy limp along without fully recovering, and we’re having measures that help the banks survive without really thriving,” Krugman said.

“We’re doing what the Japanese did in the nineties,” he told a small group of reporters during a visit to Beijing. He said it was not clear that China would suffer sub-par growth as a consequence of the fallout of the present crisis. “I’m mostly worried that the U.S. and the euro zone will have Japanese-type lost decades,” he said.

Krugman said he expected little or no employment growth this year or next in the United States, where the jobless rate in April hit a 25-year high of 8.9 percent. “A second stimulus is becoming clearly urgent. They need a very, very strong stimulus,” said Krugman, a Princeton University professor and a New York Times columnist.

He said stress tests carried out on 19 leading U.S. banks had bought time for the administration of Barack Obama, but they had not answered the key question of whether the banks have enough capital to fulfill their key role in the economy. “It’s clear the administration won’t take radical action to strengthen the banks any time soon,” he said. To have done so would have meant temporarily nationalizing Citigroup and, perhaps, Bank of America, he said. Read more here-http://www.reuters.com/article/ousiv/idUSTRE54A0WU20090511

-The Zarnowitz rule may live, but not for long. The current contraction may so far be following the economic law named for Victor Zarnowitz, the late expert on business cycles: Deep recessions are almost always followed by rapid rebounds. Consumer confidence rose by the most in more than two years in April as surging stock prices and falling mortgage rates boosted optimism. A gauge of U.S. manufacturing activity had its biggest bounce since 2005 as companies eased up on efforts to slash inventories.

Even the crippled housing market has shown signs of stabilizing. The risk is that any snapback may end up stunted by structural impediments from heavily indebted consumers to a hobbled banking system that continue to weigh on the economy and may prevent a sustained run of rapid expansion. “We could see one or two quarters of 6, 5, 4 percent growth,” says Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, who was the top forecaster of the U.S. economy in Bloomberg News surveys last year. “But that doesn’t mean that the economy will be in good shape.

We’ll just be going from truly gruesome to bad.” Bridgewater Associates agrees. The Westport, Connecticut- based financial firm, which says it manages $72 billion in assets, sees a good chance of a big spurt in the economy late in the year, with growth then settling back to a trend line of a shade over 2 percent. That would be well below the postwar rate of 3.3 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aVK2m3ibUH6o&refer;=home

REAL ESTATE-FORECLOSURES

-Home Prices in U.S. Drop Most on Record in Quarter. Home prices in the U.S. dropped the most on record in the first quarter from a year earlier as banks sold seized homes and foreclosures in California and Florida dominated sales.

The median price fell 14 percent to $169,000, the National Association of Realtors said today. Prices dropped in 134 of 152 metropolitan areas, with the deepest declines in Cape Coral-Ft. Myers, Florida, and the San Francisco and San Jose areas.

Distressed sales increased transactions in 17 states from the fourth quarter as speculators and first-time buyers purchased bank-owned properties. Such homes typically sold for 20 percent less than others, the NAR said today. The inventory of previously owned homes on the market dropped to 3.7 million in March from 3.8 million a month earlier, according to NAR data. The number of new homes for sale fell to 311,000, the lowest since January 2002, according to the Commerce Department.

“We are very much in a bifurcated market with sharp differences between foreclosures and short sales on one hand, and traditional homes on the other,” Lawrence Yun, the NAR’s chief economist, said in a statement.

Total existing home sales fell 6.8 percent from a year earlier to a seasonally adjusted annual rate of 4.59 million units, the group said. Sales were down 3.2 percent from the fourth quarter. The figures include single family homes and condominiums and co-ops. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aKkPN8keugMw&refer;=home

-Greenspan Sees ‘Seeds of a Bottoming’ in U.S. Housing. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=amYs8axswrJQ&refer;=home

-Most U.S. homeowners think a bottom has been reached: Zillow. Most American homeowners believe their home’s value has declined over the past year, but a majority also think a bottom has been reached, real estate website Zillow.com said on Thursday. A majority, or 60 percent, believe their home lost value during the past 12 months, according to the Zillow Q1 Homeowner Confidence Survey.

In reality, 80 percent of homes across the country lost value during the past 12 months, according to Zillow’s first-quarter Real Estate Market Reports. Additionally, 18 percent believe their home gained value in the past 12 months, and 22 percent believe its value remained the same, according to the survey.

That resulted in a Zillow Home Value Misperception Index of five the lowest it has been since Zillow introduced the index in the second quarter of 2008 and down from 10 in the fourth quarter of 2008. A Misperception Index of zero would mean homeowners perceptions’ were in line with actual values. Read more here- http://www.reuters.com/article/wtUSInvestingNews/idUSN1339409420090514

-Australian Prime Minister Kevin Rudd’s bid to ensure his housing market avoids the global property slump may push a generation of buyers into a debt crisis. Grants of as much as A$21,000 ($16,142) to first-time buyers and the lowest interest rates in 49 years have emboldened more than 40,000 young Australians to take out home loans since October, stoking demand for properties that cost less than A$500,000.

These buyers may be vulnerable when interest rates begin rising, potentially triggering a jump in foreclosures that will drive down property prices, cut profits at banks and damp household spending, which accounts for half the economy. A surge in defaults in America was a key trigger for the financial crisis that pushed the global economy into its worst recession since World War II.

“We’re mirroring what happened to the U.S. three years ago, when people who shouldn’t have been in the market bought houses,” said Martin North, managing director of Fujitsu Australia, a Sydney-based property-consulting company. “It’s a strategy set for an unfortunate outcome.”

As Australia slides into its first recession since 1991, Rudd’s payments have been criticized by economists and newspapers for fueling a property boom that may burst once the grants are reduced, possibly as soon as July 1. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=azjnQbCD2dm8&refer;=exclusive

-Worries growing about commercial real estate. Delinquency rates at hotels, office buildings have more than doubled. Read more here-

http://www.msnbc.msn.com/id/30701874/

-Luxury retail strips from Manhattan’s Fifth Avenue to London’s Bond Street and the Avenue des Champs Elysees in Paris recorded lower rents in the first quarter as the global recession cut sales, Colliers International said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=amIJt1OBFTqg

-U.S. Foreclosure Filings Hit Record for Second Straight Month. Foreclosure filings in the U.S. rose to a record for the second consecutive month in April as banks increased efforts to seize homes from delinquent borrowers.

A total of 342,038 properties received a default or auction notice or were seized last month, RealtyTrac Inc. of Irvine, California, said today in a statement. One in 374 households got a filing, the highest monthly rate since the property data service began issuing such reports in 2005.

“What you’re seeing is the inevitable result of severe job losses,” Nicolas Retsinas, director of housing studies at Harvard University in Cambridge, Massachusetts, said in an interview. “Until we stem the job losses, we can expect to see continuing foreclosures.”

Unemployment is hampering the housing market as property prices fall. The U.S. jobless rate rose to 8.9 percent, the highest in more than a quarter century, the Labor Department said May 9. Home prices fell the most on record in the first quarter to a median $169,000 amid sales of foreclosure properties, the National Association of Realtors said yesterday.

Foreclosure filings jumped 32 percent from the year-earlier period, RealtyTrac said. Filings were little changed from March as some states delayed seizures. Ten states accounted for three quarters of all foreclosures in April, with California leading the nation. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aYokz_rb3kbw&refer;=home

-Beware Crisis’ Next Wave: Option ARM Foreclosures, More Debt Defaults. Read and watch video here-http://finance.yahoo.com/tech-ticker/article/243889/Beware-Crisis%27-Next-Wave-Option-ARM-Foreclosures-More-Debt-Defaults?tickers=XLF,FAS,C,^GSPC,JPM,BAC,^DJI?sec=topStories&pos;=9&asset;=&ccode;

The Goldbugg Report – May 19, 2009
Posted by Worldwide Precious Metals on Tuesday, May 19, 2009

The Goldbugg Report – May 11, 2009

May 11, 2009

WORLD FINANCIAL REPORT ON RADIO MAY 8 2009 SHOW

-How Gold Will Top $2,000 Per Ounce.

-Is Silver The New Magic Bullet for Investors?

-Gold isn’t going to $2,000 an ounce, its going much higher.

GOLD

-Unprecedented U.S. money supply to create inflation in time. Very positive for gold. The U.S. government is creating an unprecedented new supply of money, but where’s inflation? Analysts at Blanchard & Co. explain why we haven’t seen it yet. “Right now, normally it would be incomprehensible that the amount of new money being created has not led to inflation or even hyperinflation. However, the reason we have not seen inflation take off is due to the slowdown of the velocity of money.

Because fear is still rampant, money is not changing hands in the way that was originally planned,” says Donald Doyle, Chairman and CEO of Blanchard and Company. “Over the last six months, the money supply has grown exponentially, but because the economy is in such bad shape, we remain in a deflationary recession because so few are lending money, borrowing money, or spending money.”

Doyle says this cycle will continue until confidence in the economy returns, and banks, investors and consumers, begin to spend money, as the bailout plan is designed to encourage them to do. Ultimately, Doyle sees Treasury money supply reaching a critical mass that will fan the fires of inflation, increasing it to a level that could potentially produce hyper-inflation. And he says, until the velocity of money returns to normal, the U.S. economy will not see the improvement the stimulus was created to generate.

Doyle says he sees major companies continuing to have financial problems, unemployment continuing to rise, bankruptcies continuing to increase, and ongoing home foreclosures multiplying the existing problems. So what can the Fed do? Doyle sees the Fed having few choices other than printing even more money, adding to the likelihood of an inflationary meltdown in the dollar.

That’s why gold and other tangible assets remain investments with a big upside because of their appeal as safe-havens during times of economic uncertainty and as hedges against inflation. “It’s not a question of ‘if,’ but ‘when’,” says Doyle. “Investors still have a window of opportunity to prepare for, or hedge against, the coming erosion of the value of paper assets by diversifying their portfolios with tangible ones, even with gold maintaining a price level above its 1980 high in spite of a bloated dollar.” Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=82760&sn;=Detail

-US$ heads down as China picks gold. “The US should be afraid, very afraid. China is questioning the dollar’s status as a reserve currency and, at US$1,000 an ounce, gold has become the world’s de facto currency” John Ing, Maison Placements in Canada. It is a chilling statement from an expert on both gold and China. But he is just speaking truth to power: In a G2 world (the US and China), he who is the piper calls the tune and China holds a US$2-trillion mortgage on the U.S. and is not happy.

This country, along with others who lend money to the U.S. such as Saudi Arabia, will determine the value of the US$ and gold. And they have spoken. They are not buying more US$ treasuries and are buying gold as a new asset class. China announced that it was doing so quietly and recent reports are that the Saudis and others have been buying bullion and hocked gold jewellery from around the world to be melted down in Middle Eastern refineries.

The only way is up for gold prices because the U.S., which backstops the IMF which is the world’s lender of last resort, has had to become its own lender of last resort. Washington has cranked up the printing presses in an unprecedented way, replicating the behaviour of its spendthrift corporations and consumers. This year’s budget is US$3.5 trillion, bigger than any in history including Napoleon’s when he was taking on the British, Germans and Russians at the same time.

And as Ing points out, the “bi” in this bipolar global economy is China and it is not amused. Beijing has not only started to hoard gold but has continued to talk up a new reserve currency concept to replace the US$. The writing’s on the wall and the only reason the Chinese and others don’t dump US$s is because it would be like shooting themselves in the feet. Inflation, on top of excessive money supply dilution, will (unless mitigated by growth or stoppage) reduce the dollar’s value.

Ing estimates that the printing of money to bail out banks, autos and the U.S. economy will create a catch-up in gold bullion prices: “Gold should be US$9,000 an ounce to cover the [current and projected] U.S. monetary base.” China has become the world’s fifth biggest gold hoarder, in addition to being the world’s biggest gold producer (through its government-owned mining companies).

I also suspect that China is behind the political sabotage in Mongolia, to its north, which has for five years prevented Ivanhoe Mines of Vancouver from producing gold and copper from its massive discovery. Keeping supplies off markets, and massive ore bodies shut in, is a good way of jamming prices upwards. Read more here-http://network.nationalpost.com/np/blogs/francis/archive/2009/05/06/china-bets-on-gold-not-yankee-dollars.aspx

-Central Banks Favouring Gold Again Especially the “Elephant in the Room” China. Read more here-http://blog.goldassets.co.uk/2009/05/07/central-banks-favouring-gold-again-especially-the-elephant-in-the-room-china/

-Major Banks Buy Gold and Silver. Read more here-http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId;=6653

-John Embry commentary, monetary measures imply big movement for gold. Read more here-http://www.sprott.com/pdf/investorsdigest/digest.pdf

-How Gold Will Top $2,000 Per Ounce. Read more here-http://news.goldseek.com/DailyReckoning/1241121436.php

-Gold isn’t going to $2,000 an ounce, its going much higher. Read more here-http://www.321gold.com/editorials/casey/casey050409.html

-Gold, the Apex of the Pyramid. Read more here-http://news.goldseek.com/GoldSeek/1241372765.php

-Newmont Mining President and CEO Richard O’Brien says the company has noted a decoupling of the traditional relationship between the weak U.S. dollar and gold prices. However, O’Brien expects them to re-couple in the near future, bringing the inflation risks that will continue to prompt investors to invest in gold. In fact, investment demand continues to support gold prices despite other factors, he noted. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=82660&sn;=Detail

-Falling gold mine production will support prices. Global mine production of gold will continue to decline in the face of rising demand, and with less new supply there will be no gold price declines, the CEO of the world’s biggest gold miner said.

“The gold industry needs to replace almost 100 million ounces of reserves per year, and clearly this has not been happening,” Aaron Regent, CEO of Barrick Gold told the company’s annual shareholders meeting in Toronto. Regent says that gold mine supply actually has been on a downward trend since 2001. Read more here-

http://www.bi-me.com/main.php?c=3&cg;=4&t;=1&id;=35637

-Zimbabwe gold production plunges 76%. Despite new rules allowing gold producers to sell directly to world market, major mining houses are still avoiding Zimbabwe. Read more here-

http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=82845&sn;=Detail

-Warren Buffett’s good news for gold. Alec Hogg reports from Omaha on a developing scenario ripe for another bullion boom. Read more here-

http://www.mineweb.net/mineweb/view/mineweb/en/page34?oid=82710&sn;=Detail or http://www.gata.org/node/7400

-Venezuela wants to buy more gold produced locally. Venezuela more than doubled the amount of gold that local producers must offer to the central bank in a bid to increase its reserves of the metal and reduce reliance on supporting them with U.S. dollars.

The Finance Ministry said today that 70 percent of gold produced in Venezuela must be sold domestically, and 60 percent must be offered first to the central bank, in a resolution published in the Official Gazette. The remaining 30 percent can be exported. Previously, 20 percent had to be offered to the central bank. Read more here-

http://www.gata.org/node/7406

-Gold Today and Nasdaq 1995. Read more here-http://news.goldseek.com/GoldSeek/1241714077.php

-U.S. House Prices in Gold. Read more here-http://news.goldseek.com/BullionVault/1241207027.php

-New central bank gold sales plan seen as bullish for bullion. Read more here-http://www.gata.org/node/7396

-Decade of gold sales cost European central banks $40 billion. Read more here-http://www.gata.org/node/7411

-A Short History of the Gold Cartel. Read more here-http://news.goldseek.com/JamesTurk/1241449200.php

SILVER

Gold to silver ratio at 80 to 1 with gold at $2,000 the silver price would be $25.00

Gold to silver ratio at 70 to 1 with gold at $2,000 the silver price would be $28.57
Gold to silver ratio at 60 to 1 with gold at $2,000 the silver price would be $33.33

Gold to silver ratio at 50 to 1 with gold at $2,000 the silver price would be $40.00
Gold to silver ratio at 15 to 1 with gold at $2,000 the silver price would be $133.33

-Gene Arensberg’s new “Got Gold Report,” excerpted from Brien Lundin’s Gold Newsletter, finds the market structure bullish for silver, predicts a sharp reversal upward for natural gas, and quotes GATA board member Adrian Douglas, editor of the Market Force Analysis letter. Arensberg’s report is headlined “Silver Bullish, While a Natural Gas Reversal Looms.” Read more here-http://www.gata.org/node/7407

-Silver Leads Gold as Dollar Teeters. Read more here-http://news.silverseek.com/SilverSeek/1241716773.php

Silver particularly interesting as silver/gold ratio “out of whack” – Niehuser

-Mike Niehuser, founder of Beacon Rock Research, LLC, weighs the historical seasonality of gold and silver against the forces at work in today’s market and explains why we could see a significant run up in metals by fall. Interview with The Gold Report. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=82703&sn;=Detail

-Fortis/VM forecast 700t drop in silver mine production this year. View the report here-http://www.virtualmetals.co.uk/pdf/FSB0904.pdf or http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=82735&sn;=Detail

-Is Silver The New Magic Bullet for Investors? Read more here-http://news.silverseek.com/SilverSeek/1241444272.php

-Ted Butler silver commentary. Gold and silver are uniquely comparable. Both have been known by man throughout history. Both are the most popular precious metals held for investment. Both were money in the past. Because they are comparable, it would seem logical that if gold bullion was worth 140 times more than silver, it would suggest that 140 times more money was flowing into gold.

This year, only 13 times more money came into gold. Last year it was only 5 times as much. In other objective measurements, such as the money flowing into gold and silver bullion coins from the U.S. Mint, only about 3 times more money has flowed into gold than silver in recent years. So the question that a serious student should ask (and the point I’m trying to make) is why is the total amount of gold worth more than 140 times the amount of silver, if nowhere near 140 times more money is flowing into gold? The answer has nothing to do with gold being overvalued, or for that matter, anything to do with gold at all.

The answer is because silver is grossly undervalued. The undervaluation exists because silver is artificially depressed in price and has been for more than 25 years. It’s doubtful you will ever see imbalances like this again in any other asset. That’s why the investor that’s educated on silver can see the incredible profit potential. The coming investment outperformance of silver will be something that’s written about for years to come. Read more here-http://news.silverseek.com/TedButler/1241543512.php

DEFINITIONS-QUOTES-QUICK HITS

Calgary 2009: Worldwide Precious Metals – Rob McInerney, Lucas R. Bugg http://www.metalsnews.com/picturegalleries/PicturePopUp.aspx?ID=58451

-Ayn Rand (February 2 1905 – March 6, 1982), was a Russian-American novelist, philosopher, playwright, and screenwriter. She is known for her best-selling novels and for developing a philosophical system called Objectivism. Born and educated in Russia, Rand emigrated to the United States in 1926. She worked as a screenwriter in Hollywood and had a play produced on Broadway in 1935-1936. She first achieved fame with The Fountainhead (1943), and her best-known work the philosophical novel Atlas Shrugged was published in 1957.

Rand’s political views, reflected in both her fiction and her theoretical work emphasize individual rights (including property rights) and laissez-faire capitalism, enforced by constitutionally limited government. She was a fierce opponent of all forms of collectivism and statism, including fascism, communism, and the welfare state. She was also an atheist, and promoted ethical egoism (which she termed “rational self-interest”) as energetically as she condemned altruism (which she called “moral cannibalism”). Read more here-

http://en.wikipedia.org/wiki/Ayn_Rand video here-http://www.youtube.com/watch?v=FzGFytGBDN8 or http://www.youtube.com/watch?v=7ukJiBZ8_4k

-We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force. Ayn Rand

-”The charm of history and its enigmatic lesson consist in the fact that, from age to age, nothing changes and yet everything is completely different.” Aldous Huxley-Read more here-

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

-The new systemic risk to the system is the U.S. Congress. James Robinson III, ex-CEO of American Express

-Charles Allmon is the sage of Growth Stock Outlook, which he founded in 1965 and was one of the first investment letters monitored by the Hulbert Financial Digest, is now 88. He closed the public letter last year but still communicates with institutional clients. Allmon still thinks the stock market could decline to 3,200-4,200 on the Dow by 2011-2012 and that it could cross the price of gold. Read more here-http://www.marketwatch.com/news/story/charles-allmon-88-cautiously-buying/story.aspx?guid={5F01F962-DD4B-4AF9-9CCA-65E418ACB3AC}&dist;=msr_2&print;=true&dist;=printMidSection

-Concerns about the international financial system and their implications for the dollar and other currencies and inflation going forward look likely to see gold remain firm for the foreseeable future. The central bankers and politicians mantra of “inflate or die” will likely soon lead to the emergence of real inflationary pressures. Gold.ie

-Stress test shows bank credit losses could be $600 billion. Ten of 19 institutions must raise $74.6 billion in private capital by November. Read more here-http://www.marketwatch.com/News/Story/Story.aspx?guid={754FEF5D-53E4-4653-9942-6C2318049143}&print;=true&dist;=printMidSection

-Global Crisis ‘Vastly Worse’ Than 1930s, Taleb Says. The current global crisis is “vastly worse” than the 1930s because financial systems and economies worldwide have become more interdependent, “Black Swan” author Nassim Nicholas Taleb said. “This is the most difficult period of humanity that we’re going through today because governments have no control,” Taleb, 49, told a conference in Singapore today.

“Navigating the world is much harder than in the 1930s.” The International Monetary Fund last month slashed its world economic growth forecasts and said the global recession will be deeper than previously predicted as financial markets take longer to stabilize. Nouriel Roubini, 51, the New York University professor who predicted the crisis, told Bloomberg News yesterday that analysts expecting the U.S. economy to rebound in the third and fourth quarter were “too optimistic.” “Certainly the rate of economic contraction is slowing down from the freefall of the last two quarters,” Roubini said.

“We are going to have negative growth to the end of the year and next year the recovery is going to be weak.” The global economy is facing “big deflation,” though the risks of inflation are also increasing as government’s print more money, Taleb told the conference organized by Bank of America Merrill Lynch. Gold and copper may “rally massively” as a result, he added. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aw8ry7hR04m4&refer;=home

-Gold May Be ‘Off to the Races’ Above $950: Technical Analysis. Gold may be “off to the races” if prices break resistance levels at $950 to $960 an ounce, according to Jeffrey Rhodes, a Dubai-based trader with International Assets Holding Corp.

Prices may surpass $1,200 an ounce this year, more than the record $1,032.70 reached in March 2008, Rhodes said. Gold peaked at $1,006.29 this year on Feb. 20. Gold’s support level is at about $850 an ounce, he said. Support is where buy orders may be clustered and resistance is where there may be sell orders. “A number that would get everyone very excited would be $1,005 an ounce,” Rhodes said in an interview April 27. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ansCeuvebmvU&refer;=worldwide

-The lonely Gold bug is about to be the toast of the financial world. Soon, holding Gold will be all the rage and everyone will be telling stories of how they bought physical Gold when it was only $250, $600 or $1000 an ounce. Sadly, this is about the time I will be quietly leaving the party and selling my Gold to the new and frenzied retail investors that just don’t get it.

You see, investing in a bull market is supposed to be lonely until the very end. Once everyone’s on board, the bull market will be just about over. Maybe being lonely ain’t so bad after all when it comes to investing. Adam Brochert-Read more here-http://news.goldseek.com/GoldSeek/1241615803.php

-Big money moving into comex gold and silver call options. I conclude that smart money is being placed for a massive rise in the gold price in the next 30 days and silver in the next 60 days (which probably means within 30 days for both metals) and again by December.

I wouldn’t be surprised to see a pullback in between the two events. This money could not go in to the futures market without blowing the lid off the price as it would represent such a large increase in open interest. Going into the out-of-the-money option market allows flying below the radar. Adrian Douglas-Read more here-http://www.lemetropolecafe.com/Pfv1.cfm?pfvID=7787&SearchParam;=Adrian%20Douglas

-China’s gold buy raises eyebrows for all the right reasons. The precious-metals market took notice for all the right but not-so-obvious reasons when China announced last week that it ramped up its gold reserves by 76% in the last six years. After all, the world’s largest producer of gold, which also happens to be the world’s most populous nation and third-largest economy, must have a good reason for its purchases and quite a few experts said the move solidifies gold’s place as a monetary asset, and shows that it’s destined for a brighter future.

“The important take-away is that China itself is absorbing the bulk (if not all) of the production of the world’s largest producer of gold (also China) with the now confirmed intent of building reserve holdings,” said Peter Grant, a senior metals analyst at USAGold-Centennial Precious Metals in Denver. “That is very favorable for the longer-term outlook for gold,” he said.

Last week, China announced that the amount of gold in its reserves has climbed to 1,054 tons from 600 tons in 2003.

“China, true to its reputation for patience and steady, long-term progress toward its goals, has taken the golden path and now they want the world to know about it,” said Michael Kosares, president of Centennial Precious Metals. The nation has become the fifth-largest individual-country holder of the precious metal.

And it didn’t just announce its gold accumulation last week. It also asked the International Monetary Fund to sell its entire 3,217 tons reserve, Kosares points out. And why would China encourage sales that could potentially depress the price of the gold it just bought a lot of? So it can buy more, said Peter Grandich, a metals writer at Agoracom, an online marketplace for small-cap investors. Read more here-http://www.gata.org/node/7397

-U.K.’s Royal Mint Uses 75% More Gold as Investor Demand Expands. The Royal Mint, established in the 13th century, used 75 percent more gold in the first quarter amid a surge in demand for bullion to diversify investments.

The U.K. mint made 28,496 ounces of gold coins in the quarter, compared with 16,317 ounces a year earlier, according to data obtained by Bloomberg News under a Freedom of Information Act request. Production last year rose 30 percent to 53,089 ounces, the data show.

Demand for gold and exchange-traded funds linked to the metal accelerated as equities collapsed and governments spent trillions of dollars to combat recessions. The Austrian mint, Muenze Oesterreich AG, sold a record 1.5 million ounces of gold last year, while the U.S. Mint’s sales of 1-ounce American Eagle gold coins more than quadrupled in January to 92,000.

“People are worried about their savings and banks, and a lot of people realize it’s a safe-haven asset,” said Mark O’Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin. “Very few people are selling.” Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aohCdbLOY3BU&refer;=home

-China has ‘canceled US credit card’: lawmaker. China, wary of the troubled US economy, has already “canceled America’s credit card” by cutting down purchases of debt, a US congressman said Thursday. China has the world’s largest foreign reserves, believed to be mostly in dollars, along with around 800 billion dollars in US Treasury bonds, more than any other country.

But Treasury Department data shows that investors in China have sharply curtailed their purchases of bonds in January and February. Representative Mark Kirk, a member of the House Appropriations Committee and co-chair of a group of lawmakers promoting relations with Beijing, said China had “very legitimate” concerns about its investments.

“It would appear, quietly and with deference and politeness, that China has canceled America’s credit card,” Kirk told the Committee of 100, a Chinese-American group. “I’m not sure too many people on Capitol Hill realize that this is now happening,” he said. Read more here-http://www.google.com/hostednews/afp/article/ALeqM5i4estRSYeFBIII9kezxnP4jgoGZQ

-Oil May Break Resistance, Rise to $71.55: Technical Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=arWZYxpaS.K0

-401 k’s Hit by Withdrawal Freezes. Investors Cry Foul as Some Funds Close Exits; Perils of Distressed Markets. Some investors in 401(k) retirement funds who are moving to grab their money are finding they can’t.

Even with recent gains in stocks such as Monday’s, the months of market turmoil have delivered a blow to some 401(k) participants: freezing their investments in certain plans. In some cases, individual investors can’t withdraw money from certain retirement-plan options. In other cases, employers are having trouble getting rid of risky investments in 401(k) plans. Read more here-http://online.wsj.com/article/SB124148012581385199.html

-Stores won’t buy into rebound talk. Retail insiders are betting that it could be 12 to 18 months before consumer spending returns to pre-recession levels. Read more here-

http://money.cnn.com/2009/05/05/news/economy/retail_consumerrebound/index.htm?postversion=2009050515

-U.S. Restaurants’ Risk of Failing Has Surged, Survey Shows. U.S. restaurants are four times more likely to fail than they were a year ago and as many as 40 percent may face a “severe” cash shortage within the next 12 months, restructuring firm AlixPartners LLP said.

The increased risk may spur liquidations, restructuring, bankruptcies and buyouts, according to a survey of 110 restaurant chains. Debt-to-equity ratios have more than doubled in the past two years, hurt by falling asset and share values. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a8dXXb0J.6HM

-General Motors Corp. said its first- quarter net loss widened to $5.98 billion as sales plunged by almost half, ratcheting up the prospect of a bankruptcy filing by a U.S.-imposed June 1 deadline. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=adtEtB9NqfxM&refer;=home

-GMAC Reports $675 Million Loss as Loan Defaults Rise. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aq7ENxaOI88E

-Hedge fund manager lashes back at Obama on Chrysler. Read more here-http://uk.reuters.com/article/businessNews/idUKTRE54471L20090505

-The troubled insurer AIG posts first-quarter loss of $4.4 billion 6th quarterly loss. Writedowns narrow as AIG makes strides in unwinding financial products unit. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aMDAl0sDqVBY or http://money.cnn.com/2009/05/07/news/companies/aig/index.htm

-Most in U.S. think economy still in trouble: survey. Read more here-http://www.reuters.com/article/ousiv/idUSTRE54456820090505 or http://money.cnn.com/2009/05/05/news/economy/retail_survey.reut/index.htm?postversion=2009050514

-Fed’s Yellen predicts U.S. recovery to be slow. Read more here-http://www.reuters.com/article/companyNewsAndPR/idUSN0551721120090506

-U.S. cities need national bailout agency: Rohatyn. The architect of the 1970s financial rescue of New York City said on Wednesday the federal government should create a powerful national agency to bail out dozens of floundering U.S. cities.

Felix Rohatyn, the chairman of New York’s Municipal Assistance Corp. from 1975 to 1993, said at the Reuters Infrastructure Summit that policymakers should look to the Reconstruction Finance Corp. created in 1932 as a model to aid cities and states as they confront their biggest deficits in decades. Read more here-

http://www.reuters.com/article/Infrastructure09/idUSTRE5457EC20090506

-Bankers see more losses ahead. Credit cards, commercial real estate are just two trouble spots in 2009, Fed survey of loan officers reveals. Read more here-

http://money.cnn.com/2009/05/04/news/economy/fed_survey/index.htm?postversion=2009050415

-Consumer credit in the U.S. contracted by a record in March after the jobless rate reached its highest level in a quarter century and banks made it harder to get loans in an effort to buttress their balance sheets.

Consumer credit fell by $11.1 billion, almost three times more than forecast and the most since records began in 1943, to $2.55 trillion, according to a Federal Reserve report released today in Washington. The 5.2 percent drop at an annual rate was the biggest since 1990, the Fed said. Credit also decreased by $8.1 billion in February, more than previously estimated. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a7VgVoYfGFAo

-Why stimulus money goes unspent. Even after federal funds become available, states face hurdles in putting the money to work. Read more here-

http://money.cnn.com/2009/05/05/news/economy/spending_stimulus_money/index.htm?postversion=2009050513

-FDIC Cash Reserve Cushion Forecast to Triple by 2016. President Barack Obama’s 2010 budget proposal projects the Federal Deposit Insurance Corp.’s cash cushion, which fell below minimum levels after the failure of 57 lenders in 16 months, will more than triple by 2016.

The reserve ratio, the fund balance divided by insured deposits, slipped below the legal minimum 1.15 percent last year and was 0.4 percent in the fourth quarter, forcing an emergency one-time fee on banks to replenish the fund. The administration also is seeking to boost the FDIC’s borrowing authority from the Treasury, to $100 billion from $30 billion, which will let the agency rebuild the insurance fund at a faster pace. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ajIbdlP8FmfU

-More Millionaires Don’t Feel Wealthy, Fidelity Finds. How much money does it take to feel wealthy these days? About $1.8 million in investable assets, according to a study by Fidelity Investments released today.

The survey found that 46 percent of Americans who described themselves as millionaires don’t feel wealthy, twice as many as last year, Boston-based Fidelity said. Stock market losses were cited by 42 percent of the respondents as the main reason, according to Fidelity’s third annual “Millionaire Outlook.”

“While many millionaires recognize they are doing better than the average investor, last year’s market volatility and loss of assets have forced them to reassess what the term ‘wealthy’ really means to them,” said Gail Graham, executive vice president of Fidelity Investments in a statement. Read more here-

http://www.bloomberg.com/apps/news?pid=20601110&sid;=ac5izIBxlFrI

-Convicted conman Bernard Madoff turned his investment firm into his “personal piggy bank,” using tens of millions of dollars in client funds to cover costs for employees and family members, court papers say.

Madoff used money from his firm, Bernard L. Madoff Investment Securities LLC, to pay loans, satisfy capital calls, fund real estate purchases and hire employees for his children, wife, brother and workers, according to a filing by Irving Picard, the trustee liquidating Madoff Securities.

“He essentially used BLMIS as his “personal piggy bank,” having BLMIS pay for his lavish lifestyle and that of his family,” David Sheehan, a lawyer for Picard, wrote in a legal brief filed in U.S. Bankruptcy Court in New York. “Madoff used BLMIS to siphon funds which were, in reality, other people’s money, for his personal use and the benefit of his inner circle. Plain and simple, he stole it.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a8×0ApC7C.rE

-China military build-up seems U.S.-focused: Mullen. Read more here-http://uk.reuters.com/article/usPoliticsNews/idUKTRE54363X20090504?pageNumber=1&virtualBrandChannel;=0

-Robert Gates: bombing Iran would not stop nuclear threat. Bombing Iran would fail to stop the Islamic Republic from building nuclear weapons and could only ‘buy time’, according to Robert Gates, the US defence secretary. Read more here-http://www.telegraph.co.uk/news/worldnews/middleeast/iran/5257343/Robert-Gates-bombing-Iran-would-not-stop-nuclear-threat.html

-Poll: Most Israelis would support Iran strike. Read more here-http://www.jpost.com/servlet/Satellite?cid=1239710853310&pagename;=JPost%2FJPArticle%2FPrinter

-Iran’s Ahmadinejad in new tirade against Israel. Read more here-http://www.breitbart.com/article.php?id=CNG.9fb00f626c815dbdf828c671ccf43420.eb1&show;_article=1

RARE COLORED DIAMONDS

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.youtube.com/watch?v=BWYMJnEz-n4

and http://www.rarecoloreddiamonds.com/articles/index.html

-BTV-Business Television Features Rare Colored Diamonds. Read press release here-http://www.globenewswire.com/newsroom/news.html?d=162753

-Average diamond cutters in New York make $35,000 a year. A premier cutter can earn up to $2 million, said Jamie Neufeld, regional sales manager for Lazare Kaplan. Courierpostonline.com

-Take a look at this before and after, from rough to polished blue diamond. View here-http://ilovecolordiamonds.com/home.php

-Recessionistas Scoop Up Blue Diamonds. Typically, discretionary spending on luxury goods is the victim when there’s a downturn in the economy. But Australian miner Argyle diamonds says that its global auction of a rare collection of blue diamonds has been a sparkling success. Jewelry makers say that diamonds are becoming an investor’s new best friend in the wake of the property slump and the stock market slide.

Sydney jewelry maker Ron Crisp is setting a 3-carat diamond into a fashion ring. It’s about the size of a Smartie and it’s worth a fortune. “The finished article with a retail valuation on it would be about $78,000. It is a substantial ring,” he said. Crisp has been making jewelry for 40 years and has never witnessed so much demand for big stones. He says so-called “recessionistas” see the diamond as a good investment.

“Probably the last six months I’ve always done carat stones, carat-plus but now [people are buying] one-and-a-half carats and two carats more and now we’re getting into three carats,” he said. In recent months the value of mainstream white diamonds has fallen sharply, in line with the economic downturn. But Josephine Archer from Argyle diamonds says the fancy colored diamond market is surprisingly strong. She has just finished touring Argyle’s first blue diamond tender.

“We did undertake the tender with trepidation, and in fact we didn’t travel it as globally as we ordinarily would travel a tender,” she said. “We were delightfully surprised as we got on the road and we exhibited in Hong Kong and in Tokyo. By the time we got to Tokyo we were getting calls from [people in] India and the U.S. wanting us to travel it further. “They tend to be very sophisticated buyers that have graduated from the whites. The graduation tends to go from whites to yellows, into pinks and then ultimately into the blues.

They tend to be collectors; a lot of these stones don’t ever even get set into jewelry. They’re held as a collectable item, and we sometimes see them come back on the market a few years later and then end up in somebody else’s collections.” Argyle is keeping the sale price of its blue diamonds a secret, but in the U.K., Sotheby’s wants to sell a 7-carat blue diamond for more than $8 million. Analyst Peter Strachan says the rare colored diamonds are the uber-rich investor’s escape during the hard times.

“Collectors, people who are wanting to perhaps diversify their portfolio away from uncertain equity assets or uncertain property assets at the moment, might be looking at holding commodities or some other collectible as a store of value over the long term,” Strachan said. Argyle Diamonds says it is planning to push ahead with its pink diamond tender in September. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=26192

INFLATION IS COMING

-Warren Buffett: Inflation on the horizon. The Berkshire Hathaway chief says policymakers will have to raise money to pay off costly rescue plans one way or another. Berkshire Hathaway chief Warren Buffett defended the government’s handling of the economic crisis, but warned that the purchasing power of the dollar may fall as policymakers stretch to finance expensive rescue plans.

Reflecting on the near implosion of the financial system last fall, Buffett said officials should be judged more leniently when facing “as close to a total meltdown as you can imagine.” But he warned that efforts such as the Treasury’s $700 billion Troubled Asset Relief Program and the $787 billion fiscal stimulus plan passed this year by Congress will have to be paid for, one way or another.

And with political leaders showing little inclination to raise taxes, one sure way to pay for excess spending is to inflate the value of the currency, Buffett said. The biggest losers in a surge of inflation, he added, would include holders of bonds and other fixed-income assets. Read more here-http://money.cnn.com/2009/05/02/news/newsmakers/warren_buffett.fortune/index.htm

-China warns of worldwide devaluations and inflation. Global central banks risk inflation, currency devaluation, and a “big consolidation’ in bond markets by pumping cash into their economies, the People’s Bank of China said in its quarterly monetary policy report.

The Federal Reserve and the Bank of England this year started quantitative easing, or printing money to buy government bonds, a policy that the Bank of Japan pioneered to revive its economy at the start of the decade. “A policy mistake made by some major central bank may bring inflation risks to the whole world,” China’s central bank said in the report today. “As more and more economies are adopting unconventional monetary policies, such as quantitative easing, major currencies’ devaluation risks may rise.” Read more here-

http://www.gata.org/node/7408 or http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5286832/China-fears-bond-crisis-as-it-slams-quantitative-easing.html

FED STRESS TEST SAYS 10 BANKS NEED $75 BILLION WORTH OF NEW CAPITAL

-The Federal Reserve determined that 10 U.S. banks need to raise a total of $74.6 billion in capital, concluding its unprecedented probe of the health of the nation’s 19 largest lenders.

The results showed that losses at the banks under ‘more adverse” economic conditions than most economists anticipate could total $599.2 billion over two years. Mortgage losses present the biggest part of the risk, at $185.5 billion. Trading accounts were the second-largest vulnerability, with potential losses of $99.3 billion.

For some banks, today’s results open an exit from a tense partnership between Wall Street and the government. Others will have six months to fill their capital shortfalls and may be forced to accept expanded federal ownership that could prompt changes in their management.

“The results released today should provide considerable comfort to investors and the public,” Fed Chairman Ben S. Bernanke said in a statement. “The examiners found that nearly all the banks that were evaluated have enough Tier 1 capital to absorb the higher losses envisioned under the hypothetical adverse scenario.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=aypbiEbtoJYs&refer;=home or http://money.cnn.com/2009/05/07/news/companies/stress_test_announcement/index.htm?postversion=2009050718

-The big banks: How much each needs. Read more here-http://money.cnn.com/2009/05/07/news/economy/stress_test_table/index.htm?postversion=2009050717

THREE MORE U.S. BANKS FAIL

-Three Banks Seized by Regulators, Pushing Year’s Total to 32. Regulators seized banks in Georgia, New Jersey and Utah yesterday, boosting the tally of failed lenders in the U.S. this year to 32 and tapping more than $1.4 billion from the federal government’s deposit-insurance fund.

Silverton Bank of Atlanta, a commercial bank, was shut by the Office of the Comptroller of the Currency. Citizens Community Bank of Ridgewood, New Jersey, and America West Bank of Layton, Utah, were seized by state regulators. The Federal Deposit Insurance Corp. was named receiver for all three. Silverton was the largest failure since Downey Financial Corp. was shut in November, costing the FDIC about $1.37 billion.

The FDIC’s deposit-insurance fund, supported by fees on insured banks, fell 45 percent to $18.9 billion in the fourth quarter after 25 banks closed in 2008 amid the worst financial crisis since the Great Depression. The U.S. economy contracted at a 6.1 percent annual rate from January through March, the weakest performance since 1957-1958.

Silverton Bank, which didn’t take consumer deposits, provided services to about 1,400 banks in 44 states, the FDIC said yesterday in a statement. The Washington-based regulator set up a bridge bank to take over the operations of Silverton, which had about $4.1 billion in assets and $3.3 billion in deposits. Taking over the bank will cost the insurance fund about $1.3 billion, the FDIC said.

“Silverton had significant loan losses which had eroded its capital position,” Pamela Farwig, an associate director in the FDIC’s division of resolution and receivership, said on a conference call yesterday. “They had a large volume of problem assets centered in acquisition development and construction loans.” Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=adrpmdHyCB8s or http://money.cnn.com/2009/05/01/news/companies/bank_failure/index.htm

JOB NUMBERS

-Since the fall of 2007, the number of employees forced to work part-time due to the economic slowdown has doubled to over nine million people – that’s two million more than at any time in 54 years of collecting the data. You can see the spike in the chart above.

You can also see a close correlation between the start of a recession and a sharp shift to using part-time workers. And, conversely, that when an economy recovers, the use of part-time workers falls off quickly.

Lesson of the day? This is one of the few reliable indicators of an economic turnaround, watch it closely. Until you see a distinct reversal in the indicator, ignore the government’s happy talk of green shoots and continue to rig for stormy economic weather. Casey Charts

-Misleading Jobless Claims Data and Recessions. One of the many “green shoots” that has popped up recently for the U.S. economy is the possible peaking of weekly jobless claims, what has been increasingly referred to as a “reliable” indicator for the end of recessions since 1967 when this data was first collected. The chart below, similar to the one published by CR in this item http://www.calculatedriskblog.com/2009/04/end-of-recessions-and-unemployment.html from a couple weeks ago shows the correlation. Read more here- http://news.goldseek.com/GoldSeek/1241629200.php

-U.S. Initial Jobless Claims Fall to Three-Month Low. The number of Americans filing claims for unemployment insurance unexpectedly fell last week to the lowest level in three months, a sign the worst of the job cuts may be over.

Initial jobless claims decreased by 34,000 to 601,000 in the week ended May 2, the fewest since late January, from a revised 635,000 the prior week, the Labor Department said today in Washington. The number of people collecting benefits climbed to 6.35 million the prior week, the 14th consecutive record, showing companies are still not hiring even as staff reductions abate.

Fewer firings reduce the risk that gains in consumer spending will be cut short. Economists surveyed by Bloomberg News predict the payrolls report Friday show unemployment rose to a 25-year high in April, indicating the labor market will be one of the last areas to emerge from the worst recession in at least 50 years. Read more here-

http://www.bloomberg.com/apps/news?pid=20601087&sid;=avK63SBwQwIs&refer;=home

-ADP Estimates U.S. Companies Cut Fewer Jobs as Recession Eased. Companies in the U.S. cut fewer jobs in April, indicating the worst of the recession’s employment losses may have passed, a private report showed today.

Payrolls fell by an estimated 491,000 workers last month, less than economists forecast and the fewest since October, figures from ADP Employer Services today showed. March’s reading was revised to show a reduction of 708,000 workers, down from a previous estimate of 742,000. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=asnDB772FbzE&refer;=home

-‘Great Recession’ Will Redefine Full Employment as Jobs Vanish. Post-recession America may be saddled with high unemployment even after good times finally return. Hundreds of thousands of jobs have vanished forever in industries such as auto manufacturing and financial services. Millions of people who were fired or laid off will find it harder to get hired again and for years may have to accept lower earnings than they enjoyed before the slump.

This restructuring in what former Federal Reserve Chairman Paul Volcker calls “the Great Recession” is causing some economists to reconsider what might be the “natural” rate of unemployment: a level that neither accelerates nor decelerates inflation. This state of equilibrium is often described as “full” employment.

Fallout from the recession implies a “markedly higher” natural rate of unemployment, says Edmund Phelps, a professor at Columbia University in New York and winner of the 2006 Nobel Prize in economics. “It was 5.5 percent; maybe it will be 6.5 percent, maybe 7 percent.”

That has implications for policy makers as well as workers. The Obama administration and the Federal Reserve are counting on the jobless rate to fall to a medium-term equilibrium of about 5 percent as the economy recovers. A natural rate significantly above that would drive up the annual budget deficit which will top $1 trillion for the first time this year by reducing tax revenue and pushing up spending on unemployment benefits.

A higher rate would also require the Fed to make a choice: Accept an economy with more Americans permanently out of work, or try to boost employment at the risk of heating up inflation. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aOhkusQ9LifQ&refer;=home

U.S. DEBT WORRIES

-The nation’s debt clock is ticking faster than ever and Wall Street is getting worried. As the Obama administration racks up an unprecedented spending bill for bank bailouts, Detroit rescues, health care overhauls and stimulus plans, the bond market is starting to push up the cost of trillions of dollars in borrowing for the government. Last week, the yield on 10-year Treasury notes rose to its highest level since November, briefly touching 3.17 percent, a sign that investors are demanding larger returns on the masses of United States debt being issued to finance an economic recovery.

While that is still low by historical standards it averaged about 5.7 percent in the late 1990s, as deficits turned to surpluses under President Bill Clinton investors are starting to wonder whether the United States is headed for a new era of rising market interest rates as the government borrows, borrows and borrows some more. Already, in the first six months of this fiscal year, the federal deficit is running at $956.8 billion, or nearly one seventh of gross domestic product levels not seen since World War II, according to Wrightson ICAP, a research firm.

Debt held by the public is projected by the Congressional Budget Office to rise from 41 percent of gross domestic product in 2008 to 51 percent in 2009 and to a peak of around 54 percent in 2011 before declining again in the following years. For all of 2009, the administration probably needs to borrow about $2 trillion. The rising tab has prompted warnings from the Treasury that the Congressionally mandated debt ceiling of $12.1 trillion will most likely be breached in the second half of this year.

Last week, the Treasury Borrowing Advisory Committee, a group of industry officials that advises the Treasury on its financing needs, warned about the consequences of higher deficits at a time when tax revenues were “collapsing” by 14 percent in the first half of the fiscal year. “Given the outlook for the economy, the cost of restoring a smoothly functioning financial system and the pending entitlement obligations to retiring baby boomers,” a report from the committee said, “the fiscal outlook is one of rapidly increasing debt in the years ahead.” While the real long-term interest rate will not rise immediately, the committee concluded, “such a fiscal path could force real rates notably higher at some point in the future.” Read more here-http://www.nytimes.com/2009/05/04/business/economy/04debt.html

INTEREST RATES

-Carney Says Key Canada Rate May Stay at 0.25% Until June 2010. Bank of Canada Governor Mark Carney reiterated he plans to keep the central bank’s main interest rate at a record low until the end of June 2010, and doesn’t anticipate moving to so-called quantitative and credit easing to give the economy another boost.

The bank’s interest rate reductions, “together with the conditional commitment to keep rates low for a considerable period, is the appropriate policy stance to move the economy back to full production capacity and to achieve the 2 percent inflation target,” Carney, 44, said in an opening statement to the Senate Banking Committee in Ottawa today. His comments echo ones he has made since cutting his key rate to 0.25 percent on April 21. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=a0CjRuRPm5NA&refer;=canada

-The European Central Bank cut its key interest rate to a new record low of 1 percent today, and may offer banks longer-term loans to stem the region’s worst recession since World War II. ECB officials meeting in Frankfurt lowered the benchmark rate by a quarter point, as predicted by all 53 economists in a Bloomberg News survey. Separately, the Bank of England left its key rate at 0.5 percent and increased its asset-purchase program. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aS6MaLZUVu_8 or

http://money.cnn.com/2009/05/07/news/international/ECB.reut/index.htm

-BOE Increases Bond Purchase Plan, Rate Stays at 0.5%. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a0BFAZFLw9ro or

http://money.cnn.com/2009/05/07/news/international/BoE.reut/index.htm

BILL GROSS COMMENTARY

-Gross: Growth Will Slow, Financials Will Get Hit. Bill Gross, manager of Pimco Total Return, the world’s biggest bond fund, says investors better get used to the idea of government involvement in the economy. This year represents a “demarcation point because it represents the beginning of government policy counterpunching,” Gross writes in his monthly commentary.

“A period when the public with government as its proxy decided that private market, laissez-faire, free-market capitalism was history and that a ‘private/public’ partnership yet to gestate and evolve would be the model for years to come.” How should investors cope with this new environment? They “should recognize that this grassroots trend signals an increasing uncertainty of cash flows from financial assets,” Gross says. “Not only will redistribution and reregulation lead to slower economic growth, but the financial flows from it will be” reduced for stakeholders, he explains.

“In turn, the present value of those flows should reflect an increasing risk premium and a diminishing multiple of annual receipts.” Translation: prices of financial assets will fall. As for the economy, Gross predicts “a slower rate of economic growth, not just in the U.S., but worldwide as heretofore libertarian capitalism is bridled, saddled and taught to trot instead of gallop over the investment plains.” Read more here-http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/IO+May+09+Gross+2+2+4.htm or http://moneynews.newsmax.com/financenews/bill_gross_financials/2009/05/05/210830.html

BEAR MARKET RALLY

-Many investors are looking to the early 1930s for some insight into the current economic-stock market environment. While there are significant differences (global economy, credit default swaps, TARP, FDIC, etc.) between the current environment and that what occurred in the early 1930s, there are also many similarities (bank failures, bankruptcies, severe market declines, etc.).

After all, history may not repeat but it often does rhyme. For some perspective on the current stock market rally that began on March 9th, today’s chart illustrates the duration (calendar days) and magnitude (percent gain) of all significant Dow rallies that occurred during the 1929-1932 bear market (solid blue dots).

For example, the bear market rally that began in October 1931 lasted 35 calendar days and resulted in a gain of 35%. As today’s chart illustrates, the current Dow rally (hollow blue dot labelled you are here) is slightly below average in both duration and magnitude relative to the average 1929-1932 bear market rally (hollow red dot). Chartoftheday.com

REAL ESTATE-MORTGAGES-FORECLOSURES

-Almost One-Quarter of U.S. Homeowners Underwater as Values Sink. A growing number of U.S. homeowners owe more than their properties are worth after prices extended their two-year decline in the first quarter, Zillow.com said.

Almost 21.8 percent of all owners were underwater as of March 31, the Seattle-based real estate data service said in a report today. At the end of the fourth quarter, 17.6 percent of homeowners owed more than their original mortgage, while 14.3 percent had negative equity three months earlier.

Property values dropped 14 percent from a year earlier in the first quarter, reducing the median value of all U.S. single- family homes, condominiums and cooperatives to $182,378, Zillow said. The gain in underwater homeowners will lead to more bank repossessions, the company said.

Many owners “would be more willing to bear the financial consequences of bankruptcy or foreclosure,” Stan Humphries, Zillow’s vice president of data and analytics, said in an interview. “You are going to continue to see home prices fall for the rest of this year and some portion of next year.”

The recession cut home values by $2.4 trillion last year, First American CoreLogic said in a March 4 report. More than 8.3 million U.S. mortgage holders owed more than their properties were worth and an additional 2.2 million borrowers will be underwater if prices decline another 5 percent, the Santa Ana, California-based seller of mortgage and economic data, said in the report. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=alObJoQNAz.E&refer;=home

-Manhattan Financial District Apartments Get Deepest Price Cuts. Real-estate broker Ronnie Diamonde expected the three-bedroom apartment in New York’s Financial District, listed in August for $1.64 million and seen by 145 potential buyers, to sell in eight weeks.

The condominium in the triangular-shaped Cocoa Exchange building was reduced twice by a total 21 percent over four months to $1.3 million, according to Streeteasy.com, a service that tracks New York real estate prices. A buyer will probably sign a contract this week for even less, said Diamonde, of the Corcoran Group, who has three other listings in the building.

The Financial District suffered the deepest price cuts in Manhattan in the first quarter as securities firms shed more than 180,000 jobs in the Americas. Manhattan apartment sales fell 48 percent from a year earlier, real-estate appraiser Miller Samuel Inc. said. Sellers lowered prices on almost a third of condo or co-op listings by an average of 11 percent in the Financial District, according to Streeteasy.

Downtown has been “disproportionately impacted by the layoffs and contraction of the financial-services sector,” said Jonathan Miller, president of New York-based Miller Samuel. In TriBeCa, the site of converted warehouses and the TriBeCa Film Festival, 24 percent of advertised apartments were discounted by an average of 11 percent, Streeteasy said. The deepest cut in the area is at 39 Worth St., which is listed at $5.99 million, a 40 percent discount, Streeteasy said. Read more here-

http://bloomberg.com/apps/news?pid=20603037&sid;=aZ2FN2jxOwHQ&refer;=home

-U.S. Home Prices May Be Lost for a Generation. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&sid;=aiiT.sNeq2YQ&refer;=home

-Home Prices: More Downside to Come. Read more here-http://www.321gold.com/editorials/cooke_r/cooke_r050609.html

-Troubled housing market brings wrecking ball down on partially completed SoCal homes. Read more here-http://finance.yahoo.com/news/Partially-completed-SoCal-apf-15147127.html/print

-Commercial Mortgage Delinquencies in U.S. Rise to 11-Year High. Commercial mortgage delinquencies in the U.S. climbed to the highest level in at least 11 years in April as scarce credit made it difficult for landlords to refinance loans, according to property research firm Trepp LLC. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aES8UegfUvkU&refer;=home

-The number of default notices sent to California homeowners reached an all-time record during the first three months of this year. It’s another sign that the mortgage crisis isn’t slowing down any time soon. Read more and view video here-http://abclocal.go.com/kabc/story?section=news/business&id;=6776144 or http://online.wsj.com/video/bank-decides-to-demolish-new-homes/509981D0-7AAF-4A29-AE46-A490D7FE2A93.html

-Rich Americans Default on Luxury Homes Like Subprime Victims. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a5750zUcnEEs&refer;=home

-Foreclosures for Failure to Pay Condo Dues on Rise, Experts Say. Read more here-http://www.kitsapsun.com/news/2009/may/04/foreclosures-for-failure-to-pay-condo-dues-on/

-Foreclosure Trouble Spreads to Those Who Bet the Farm. Read more here-http://online.wsj.com/article/SB124148662805485947.html

The Goldbugg Report – May 11, 2009
Posted by Worldwide Precious Metals on Monday, May 11, 2009

The Goldbugg Report – May 05, 2009

May 5, 2009

WORLD FINANCIAL REPORT ON RADIO MAY 1 2009 SHOW

DEFINITIONS-QUOTES-QUICK HITS

-Swine influenza (also swine flu) refers to influenza caused by any strain of the influenza virus endemic in pigs (swine). Strains endemic in swine are called swine influenza virus (SIV). Swine flu is common in swine and rare in humans. People who work with swine, especially people with intense exposures, are at risk of catching swine influenza if the swine carry a strain able to infect humans.

However, these strains rarely are able to pass from human to human. Rarely, SIV mutates into a form able to pass easily from human to human. The strain responsible for the 2009 swine flu outbreak in humans (a strain of influenza A virus subtype H1N1) is believed to have undergone such a mutation. Read more here-

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

-The 2009 swine flu outbreak is an epidemic that began in April 2009 with a new strain of H1N1 swine influenza virus. It is also referred to as Mexican flu, swine-origin influenza, or 2009 H1N1 flu. The outbreak is believed to have started in March 2009 and was classified as meeting the criteria for the World Health Organization pandemic Phase 5 status on 29 April.

Local outbreaks of an influenza-like illness were first detected in three areas of Mexico, but the virus responsible was not clinically identified as a new strain until April 24, 2009. Its presence was soon confirmed in various Mexican states and Mexico City. Within days isolated cases (and suspected cases) began to appear elsewhere in Mexico, the U.S., and several other Northern Hemisphere countries. Read more here-http://en.wikipedia.org/wiki/2009_swine_flu_outbreak

-Centers for Disease Control and Prevention swine flu info website-http://www.cdc.gov/swineflu/

-Public Health Agency of Canada swine flu info website-http://www.phac-aspc.gc.ca/alert-alerte/swine_200904-eng.php

-World Health Organization swine flu info website-http://www.who.int/csr/disease/swineflu/en/index.html

-Swine Flu Case in Spain May Point to Global Pandemic, WHO Says. A swine-flu patient in Spain who hadn’t traveled to Mexico may signal a new front of the outbreak, potentially heralding the first influenza pandemic in 41 years.

The World Health Organization raised its six-tier alert to 5, the second-highest, and said a pandemic declaration may come soon. It urged countries to make final preparations to deal with a virus that may sweep across the globe. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aIHcy7rxdvpI&refer;=home

-Estimates of economic costs of a flu pandemic. If the outbreak of swine flu in Mexico becomes a pandemic, the economic consequences could be great. The World Bank estimated in 2008 that a flu pandemic could cost $3 trillion (£2 trillion) and result in a nearly 5pc drop in world gross domestic product. The World Bank has estimated that more than 70m people could die worldwide in a severe pandemic. Read more here-http://www.telegraph.co.uk/health/healthnews/5228878/Estimates-of-economic-costs-of-a-flu-pandemic.html

-If you spent $1 million a day since the day Jesus Christ was born, you still wouldn’t have spent a trillion dollars. Senator Mitch McConnell

-Most people still do not understand that the current crisis is not about saving capitalism; it’s about saving the welfare state-crony capitalist-fascist political economy in the US that can no longer pay its bills. Bill King-the King Report

-”Make no mistake. We are selling off our future and the future of our children to prevent the bondholders of US financial corporations from taking losses. We are using public funds to protect bondholders of some of the most mismanaged companies in the history of capitalism, instead of allowing them to take losses that should have been their own.” John Hussman

-“The value of gold, as the only true ‘hard currency,’ is coming to the fore, as evidenced by the investment choices of some of the world’s most seasoned investors.” AngloGold Ashanti Ltd. chief executive officer Mark Cutifani

-So where to from here for gold and silver? The set-up in silver hasn’t been this good since it was priced around $8.70 back in October. Gold is still the question mark. The 200-day moving average was never broken to the down-side since gold got killed on its last attempt to break through, and stay above, the $1,000 mark on February 22nd. True, the ’sell in May and go away’ scenario is almost upon us but will it apply this year? Don’t know, but I haven’t taken my money off the table especially in silver. I’ve got the time, so I’m just going to wait these bastards out. Ed Steer

-John Reade of UBS in London pointed out that “considering Mexico’s position as the second-largest producer of silver, supplies could be interrupted if the swine virus continues to spread.” Casey Daily Resource

-The official Xinhua News Agency reported that, according to the head of the State Administration of Foreign Exchange, China has increased its gold reserves by 76% over the six-year period, to 1,054 metric tons (nearly 34 million ounces), mainly through domestic buying and scrap refining.

That makes a great deal of sense in light of China’s repeated assertions that it needs to diversify its nearly $2 trillion stockpile of foreign exchange reserves. Bullion buying clearly reflects efforts in that direction.

“This news is highly significant for the gold market,” wrote John Reade, UBS AG’s head metals strategist in London. “It will raise expectations of further Chinese purchases. It may also trigger purchases from other central banks.” Casey Daily Resource

-While none of the precious metals are truly precious (in terms of supply availability), gold is indeed precious in terms of real money. All I heard in 2008 was how poorly it was performing given what was happening worldwide. Yet it was up 4% for the year. How many people wish their investments were up 4% in 2008 versus what they lost? Now in 2009, the peanut gallery and members of the “Don’t Worry, Be Happy” crowd (and a shill or two who work for gold-oriented companies but are really bears on gold) say with the worst behind us, gold should become a relic once again.

I won’t argue it’s not possible to see $700 again but with upside of two to three times versus downside, I’m not going to try and trade any decline knowing in my heart what’s coming down the pike. I also laugh at the seemingly tireless talk of the IMF selling its gold. During the most recent chatter about it, reports circulated that said China and India were urging the IMF to finally pull the trigger.

Isn’t it interesting that we just learned that China has been purchasing gold consistently yet they want someone to sell it? Why? So they can lose money on their recent purchases? No, because they want to own more and be glad not to have to pay greatly up for it. Please IMF, sell! Before long it will be one less false stick the gold bears can wave at the market. Peter Grandich-Read more here-http://news.goldseek.com/Grandich/1241036623.php

-How anyone can reasonably think the U.S. Dollar can be higher in the coming years is beyond me. U.S debt is out of control and key holders of it will grow more disenchanted with taking on more without a much higher interest rate to make up for a near certain loss on the currency. My favorite currency is the Canadian dollar. Peter Grandich

-Gerald Celente Predicts Economic Armageddon by 2012. Watch more here-http://www.youtube.com/watch?v=Q2qDW34Fr64 and http://geraldcelentechannel.blogspot.com/

-Martin Armstrong says Major Turn at Hand, batten down the hatches. Read more here-http://jsmineset.com/2009/04/27/martin-armstrong-says-major-turn-at-hand-batten-down-the-hatches-or/ or http://www.moneytalks.net/index.php?option=com_content&view;=article&id;=1204:major-turn-at-hand-will-it-be-batten-down-the-hatches-or

-Ambrose Evans-Pritchard: Capital well is running dry. The world is running out of capital. We cannot take it for granted that the global bond markets will prove deep enough to fund the $6 trillion or so needed for the Obama fiscal package, US-European bank bailouts, and ballooning deficits almost everywhere. Read more here-

http://www.gata.org/node/7387

-Howard Ruff interviews John Williams of Shadow Stats. Williams says we are headed into a hyper-inflationary depression that will become a Great Depression. When hyper inflation hits, it will disrupt the normal flow of commerce and turn it into a Great Depression. Read more here-http://www.321gold.com/editorials/ruff/ruff042709.html

-The U.K.’s recession will last through the end of next year as house prices drop in an economic slump increasingly resembling that of the 1930s, former Treasury adviser Roger Bootle said. Gross domestic product will drop 1 percent in 2010 after shrinking 4 percent this year, Bootle, an economic adviser at Deloitte & Touche LLP, predicted today. U.K. house prices dropped for a 19th month in April, Hometrack Ltd. said in a separate report.

“It’s looking more and more like the 1930s all over again,” Bootle said in an interview on Bloomberg Television. When asked if the U.K. will sink into a depression, he said, “it’s in danger of being that, yes.” Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=as70JW7BS51o&refer;=home

-Economy in U.S. Shrank at 6.1% Rate in First Quarter. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aHyjnZCJkYIU&refer;=home or http://www.bloomberg.com/apps/news?pid=20601110&sid;=aeLS30YslYd8

-U.S. March Consumer Spending Fell More Than Forecast. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a_oglDHVKGyI&refer;=home

-U.S. Economy: Confidence Index Rises Most Since 2005. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=a.JioUJOTODc&refer;=economy

-Treasury needs record $361B April-June borrowing. The Treasury Department said Monday it will need to borrow $361 billion in the current April-June quarter, a record amount for that period. It’s the third straight quarter the government’s borrowing needs have set records for those periods.

Treasury also estimated it will need to borrow $515 billion in the July-September quarter, down slightly from the $530 billion borrowed during the year-ago period. The all-time high of $569 billion was set in the October-December period. The huge borrowing needs reflect the soaring costs of the $700 billion financial rescue program and the recession, which is nearing a record as the longest in the post World War II period. Read more here-http://news.yahoo.com/s/ap/20090427/ap_on_bi_go_ec_fi/us_treasury_borrowing

-Where did all the bailout money go? The government has pledged $11.3 trillion for economic rescue and has spent one-quarter of that. On what? Read more here-

http://www.csmonitor.com/2009/0429/p19s01-usgn.html?page=1

-U.K. government support for the banking system has risen to 1.4 trillion pounds ($2 trillion) and may climb higher as the financial crisis spreads to building societies and economists warn lenders may need more aid. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a0_DlDun684Q&refer;=news

-Question about Goldman Sachs role in the stock market. Something smells fishy in the market. And the aroma seems to be coming from Goldman Sachs. As you probably already know, stock prices have been roaring for seven weeks. This has created a historic rally despite the fact that the economy continues to be in serious trouble, banks are still wheezing under the heavy load of bad assets, workers are being laid off each month by the hundreds of thousands and nobody seems to have answers to our problems. Read more here-

http://www.nypost.com/seven/04282009/business/questions_about_goldman_sachs_role_in_ma_166505.htm

-Bill Fleckenstein says thank Uncle Sam for the stock rally. Cranking up the money-printing machines is like pouring gas on a smoldering fire. While the short-term response is predictable, the long-term effect is far from certain. Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/thank-uncle-sam-for-the-rally.aspx?page=all

-Car Dealers’ Next Headache: Inventory Loans. For Chrysler LLC and General Motors Corp. dealerships, slow sales are just part of their worries. Now they’re bracing for possible auto-maker bankruptcy filings that could trigger repayment of their inventory loans.

The two auto makers have about 10,000 dealers in the U.S., with the bulk of them carrying considerable debt, mainly from the money they borrow to buy cars that sit on their lots. If Chrysler or GM were to file for bankruptcy protection, the banks extending that credit could immediately begin calling dealer loans, demanding a good portion of the money back and refusing to extend any more inventory financing.

U.S. taxpayers, meanwhile, could be called to the rescue. At issue are loans for inventory, known as “wholesale” loans or “floorplan” financing, that are primarily given by GMAC LLC and Chrysler Financial to dealers so they can buy vehicles to stock their showrooms. These loans are typically backed by the vehicles that are being financed by the dealer and paid back when the vehicles are sold. Read more here-http://online.wsj.com/article/SB124078863198457471.html#printMode

-Auditors: Nearly 25% of Companies May Not Be Going Concerns. A research firm predicts 3,589 companies will report that their auditors doubt they will continue as going concerns. Read more here-http://www.cfo.com/article.cfm/13525910

-Italy Seizes Millions in Assets From Four Banks. With municipal bond investigations spreading to Europe from the United States, Italian authorities have seized about $300 million in assets of four global banks JPMorgan Chase, Deutsche Bank, UBS and Depfa whose officials have been accused of fraud.

The Guardia di Finanza in Milan, the financial police of Italy, took over real estate properties, bank accounts and stock holdings on Monday to assure it could collect from the banks if their officials were found guilty and the banks were held responsible. Read more here-http://www.nytimes.com/2009/04/28/business/global/28muni.html

-Italy’s Mafia thrives in global financial meltdown. Read more here-http://www.breitbart.com/article.php?id=D97PHLVO0&show;_article=1

-How Bernie did it. Madoff is behind bars and isn’t talking. But a Fortune investigation uncovers secrets of his massive swindle. Read more here-

http://money.cnn.com/2009/04/24/news/newsmakers/madoff.fortune/index.htm

-Petraeus: Afghanistan could be harder than Iraq. Read more here-http://www.cnn.com/2009/POLITICS/04/24/petraeus/index.html

-NKorea threatens nuclear, missile tests. Read more here-http://www.breitbart.com/article.php?id=D97S4DRG0&show;_article=1

-Jordan sees new war if US does not act quickly. Jordan’s king urged President Barack Obama Sunday to take a more forceful role in the peace process between Israelis and Palestinians, warning of a new Mideast war if there is no significant progress in the next 18 months.

Speaking to NBC’s “Meet the Press,” King Abdullah described the Israeli-Palestinian dispute as the core problem of the region and solving it would help the U.S. in dealing with Iran and combating the appeal of radical Islamic groups like Al-Qaida.

“In the next 18 months, if we don’t move the process forward, and bring people to the negotiation table, there will be another conflict between Israel and another protagonist,” he said in the interview recorded in Washington on Friday. Read more here-http://news.yahoo.com/s/ap/20090426/ap_on_re_mi_ea/ml_jordan_king_1

-Is Iraq sliding back into chaos? Read more here-http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/middle_east/8018866.stm?ad=1

-TIME ‘100 most influential people list. Read more here-http://www.time.com/time/specials/packages/completelist/0,29569,1894410,00.html

WWW.RARECOLOREDDIAMONDS.COM

-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.youtube.com/watch?v=BWYMJnEz-n4

and http://www.rarecoloreddiamonds.com/articles/index.html

-BTV-Business Television Features Rare Colored Diamonds. Read press release here-http://www.globenewswire.com/newsroom/news.html?d=162753

-”Colored diamonds have held their value and not suffered from the current economical crisis as other traditional assets have.” Mahyar Makhzani-Rapaport February 18 2009

-Rare blue diamond goes on display. A rare blue diamond which could set a world record price per carat when it is sold in May has gone on show in London. Smaller than a penny piece, it is worth between $5.8m (£3.9m) and $8.5m (£5.7m) according to estimates by its sellers.

It weighs 7.03 carats and is one of only a handful of blue diamonds in existence in the world. The diamond was found in South Africa last year and is on show at Sotheby’s, in Mayfair, until Tuesday. It will be auctioned in Geneva on 12 May. The gem, which was cut from a 26.58 carat rough diamond, was discovered in 2008 at the Cullinan mine. Read and watch more here-

http://news.bbc.co.uk/2/hi/uk_news/8019249.stm or http://files.shareholder.com/downloads/BID/621714246×0x287752/3f6b2a4c-2955-4ad7-8594-b335242168ab/287752.pdf or http://www.bloomberg.com/apps/news?pid=20601088&sid;=a4rPTX2.qZo8&refer;=muse

-French Blue diamond is explored in Gems & Gemology’s spring issue. For the Spring 2009 issue of its Gems & Gemology publication, the Gemological Institute of America (GIA) has given a concentrated and in-depth editorial on the French Blue diamond, a rare piece which disappeared in 1792 during the French Revolution.

It has long been believed that the 45.5 ct Hope diamond was cut from the 69 ct French Blue. A lead cast of the fabled French Blue recently discovered at the Muséum National d’Histoire Naturelle (MNHN) in Paris appears to validate this theory. In “The French Blue and the Hope,” Dr. François Farges of MNHN and coauthors used the cast to create a computer model that sheds new light on the Hope-French Blue connection.

“This article reconstructs the history of the French Blue and offers implications for its fate,” says G&G; Editor-in-Chief Alice Keller. “It’s a significant breakthrough in our understanding of this mythic diamond and the famous stone cut from it,” she added. Read more here-http://diamondworld.net/contentview.aspx?item=3749

-Rio Tinto’s Blue Diamond Tender Ends, “Exceeds Expectations.” Rio Tinto’s tender of rare blue and violet diamonds ended recently, realizing record prices according to the company, which did not disclose any specific figures. The diamonds, dubbed the ‘Once in a Blue Moon “collection, included a range of diamonds, divided into16 lots weighing 287 carats in total. Sourced from several years of production at the Argyle diamond mine in Western Australia, the company said the tender prices “far exceeded the company’s expectations.”

But while the company is sheepish on the sale prices, not disclosing the total prices or even if all the diamonds were sold, according to Jean-Marc Lieberherr, Rio Tinto’s general manager of diamond sales and marketing, “it was a bold move, with numerous lots selling in excess of the reserve prices, which is a great sign in the lead up to our annual pink diamond tender.” A request for more details about the tender was not answered at publication time.

“We have been overwhelmed by the enthusiasm from new and existing colored diamond collectors around the globe,” said Josephine Archer, sales and marketing manager for Argyle Pink Diamonds. The collection was showcased in Tokyo, Hong King and Perth with bids closing on April 8. It included single cuts, a number of matching pairs and a selection of smaller diamonds. In terms of quality, Rio Tinto defined the diamonds as “premium” and commercial diamonds.

The Argyle diamond mine is known for its colored diamonds. While most are brownish in color, the mine also produces rare pink, red, violet and gray stones. Rio Tinto usually polishes these diamonds in-house and tenders them to traders and collectors. Story here-http://www.idexonline.com/portal_FullNews.asp?id=32274\

-Christie’s Dubai Jewels Sale Tops $4M, Sees Dubai Wealthy Shrug off Econ Woe. Read more here-http://online.wsj.com/article/BT-CO-20090429-702639.html or http://www.diamonds.net/news/NewsItem.aspx?ArticleID=26155

-Christie’s Dubai Jewels auction results here-

http://www.christies.com/LotFinder/searchresults.aspx?intSaleID=22320#&intSaleID;=22320&sid;=3c9f4168-2941-478e-ad4c-7d1f934a1bf3&selectedids;=2241&pg;=2 and http://www.christies.com/LotFinder/searchresults.aspx?intSaleID=22320#action=refine&intSaleID;=22320&sid;=3c9f4168-2941-478e-ad4c-7d1f934a1bf3&selectedids;=2241

A COLOURED DIAMOND RING, BY CALLEIJA-The pear-shaped Fancy Light Purplish Pink diamond weighing 1.52 carats to the oval-shaped pink diamond shoulders, ring size 7, in Callleija dark blue case Signed Calleija and with maker’s mark for John Calleija. Price Realized $30,000-More here-http://www.christies.com/LotFinder/lot_details.aspx?from=salesummary&intObjectID;=5192627&sid;=76d98328-b1e7-43f9-85dd-0b6ac2ed6c98

A COLOURED DIAMOND AND DIAMOND RING-The oval-shaped Fancy Vivid Purplish Pink diamond weighing 1.53 carats to the marquise-cut diamond double tiered surround and plain hoop, ring size 6½. Price Realized $182,500-More here-

http://www.christies.com/LotFinder/lot_details.aspx?from=salesummary&intObjectID;=5192628&sid;=76d98328-b1e7-43f9-85dd-0b6ac2ed6c98

A DIAMOND AND COLOURED DIAMOND PENDANT-The modified kite-shaped diamond weighing 5.01 carats suspended from a brilliant-cut diamond spacer to the brilliant-cut Fancy Light Bluish Green diamond within a pavé-set diamond halo with spectacle-set diamond chain, 48.0 cm long, may also be fastened at 43.0 cm. Price Realized $194,500-More here-

http://www.christies.com/LotFinder/lot_details.aspx?from=salesummary&intObjectID;=5192624&sid;=3c9f4168-2941-478e-ad4c-7d1f934a1bf3

-Diamonds Hold Steady at Sotheby’s New York Auction. Read more here-http://www.diamonds.net/news/NewsItem.aspx?ArticleID=26095

-Sothebys Magnificent Jewels auction results here-http://www.sothebys.com/app/live/lot/LotResultsDetailList.jsp?event_id=29345&sale;_number=N08540

LOT 96-FANCY INTENSE YELLOW DIAMOND RING, CARTIER-The oval modified brilliant-cut diamond of fancy intense yellow color weighing 3.08 carats, flanked by 2 half-moon-shaped diamonds, mounted in platinum and 18 karat gold, size 5¾, signed Cartier. 45,000-55,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 56,250 US-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=96

LOT 124-PAIR OF YELLOW DIAMOND PENDANT-EARRINGS-Composed of 2 pear-shaped diamonds of fancy intense yellow color weighing 3.83 and 3.11 carats, 2 marquise-shaped diamonds of yellow hue together weighing 1.32 carats, and 2 pear-shaped diamonds of fancy intense yellow color weighing 1.40 and 1.11 carats, framed by small round diamonds, mounted in platinum and 18 karat gold. 125,000-75,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 134,500 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=124

LOT 126-FANCY INTENSE YELLOW DIAMOND RING-The oval diamond of fancy intense yellow color weighing 4.00 carats, flanked by 2 oval diamonds weighing 1.91 carats, mounted in platinum and 18 karat gold, size 7½, numbered 33952. 50,000-60,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 62,500 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=126

LOT 138-PAIR OF YELLOW DIAMOND EARRINGS-Set with 2 cushion-shaped diamonds of yellow color weighing 3.29 and 2.97 carats, framed by numerous round diamonds, mounted in platinum and 18 karat gold. 20,000-30,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 23,750 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=138

LOT 139-YELLOW AND WHITE DIAMOND NECKLACE-Designed as a flexible stylized graduated fringe set with numerous fancy-shaped diamonds of yellow color weighing approximately 17.60 carats, accented by numerous round diamonds weighing approximately 5.25 carats, mounted in 18 karat white gold, length 16 inches. 10,000-15,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 15,000 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=139

LOT 141-FANCY INTENSE YELLOW DIAMOND RING-The cushion modified brilliant-cut diamond of fancy intense yellow color weighing 3.07 carats, framed by numerous small round diamonds weighing approximately .55 carat, mounted in 18 karat white gold, size 6½. 40,000-50,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 41,250 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=141

LOT 270-DIAMOND RING-The oval diamond weighing 3.00 carats, framed by numerous round pink diamonds weighing approximately 1.30 carats, mounted in 18 karat rose gold, size 6¾. 50,000-60,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 68,500 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=270

LOT 273-FANCY INTENSE PINK DIAMOND RING-The pear-shaped diamond of fancy intense pink color weighing 1.52 carats, flanked by 8 round diamonds, mounted in platinum, size 6. 50,000-70,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 71,500 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=273

LOT 300-FANCY ORANGE-BROWN DIAMOND RING-The emerald-cut diamond of fancy orange-brown color weighing 8.69 carats, flanked by 2 baguette and 2 triangular-shaped diamonds weighing approximately 1.60 carats, mounted in platinum, size 7¼. 80,000-100,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 86,500 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=300

LOT 359-FANCY DEEP BROWNISH ORANGY YELLOW DIAMOND RING-The pear-shaped diamond of fancy deep brownish orangy yellow color weighing 17.33 carats, mounted in 18 karat gold, size 6¾. 90,000-120,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 170,500 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=359

LOT 361-FANCY INTENSE YELLOW DIAMOND RING-The cut-cornered rectangular modified brilliant-cut diamond of fancy intense yellow color weighing 12.17 carats, flanked by 2 triangular-shaped diamonds weighing approximately 1.55 carats, mounted in 18 karat gold and platinum, size 6½. 120,000-160,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 158,500 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=361

LOT 362-FANCY DEEP BROWNISH YELLOWISH ORANGE DIAMOND RING-The pear-shaped diamond of fancy deep brownish yellowish orange color weighing 6.41 carats, flanked by 2 tapered baguette diamonds, mounted in platinum and gold, size 6¼. 30,000-40,000 USD-Lot Sold. Hammer Price with Buyer’s Premium: 46,875 USD-More here-http://www.sothebys.com/app/live/lot/LotDetail.jsp?sale_number=N08540&live;_lot_id=362

GOLD

-China Increases Gold Reserves 76% to Fifth-Largest. China boosted its gold reserves by 76 percent since 2003 and has the world’s fifth-biggest holding by country, said Hu Xiaolian, head of the State Administration of Foreign Exchange.

The nation increased its reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu said in an interview with the Xinhua News Agency today. The amount is more than Switzerland’s 1,040 tons, World Gold Council data show, and is worth $31 billion at current prices.

China has the world’s largest foreign exchange reserves at $1.95 trillion as of March 31, according to state administration data. The holdings have climbed about sixfold in the past six years as the country had record trade surpluses and inflows of foreign investment. Gold prices have almost tripled to more than $900 an ounce from $337.

“Chinese foreign-exchange reserves have absolutely exploded in the past few years,” said Jan Lambregts, head of Asia research at Rabobank International in Hong Kong. “We shouldn’t be surprised that they’re adding a lot of all asset classes. I don’t think they’re shifting away from U.S. dollars into gold.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601080&sid;=aoLApmbjN47k&refer;=asia or http://www.gata.org/node/7380

-CPM stresses significance of Chinese gold holding clarification. The recent announcement that China has increased its monetary reserves of gold by 14.6 million ounces (454 tonnes) is perhaps more significant in the process than in the amount reckons CPM. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=82492&sn;=Detail

-Is it China that’s giving gold strength or is it on the way up anyway? While both Chinese gold reserve purchases and swine ‘flu are both said to have had an impact on the gold price we would argue that longer term trends are more significant. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=82481&sn;=Detail

-Chinese Purchase Could Lead to Structural Shift in Gold Holdings, Says WGC. Read more here-http://finance.yahoo.com/news/Chinese-Purchase-Could-Lead-bw-15027196.html?.v=1

-J.S. Kim: Central banks are full of disinformation on gold. Read more here-http://www.gata.org/node/7392

-Michael Kosares: China turns IMF gold sales into a wet noodle. Read more here-http://www.gata.org/node/7383

-Judy Shelton: The IMF’s gold gambit. Read more here-http://www.gata.org/node/7388

-Third gold sales pact to plant flag of support. Read more here-http://uk.news.yahoo.com/22/20090430/tbs-uk-precious-gold-sales-analysis-sb-e5e6c38.html

-I have just completed an analysis of the performance of the spot price of gold vs. Berkshire Hathaway. I think you will find the results are a little surprising. Interestingly, Buffet himself emphasized the non-productive aspects of gold in a speech at Harvard in 1998: “It gets dug out of the ground in Africa or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility.” Perhaps its utility is in balancing a portfolio Warren? Gold.ie

-James Turk on Gold’s Strong Technical Position. Read more here-http://goldmoney.com/en/commentary/2009-04-26.html

-Precious coin distributor claims record Krugerrand sales. A South African precious coin distributor, the South African Gold Coin Exchange, reported on Friday that sales of Krugerrands were “at an all-time high”. Executive chairperson Alan Demby said that domestic demand appeared to be underpinned by prevailing concern about the safety of banks.

Investors were also resorting to physical-gold purchasing as a way to protect their assets, as well as to stave off the threat of a possible surge in inflationary pressures as trillions of dollars were pumped into the global economy in a bid to deal with a global recession.

A recent World Gold Council report found that retail demand for gold bullion in the fourth quarter of 2008, was almost five times what it was in the same period of 2007. Demby noted that a Krugerrand bought for £200 or so in 2005 was now worth more than £700. Read more here-http://www.miningweekly.com/article/precious-coin-distributor-claims-record-krugerrand-sales-2009-04-24

-Clive Maund gold market update-http://news.goldseek.com/CliveMaund/1240768646.php

-Gold one of best asset plays, but copper due for pullback and don’t count on China! Bullish on gold, platinum, palladium and natural gas, but far from bullish on the recovery, which he sees happening later than expected. Interview with John Licata from The Gold Report. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page31?oid=82458&sn;=Detail

-Gold prices to stay high, but investors to shift to equities, industrial commodities. Scotiabank’s Patricia Mohr advises that copper prices have surged to genuinely profitable levels, although zinc and nickel prices still remain below average break-even costs. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=82565&sn;=Detail

-Worst recession in living memory, but metals already eyeing the sunny uplands. Stay with precious metals, urges RBS, but ensure also that you have industrial metal exposure. April heading to be the best month for prices in 40 years. Zinc is expected to slip into deficit next year and copper in 2011, but aluminum is carrying heavy inventories that may yet increase further. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=82561&sn;=Detail

-World gold output will continue to fall Barrick CEO. Global gold production from mines will continue to decline, as the gold industry battles maturing mines, a scarcity of new discoveries and longer permitting and construction times for new projects, the CEO of the world’s biggest gold miner said on Wednesday.

“The gold industry needs to replace almost 100-million ounces of reserves per year, and clearly this has not been happening,” Barrick Gold chief Aaron Regent said at the company’s annual shareholders meeting in Toronto. Gold mine supply has been on a downward trend since 2001, despite a more than tripling of the gold price, and this trend is likely to continue, he said.

New projects can take as long as seven to ten years to bring online, compared with just three to five years in the past, Regent said. Several gold projects around the world have also been put on ice because of ballooning capital costs and difficulties raising finance. Global gold mine production contracted almost 3% last year, to its lowest level in 12 years, according to consultancy GFMS. Read more here-http://www.miningweekly.com/article/world-gold-output-will-continue-to-fall-barricks-regent-2009-04-29

-Gold Scrapping May Have Reached 500 Tons, GFMS Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=amSEAIzDso1E&refer;=commodities

-Why Didn’t Gold Rise by $100? Read more here-http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId;=6632

-Ned Schmidt’s Gold Thoughts. Read more here-http://news.goldseek.com/NedSchmidt/1240898640.php

-GATA Chairman Murphy interviewed by TheFinancialTube.com. Watch more here-http://www.thefinancialtube.com/video/3135/042509-Bill-Murphy-of-GATA–LeMetropoleCafe

-Gold vs. Paper. Read more here-http://news.goldseek.com/GoldSeek/1240988400.php

-Gold Bullion vs. Gold Mining Stocks. Which Investment is Best for You? Many investors believe their portfolios have exposure to gold and precious metals because they hold stocks in mining companies. Bullion and mining stocks should be viewed as two different investments. But as a safe haven, no gold or silver or platinum mining stock (or even an ETF) compares with actual physical bullion. Let’s examine why physical bullion is the superior investment to mining stock’s for long-term investors.

Over the long term, bullion reduces risk and improves returns. In order to be fully diversified, investors need to include all the major asset classes in their portfolios: stocks, bonds, cash, real estate, commodities and precious metals. Of these asset classes, precious metals in bullion form are, over the long term, the most negatively correlated to traditional financial assets such as stocks and bonds.

Holding bullion reduces portfolio volatility and improves returns during normal market conditions, and will act as portfolio insurance during periods of economic stress, growing in value and effectively offsetting losses in the other asset classes.

During high inflation periods, bullion tends to outperform all other assets classes. During the 1970s, a memorable period of high inflation, precious metals outperformed all other assets classes for over 11 years. Many economists predict we will soon be heading into a period of inflation and possibly hyperinflation as a result of the ‘easy money’ policies implemented by deflation-phobic central banks.

When bullion prices are rising, mining stocks can form a significant part of the equity component of every portfolio. A study by Ibbotson Associates concluded that: “Investors can potentially improve the reward-to-risk ratio in conservative, moderate, and aggressive asset allocations by including precious metals with allocations of 7.1%, 12.5%, and 15.7%, respectively. These results suggest that including precious metals in an asset allocation may increase expected returns and reduce portfolio risk.”

However, in order to fully protect portfolios from real inflation and market declines, a much higher allocation would be appropriate. Bullion provides real wealth preservation. Gold and silver have been used as money for over 3,000 years, and platinum for centuries. Today, the world’s wealthiest families still hold bullion to protect their wealth. Precious metals have proven to be the best protection an investor can have against both inflation and monetary crises. As the financial storm clouds intensify in 2009 and beyond, any portfolio without a sizeable physical bullion component is needlessly at risk. Nick Barisheff-Read more here-http://www.kitco.com/ind/Barisheff/apr282009.html

SILVER

Gold to silver ratio at 80 to 1 with gold at $1,900 the silver price would be $23.75

Gold to silver ratio at 70 to 1 with gold at $1,900 the silver price would be $27.14
Gold to silver ratio at 60 to 1 with gold at $1,900 the silver price would be $31.67

Gold to silver ratio at 50 to 1 with gold at $1,900 the silver price would be $38.00
Gold to silver ratio at 15 to 1 with gold at $1,900 the silver price would be $126.67

-Gene Arensberg: Big players positioning for higher silver. Read more here-http://www.gata.org/node/7391

-David Morgan: A Bull’s Case For Silver. Morgan predicts that continuing financial instability will push silver higher throughout 2009. “I think silver will establish a wide trading range this summer,” says Morgan. “But by early fall, we should start to see strength. By late 2009 into first quarter 2010, I’m looking for it to go beyond the $21 level it established in 2008.”

The key, says Morgan, is the $25/ounce price point. “Once we get to that level and stay there for at least three or four consecutive trading days, I think you’ll start to see a real acceleration in the silver market,” he says.

“After that, how high is high? No one knows. There’s no upside resistance once we break through that level, because anybody who owns silver is going to say, ‘Well, I’m not going to sell now.’ And that’s when we’ll see those markets really start to accelerate.” Read more here-http://www.hardassetsinvestor.com/features-and-interviews/1544-david-morga.html

-Adrian Douglas: GFMS publishes a sham against silver. GFMS has issued a 41-page report on the silver market, It is a complete sham misinformation and garbage. Read more here-

http://www.gata.org/node/7379

-CPM forecasts big silver surplus this year. In their latest silver yearbook, precious metals consultants CPM project that investors may be net buyers of 182 million ounces of silver on a bet basis this year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=82562&sn;=Detail

-Ted Butler silver commentary. Read more here-http://news.silverseek.com/TedButler/1240851873.php

-Clive Maund silver market update-http://news.silverseek.com/CliveMaund/1240768393.php

OIL

-OPEC wants oil to reach $70 a barrel. OPEC wants to see oil prices rising to more than 70 dollars a barrel, the oil cartel’s secretary general Abdalla El-Badri said Sunday. “The price of 50 dollars is not enough to cover investment costs for the future,” El-Badri told reporters in Algiers.

“The price which allows reasonable and acceptable revenues is more than 70 dollars a barrel,” he added. El-Badri was speaking after talks with Energy Minister Chakib Khelil ahead of the next meeting of the Organization of Petroleum Exporting Countries in Vienna on May 28. Read more here-http://www.breitbart.com/article.php?id=CNG.b84fea41a4937984085503f14c5e8222.b41&show;_article=1

-Oil could rally to $60 by year-end: OPEC’s al-Badri. Read more here-http://www.reuters.com/article/ousiv/idUSTRE53P1W620090426

-Oil will hit peak after recession, says OPEC. Oil could approach the record prices of last July as the global recession halts investment in exploration and energy projects, the Organization of Petroleum Exporting Countries (Opec) warned last night. Read more here-http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/5226067/Oil-will-hit-peak-after-recession-says-OPEC.html

-Has Oil and Gas Collapse Sealed Fate of Peak Oil? Watch slide show here-http://www.321energy.com/editorials/simmons/simmons042909/simmons042909.html#

FOUR MORE U.S. BANKS ARE SHUT

-Four Banks Are Shut, Costing U.S. Deposit Fund $698 Million. Regulators shut banks in Georgia, Michigan, California and Idaho, costing the deposit insurance fund $698 million the highest so far this year as the tally of U.S. failures rose to 29 and exceeded the 2008 total.

Georgia’s American Southern Bank, Michigan Heritage Bank and First Bank of Beverly Hills were closed yesterday by state agencies. First Bank of Idaho was seized by the Office of Thrift Supervision. The Federal Deposit Insurance Corp. was named receiver of all four, which combined had $2.39 billion in assets and 1.63 billion in deposits.

First Bank of Beverly Hills, with headquarters in Calabasas, California, will cost the insurance fund $394 million. While the three other banks are being taken over by other institutions, the FDIC couldn’t find a buyer for First Bank, forcing the regulator to assume $1.5 billion in assets. “Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship,” the agency said.

The seizures pushed the tally of failed banks past the 25 reached last year. Home foreclosure filings for March totaled 341,180, a record high, according to RealtyTrac, the California- based seller of default data. The economy has lost 5.1 million jobs since December 2007, and unemployment rose to 8.5 percent in March, the highest since 1983.

The toll of failed banks last year was the most since 1993 and drained money from the deposit insurance fund, which tumbled 45 percent in the fourth quarter to $18.9 billion. The agency has estimated future bank failures may cost the deposit insurance fund $65 billion through 2013. Read more here-

http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aWAXZGoDhtRM or http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=ab5rnngdYegE

-Bad year for banks: Failures surpass ‘08. Four regional banks fail Friday, setting the FDIC back nearly $700 million and bringing the annual total up to 29. Read more here-

http://money.cnn.com/2009/04/24/news/companies/bank_failure/index.htm

-New Worries for Next Tier of Banks. Absent fresh details on how the nation’s 19 largest banks fared in a new government test of their health, analysts are turning the spotlight on a handful of major regional banks that they reckon may be the next weak links in the financial industry. Read more here-http://www.nytimes.com/2009/04/25/business/economy/25bank.html

CHRYSLER GOES BANKRUPT

-Obama Says Chrysler Getting ‘New Lease on Life’ in Bankruptcy. President Barack Obama said the U.S. and Canada will commit more money to Chrysler LLC as it forms an alliance with Italy’s Fiat SpA that will give the automaker a “strong chance of success.”

As part of the deal to get as much as $3.5 billion in operating loans from the U.S. government, Chrysler will file for bankruptcy in New York, a process that an administration official said should be completed within two months.

“The necessary steps have been taken to give one of America’s storied automakers, Chrysler, a new lease on life,” Obama said in remarks at the White House. “This process will be quick, it will be efficient.”

The president faulted some of Chrysler’s smaller lenders, including hedge funds that he didn’t name “a small group of speculators” who refused to make the concessions agreed to by the company’s major debt holders and workers.

Chrysler will be in bankruptcy for one to two months and GMAC LLC will become its new finance arm with a fresh infusion of capital from the government, according to an administration official who briefed reporters before Obama spoke. The Auburn Hills, Michigan-based automaker will receive $4.5 billion in exit financing, the official said.

Chrysler’s bankruptcy filing will be made imminently and the court process will be used to extinguish some contracts and to thin the company’s dealership body, the official said. Payments to auto-parts makers and other contractors will continue to be made. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aEijL5Nqod3k&refer;=home and http://www.bloomberg.com/apps/news?pid=20601087&sid;=awd3WqBbBqwg&refer;=home

GM CANADA TO CUT WORKFORCE IN HALF AND CLOSE 40% OF DEALERSHIPS

-General Motors Canada will slash its workforce by more than half by 2014 and close as many as 310 dealerships by the end of next year as part of a broad restructuring plan announced by the company Monday. The troubled company’s Canadian arm will reduce its hourly workforce by 57 per cent, from 10,300 currently to 4,400 over the next five years. The company employed 20,000 Canadians as recently as 2005.

Many of the 5,900 jobs being eliminated under Monday’s latest streamlining plans were previously announced and include the closure of a truck plant in Oshawa, Ont., and a transmission plant in Windsor, Ont. GM Canada spokesman Stew Low estimated that Monday’s announcement will affect about 1,500 jobs on top of those already announced.

The announcement didn’t surprise Canadian Auto Workers president Ken Lewenza. “The reality is there’s been significant plant closure announcements in Canada that are going to take place within the next couple years, and we’re not totally surprised by the numbers although they’re a little bit more than we’d anticipated,” he said.

Lewenza said he expects most of the new job cuts will take place through attrition. Meanwhile, a spokesman for the Canadian Automobile Dealers Association estimated that the dealership closures from 705 today to between 395 and 425 by the end of next year could affect as many as 12,000 Canadians. Read more here-

http://www.cbc.ca/cp/business/090427/b0427113A.html

INSIDER STOCK SELLING JUMPS TO HIGHEST LEVEL SINCE 2007

-Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.

Gap Inc.’s founding family sold $45 million of shares in the largest U.S. clothing retailer this month, according to Securities and Exchange Commission filings compiled by Bloomberg. Daniel Warmenhoven, the chief executive officer at NetApp Inc., liquidated the most stock of the storage-computer maker in more than six years.

Sales by the co-founders of Bed Bath & Beyond Inc. were the highest since at least 2001. While the Standard & Poor’s 500 Index climbed 26 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.

“They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.” Read more here-

http://www.bloomberg.com/apps/news?pid=20601213&sid;=au8cyqeJFifg&refer;=home

UNEMPLOYMENT NUMBERS

-Unemployment in Spain Hits 17.4%. Read more here-http://www.nytimes.com/2009/04/25/business/global/25euecon.html

-U.S. Unemployment: 109 cities at 10% or higher. Government survey shows jobless rate grows in all 372 metro areas, with 15% joblessness in 18 of them. Read more here-

http://money.cnn.com/2009/04/29/news/economy/metropolitan_area_unemployment/index.htm?postversion=2009042914

REAL ESTATE-FORECLOSURES

-Home Prices in 20 U.S. Cities Declined at Slower Pace. The decline in home prices in 20 major U.S. cities slowed in February for the first time since 2007, amplifying signals that the market may be stabilizing. The S&P;/Case-Shiller index’s 18.6 percent decrease compares with a record 19 percent decline the month before. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

Declining prices, Federal Reserve efforts to bring mortgage rates down, and government tax credits for first-time buyers may continue to support sales after an almost four-year slide. Still, mounting unemployment means purchases are unlikely to rebound quickly. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aIGs3yk6Pwmw&refer;=home

-Las Vegas Home Prices Fall to Lowest Since 2000 on Foreclosures. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=ad1RkuIkvrCY

-UK house price fall dampens recovery hopes. UK house prices continued to slide in April, suggesting that last month’s surprise rise was a blip in a downward trend, according to figures from Nationwide, the British mortgage lender.

Nationwide said that the average cost of a UK home dropped 0.4 per cent between March and April to £151,861, partially unwinding a 0.9 per cent increase during the previous month. The figures also revealed that UK house prices have fallen 15 per cent compared with April 2008. Read more here-http://business.timesonline.co.uk/tol/business/economics/article6196858.ece

or http://news.bbc.co.uk/2/hi/business/8026152.stm

-Home Vacancies Rise in U.S. to Record Amid Recession. A record 19.1 million homes stood unoccupied in the first quarter and the U.S. homeownership rate fell as the recession sapped demand for real estate.

The number of vacant homes, including foreclosures, properties for sale and vacation properties, jumped from 18.6 million a year earlier, the U.S. Census Bureau said in a report today. Households that own their own residence declined for the third straight quarter to 67.3 percent.

The U.S. financial crisis and falling home prices have shattered the confidence of homebuyers. The percentage of people who said they plan to buy a home in the next six months dropped to a 26-year low in March, according to the Conference Board in New York. Job losses will continue to erode real estate demand, according to an April 23 report by Mark Fleming, chief economist for First American CoreLogic Inc. in Santa Ana, California.

“We expect home prices to continue to decline into 2010 as economic conditions and excess housing inventories dampen prices,” Fleming said in the report. “Decreases are now being driven by rising unemployment and a high volume of distressed home sales.”

The percentage of all U.S. homes empty and for sale, known as the vacancy rate, fell to 2.7 percent in the first quarter. It hit an all-time high of 2.9 percent in the first and fourth quarters of 2008, the Census Bureau said. Read more here-http://www.bloomberg.com/apps/news?pid=20601213&sid;=am4VMDGoSAPY&refer;=home

-Why Housing Is Not Coming Back. Read more here-http://www.businessinsider.com/why-housing-is-not-coming-back-2009-4

-Ranieri Says Housing Is Shouting Distance From Bottom. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a1UJ49yccKoY

-Phoenix leads U.S. in home price declines in February. A new report shows home prices across the country continued to drop in February, and Phoenix has the unfortunate designation of loss leader. Phoenix home prices fell 35 percent from February 2008 to February 2009, according to the new S&P;/Case-Shiller 20-city home price index.

That’s the largest decline of any of the 20 largest cities in the U.S. In addition, Phoenix home prices are down 51 percent from their peak. The weak housing market continued to plague home sellers in February as home prices extended their losing streak to 31 consecutive months, according to a report issued Tuesday.

The entire 20-city index fell 18.6 percent for February, compared with a 19 percent year-over-year decline in January. The good news is the pace of year-over-year slowing lessened for the first time since October 2007. Read more here-http://www.bizjournals.com/phoenix/stories/2009/04/27/daily16.html?ana=from_rss

-KB Home introduces new home priced at $89,999. With foreclosures driving down home prices, KB Home is facing the competition head-on with a line of new homes it’s calling the Open Series. “We didn’t want to just sit back on our heels and let the market dictate how we were going to perform,” said Mark Rodocker, executive vice president of KB Home’s Arizona division. Read more here-http://www.azbiz.com/articles/2009/04/27/construction_real_estate/doc49e8d8813dab7411430334.txt

-Foreclosure filings in record jump. Hope Now reports a 20% increase in initial foreclosure filings during March. But there was a steep drop in bank repossessions. Read more here-

http://money.cnn.com/2009/04/30/real_estate/March_Hope_Now/index.htm

-No bankruptcy help for homeowners. Measure to modify delinquent loans in bankruptcy court fails in Senate. Obama administration loses big stick to prod loan servicers to aid troubled borrowers. Read more here-http://money.cnn.com/2009/04/30/news/economy/cramdown/index.htm?postversion=2009043017

-A second wave of home foreclosures is ahead, Fed economist says. A second, punishing wave of home foreclosures is poised to strike just as the subprime mortgage mess ebbs, an economist in Kansas City said Thursday. Kelly Edmiston, senior economist for the Federal Reserve Bank of Kansas City, dropped that unwelcome forecast at the Fed’s Money Smart Day program.

“I don’t expect the foreclosure problem to get much better in the next couple of years. In fact, it may well get worse,” Edmiston said. Blame the widening recession, persistent unemployment and exotic mortgages that emerged alongside the boom in subprime lending to less creditworthy homebuyers.

Lenders laid the groundwork for this second foreclosure wave in 2005 and 2006, Edmiston said. Those years saw a surge in mortgages on which borrowers were required to make relatively small monthly payments for the first five years.

It was the height of the housing bubble, and buyers turned to such loans, called interest-only mortgages and payment-option adjustable-rate mortgages, as one way to jump into the runaway market. Those low house payments are poised to reset to much higher levels in 2010 and 2011 and push more owners out of their homes, Edmiston said. Read more here-

http://www.kansascity.com/business/story/1159532.html

The Goldbugg Report – May 05, 2009
Posted by Worldwide Precious Metals on Tuesday, May 5, 2009

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