Newsroom
The Goldbugg Report – August 25, 2009
August 25, 2009
WORLD FINANCIAL REPORT ON RADIO AUG 21 2009 SHOW
-Barclays, JPMorgan Case and four other financial companies predict big gains in precious metals in the next four months…
-Chinese investment in silver could push prices higher. Watch the video.
-“The Week in Review” from PMI
The Week in Review
Another week of “unexpected” events is behind us.
It was all over the media that China’s stock market had topped and was heading back down. On Monday they were down 20% over the last two weeks. The US market, after a sharp downward turn on Monday, “unexpectedly” moved higher the rest of the week.
The Cash for Clunkers program ends on Monday, much to the relief of the auto dealers. It seems the US government has yet to pay many of the dealers who have submitted their paperwork for the reimbursements. Next up? Dollars for Dishwashers! Rumor has it that a rebate program is in the works for appliances to try to nudge consumers into spending to upgrade their appliances. We’ll see if the consumer will take the “buy now, save later” stance the government is trying to push them into.
The annual Fed conference in Jackson Hole is underway this week so Mr. Bernanke has the week off from campaigning to keep his job. The media has been having a field day speculating on whether or not he will remain as Fed Chairman. Wall Street wants him to remain, but political pressure appears to be ramping up to remove him.
Warren Buffett, in an op-ed piece in the New York Times, appears to see the inflation graffiti on the wall. Key statements from his piece: “With government expenditures now running 185 percent of receipts, truly major changes in both taxes and outlays will be required. A revived economy can’t come close to bridging that sort of gap.” And regarding politicians: “Since they will “correctly perceive” that raising taxes or cutting spending will hurt their re-election chances, legislators may instead “opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes.” He went on to compare the massive amount of money being printed to global warming, saying “Unchecked greenback emissions will certainly cause the purchasing power of currency to melt.”
First time applications for unemployment benefits “unexpectedly” rose again. Continuing claims for unemployment also moved higher again.
As we mentioned in our August 14th memo, foreclosures set a record in July. On Thursday, the Mortgage Bankers Association said that late payments on US mortgages also increased to a record with one in eight homeowners delinquent or already in the foreclosure process. Many of these delinquent loans are prime fixed rate loans and can be attributed to unemployment. With unemployment numbers still rising, there is a potential for another large wave of home foreclosures in the near future only this time it will be on prime loans, long considered to be relatively low risk loans.
The dollar index moved down for the week, as the dollar fell against the euro and yen once again.
Oil “unexpectedly” rose on Monday, even as the stock market was on its way down. It continued to trade above 70 dollars and began moving higher. On Friday the price of oil touched its high for the year.
Volatility should be expected to continue. We continue to feel that precious metals are poised to move higher from their current levels. Nobel Prize – winning economist Joseph Stiglitz added his voice to the call for a new global reserve currency to replace the US dollar on Friday and as the calls to replace the dollar continue, its value could slide even further. The stock market continues to trade on emotion, rising higher despite fundamentals that should have caused a dip back downward. Central banks are holding on to their gold and in many cases, increasing their holdings. There were no central bank gold sales this week at all. Taking advantage of any price dips at these levels to add to or start a precious metals portfolio could help you achieve the goal of long term profitability in precious metals. Remember that the key to profitability through the ownership of precious metals is to own and hold for the long term. The key to owning and holding is never to overextend yourself.
Trading Department – Precious Metals International, Ltd.
GOLD
-Barclays, JPMorgan Case and four other financial companies predict big gains in precious metals in the next four months: http://www.bloomberg.com/apps/news?pid=20601012&sid;=au9vWBOfMd9g
-The longer term view is more positive for the price of $Gold as the U.S. economic policy situation is so bleak. The reason for that is politics. The Obama Regime will take action in an attempt to bolster its collapsing political power. Second, Chairman Bernanke is in reelection mode as his appointment as Chairman is up for renewal in January. Together, these factors mean more U.S. government spending and the Federal Reserve monetizing the U.S. deficit created by that spending.
Slowing money supply growth in the U.S. translates into slower economic growth, regardless what the statistics for the last six months might suggest. Without aggressive monetization of the U.S. government deficit, U.S. money supply growth will continue stagnating. Slower money supply growth translates into lackluster U.S. economic growth which does not fit the political agenda of either the Obama Regime or Chairman Bernanke.
No government, and that includes the U.S., can make a money supply grow without direct monetization of the national debt. Federal Reserve policy is clearly headed in that direction. As money is fungible, whether the Federal Reserve buys U.S. Treasury debt directly or around about by buying other debt in the U.S. market makes no difference. Consequences are the same, and the discussion on the matter is trivial.
The Federal Reserve has no choice but to move toward direct financing of the Obama Deficit. The equivalent of cash delivery from the Federal Reserve to the Treasury is about to begin. The U.S. money supply will again grow as that is done. Owning Gold may be the only way to protect wealth from the political agenda of the Obama Regime and the Federal Reserve “printing” dollars without restraint in order fund that agenda. Ned W. Schmidt-Read more here-http://news.goldseek.com/NedSchmidt/1250575440.php
-We are in the optimum seasonal buying time for Gold. “So of the six months between early August and early February, gold’s massive seasonal autumn rally, fully four are gold’s biggest months of the calendar year. You absolutely want to be long gold, and indeed the entire PM-complex since everything PM-related ultimately follows gold’s lead, in September, November, December, and January. Seasonal-demand-driven price increases are very compelling then. Adam Hamilton
-John Embry August gold commentary. All things considered gold’s been spectacular. Read more here-http://www.sprott.com/Docs/InvestorsDigest/2009/Aug_21_2009.pdf
-Why Gold Will Break US$1,000. Read more here-http://www.321gold.com/editorials/charnock/charnock081709.html
-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1250520134.php
-Middle East investors join flight to safety of gold. Read more here-http://www.reuters.com/article/reutersEdge/idUSTRE57G1UK20090817
-King World News interviews GATA’s Adrian Douglas. Listen here-http://www.gata.org/node/7690
-Adrian Douglas: Central banks are NOT ordinary gold investors. Read more here-http://www.gata.org/node/7697
-Last Friday, the central banks of Europe extended their landmark agreement on gold sales. 18 national central banks, along with the European Central Bank itself, signed the third Central Bank Gold Agreement. CBGA 3, like its two predecessors, has major implications for gold that investors need to understand. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton081409.html
-Adrian Douglas: GFMS cooks books to make gold look bad. Read more here-http://www.gata.org/node/7699
-Gold Demand Shrinks to Six-Year Low on Recession, Council Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601102&sid;=ayr30bHgFXQE or http://uk.reuters.com/article/idUKTRE57I0U020090819
-Panning for gold makes a comeback in bad economy. Read more here-http://www.usatoday.com/money/markets/2009-08-17-panning-gold-economy_N.htm
-Mounties still mulling mint’s missing millions. Read more here-http://www.canada.com/Mounties+still+mulling+mint+missing+millions/1900030/story.html
SILVER
Chinese investment in silver could push prices higher:
Video: http://www.youtube.com/watch?v=PqFpl31UwPI
Gold to silver ratio at 80 to 1 with gold at $3,000 the silver price would be $37.50
Gold to silver ratio at 70 to 1 with gold at $3,000 the silver price would be $42.86
Gold to silver ratio at 60 to 1 with gold at $3,000 the silver price would be $50.00
Gold to silver ratio at 50 to 1 with gold at $3,000 the silver price would be $60.00
Gold to silver ratio at 40 to 1 with gold at $3,000 the silver price would be $75.00
Gold to silver ratio at 30 to 1 with gold at $3,000 the silver price would be $100.00
Gold to silver ratio at 20 to 1 with gold at $3,000 the silver price would be $150.00
Gold to silver ratio at 15 to 1 with gold at $3,000 the silver price would be $200.00
-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1250519310.php
-Silver market analyst Ted Butler interviewed by King World News. Listen here-http://www.gata.org/node/7694
-Silver: the Future of Jewelry. Read more here-http://seekingalpha.com/instablog/407380-jeff-nielson/23365-silver-the-future-of-jewelry
-Silver Outperforms Gold, So Should I Sell My Metals or Buy More? Read more here-http://news.goldseek.com/GoldSeek/1250489040.php
-David Morgan interviewed on the gold-silver ratio. Tom Jeffries: David Morgan is one of the world’s foremost experts on silver. I would like you to check in with David’s excellent Web site, silver-investor.com. That’s where you can check out David’s monthly investment newsletter, The Morgan Report. And there is a ton of excellent resources for the investor of all stripes.
You talk many times in your lectures, and you’ve talked in The Morgan Report recently, about something called the gold/silver ratio and where it’s going. Can you talk a little bit about that?
David Morgan: It is a controversial subject. There are a lot of people who don’t put any credence into it at all, there are some people who put a whole lot of credence into it, and then there are people, like me, who absolutely put some credence into the ratio.
The basics of it are this and I like to go for the long-term version, so starting at the 12th century or so and going to present time, if you looked at every one foot in length being 100 years (or one century), you would see throughout the entire timeframe that you would have several feet in length and it would only be in the last 19 inches of that chart where the ratio got above 16 to 1. (Note: a discussion of this is done by Franklin Sanders in his book Silver Bonanza.)
In fact, the ratio from the 12th century to roughly the 17th century was about 12 to 1, which is what I call the “natural ratio” at that time, and I define the natural ratio as the amount of silver to gold in the earth’s surface. Right now it’s less than 12 to 1, having dropped down to about 8 to 1, which means that there’s about eight ounces of silver in the earth’s surface for every ounce of gold.
So that’s the natural ratio, and that ratio held for hundreds and hundreds of years with the free market making the determination—amazing! Then, Sir Isaac Newton monetized it at a ratio of 15.5 to 1 after England was having a terrible time with their fiat money system. Newton came in and put them on a gold standard and then, with his brilliance, he picked a number basically based on the marketplace (at that time), which determined that the correct ratio of silver to gold was 15½ ounces of silver to 1 ounce of gold.
And that’s what we called the monetary of the classic ratio, and that held roughly from the 17th century for hundreds of years through about the 1873 timeframe. Then there was The Crime of 1873, which we don’t have time to go into, but that was roughly where silver was demonetized in the United States, and after that, you’ve seen the ratio undergo some really wide swings.
It’s gone up as far as 100 to 1 a couple of times, and we’ve seen it just kiss the classic ratio of 16 to 1 for a day. In modern times, meaning during the last big run-up in January of 1980, it got back to classic ratio, but again, it was only for a day or two at the most. And then the ratio dropped off.
So having given you all that background, what does it mean? For some it means you can trade the ratio, which is something that I do personally. Secondly it’s a good indicator for the overall direction of the market as far as I’m concerned. When silver’s leading gold, we’ve got more momentum in the metals than when it’s not, and silver has basically outperformed gold since 2003 until recently. In other words, in the ratio from 2003, the bottom of the silver market, and when gold was at $252 in 2000, silver went from the 80 to 1 ratio down to about 55. Currently it is around the 65 to 1 level.
And it was working its way even lower when we had this credit crisis surface, which didn’t surprise me. We got a big spike on the ratio and actually it got to around 90 to 1—again, very temporarily, maybe for a day or two.
I think it shows that silver is still undervalued to gold, but I’m open-minded enough to think that maybe something else is going on. In an absolute all-out deflation, which would be the better gold or silver? The preponderance of evidence is that gold does better. I wrote a paper on this; it was in The Morgan Report, and I also did a couple of speeches on this subject. The record is mixed as far as how silver does in a deflation.
Gold is pretty much known to do well in deflations, and this is all history. And because it is history, it doesn’t absolutely guarantee you that the next time around gold will do great in a deflation, but it certainly implies that it will.
As far as silver is concerned, there have been times that silver did better than gold in a deflation, and many times where it did not. But overall it’s done fairly well and it held its purchasing power, so even in a deflationary scenario I wouldn’t give up on silver. But as far as what will it do, if we look at it today we would say gold has actually done better than silver here in the last several months, because the ratio has gone from the 55 to 1 back to around the current 65 level.
Regardless, the overall perspective would be, how is silver doing against all other financial assets, including gold? And the answer to that is, essentially, gold has done best against all other financial assets, the general equities, the mining stocks, housing sector, bonds; and silver has done better than the base metals and most other sectors.
Silver is partly industrial and partly monetary and you can argue all day if it’s both or not. I’m absolutely convinced that it’s both. I’ve never argued that silver is just money. I have argued very strongly that silver is money but it’s not only money; it’s certainly an industrial metal as well.
In summary, if our readers think as I do that the main problem ahead is a currency crisis with the U.S. dollar, then I would urge you to study what silver did during the last period (most recent) during a prelude to a currency crisis. Basically, it outshone almost everything! The problem is people are too shortsighted and look out only so far, not realizing that once everyone understands that the death of the dollar is imminent, there will be a mad rush for the precious metals both gold and silver! Read more here-http://news.silverseek.com/SilverInvestor/1250255996.php
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week-Credit May Crunch Again Before Getting Back To Normal. It would be very unusual if we emerged from a credit crisis with a simple V-shaped recovery. (Or A-shaped if we think in terms of credit spreads) Going back to the Great Depression, we experienced a few sucker’s rallies before credit markets ultimately normalized.
As this chart from Econompic Data shows, while credit spreads have recovered from their recent spike, they may still get worse before getting better. Read more here- http://www.businessinsider.com/chart-of-the-day-corp-spread-2009-8
-Chart of the week-Americans Still Deluding Themselves About Their Homes. Americans either don’t know or don’t want to admit how much money they’ve lost in their homes. Real estate website Zillow.com has what it calls its “Misperception Index,” which measures the gap between the percentage of homeowners whose homes have dropped in value, and the percentage who say their homes have dropped in value.
As you can see, in Q109, it was a very tiny gap. The horrible economy forced people to be realistic. But here we go again, just as things start to turn around, and the housing market shows the tiniest signs of life, people are deluding themselves about their homes once again. Read more here- http://www.businessinsider.com/chart-of-the-day-zillow-index-2009-8
-“There are indications that the severest phase of the recession is over.” Harvard Economic Society (HES) January 18, 1930
-It is impossible to maintain a free society when more and more people look to the state to provide what Americans used to provide for themselves. Warren Pollock
-It may be true that you can’t fool all of the people all of the time, but you can fool enough of them to rule a large country. Will Durant-Bio here-http://en.wikipedia.org/wiki/Will_Durant
-You can fool some of the people some of the time and some of the people all of the time. But that’s usually enough. Uncle Milte-Bio here-http://en.wikipedia.org/wiki/Milton_Berle
-Inflationism is a dreadful cancer that is gnawing at the backbone of the civilized order. Hans F. Sennholz-Bio here-http://en.wikipedia.org/wiki/Hans_Sennholz
-“Always love your country but never trust your government! “That should not be misunderstood. I certainly am not advocating civil disobedience, must less insurrection or rebellion. What I am advocating is to not expect too much from government and be wary of it power, even the power of a democratic government in a free country.
“Ours is one of the mildest, most benevolent governments in the world. But it too has the power to take your wealth and forfeit your life. A government that can give you everything can take everything away.” Bob Novak-Bio here-http://en.wikipedia.org/wiki/Robert_Novak
-”If it goes down I’ll buy some more, and if it goes up I’ll buy some more. I periodically buy some gold. I don’t have a method to it. I just buy it.” Jim Rogers
-U.S. Stocks Are ‘Dramatically Overpriced,’ Tice Says. U.S. stocks are “dramatically overpriced” because the fallout from the financial crisis will continue to hurt consumer spending, said David Tice, Federated Investors Inc.’s chief portfolio strategist for bear markets.
The Standard & Poor’s 500 Index has climbed 50 percent from a 12-year low on March 9 on speculation the economy is recovering from the worst contraction since the Great Depression. The rally pushed the index’s price relative to trailing 12-month operating earnings to 18.65, the most expensive since December 2004, according to weekly data compiled by Bloomberg.
“I’d love for prosperity to return, unfortunately I think you need to be realistic and it takes time to work off these excesses” from a bubble in credit markets, Tice said in an interview with Bloomberg Television.
Tice, who predicts that the S&P; 500 will eventually slump to 400 points, said he would add to short positions should the rally continue. The S&P; 500 rose to a 10-month high of 1,012.73 last week. The main benchmark for American equities hasn’t closed below 400 since 1992. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=avmwu6UfHB4o
-PIMCO’S El-Erian: U.S. stock rally has hit a wall. Mohamed El-Erian, the chief executive of top bond fund manager PIMCO, on Tuesday said the rally in U.S. stocks had topped out because valuations have shot up too quickly. Asked if U.S. stocks have hit a wall, El-Erian told Reuters Television: “I think we have, and I think what you are seeing is a massive tug of war going on.”
“On the one hand, pushing stocks higher are powerful technicals, the fact that very low yields on the front end have pushed cash out of the money market segment and into the risk assets,” El-Erian said. “But on the other hand, the fundamentals are such that valuations are ahead of fundamentals. What you have seen over the last couple of days is a recognition that fundamentals matter.”
The global equities rally has been tempered by surprisingly weak economic data. On Tuesday, data showed U.S. housing starts unexpectedly fell in July, while the inventory of total houses under construction fell to a record low. Last week the Reuters/University of Michigan consumer sentiment survey showed a growing number of Americans were increasingly worried over jobs and wages.
El-Erian, who oversees $850 billion in assets for Pacific Investment Management Co, including equities, said U.S. stock markets have been on a “sugar high” as recent corporate earnings have surpassed expectations. But for the most part profitability has been driven by cutbacks in layoffs and capital spending, he said.
Moreover, the nascent economic recovery in the United States faces massive headwinds, including high unemployment, which translates into a vulnerable consumer, and weak private demand. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE57H3F420090818
-Pacific Investment Management Co. strategic adviser Richard Clarida said growth of about 2 percent paired with an elevated unemployment rate will likely be the “new normal” as the U.S. economy recovers. “We don’t see the V-shaped recovery” experienced in past rebounds from recessions that featured higher rates of growth, as consumption remains low, Clarida said in an interview with Bloomberg Radio in New York.
“Normally when you come out of recession, the best performing sectors tend to be the early cyclicals, retailers, homebuilders, airlines,” he said. “That was true in the first part of this rally, and I don’t think it’s going to be sustainable.” The economy is “really dependent” on sectors driven by public spending, said Clarida, who teaches economics at Columbia University in New York.
Officials at Pimco, the world’s largest bond fund manager, are using the phrase “new normal” to characterize a global economy that will include heightened government regulation, lower consumption and slower growth. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a4T3ElyiwpMA
-Taking Wall Street Advice in Rally Means Owing $6,000. Anyone who did what Wall Street analysts advised last March has only losses after the biggest stock market rally in seven decades. Citigroup Inc., Bank of America Corp. and more than a dozen other firms told clients to purchase European energy producers and U.S. drugmakers while selling banks and retailers, according to combined rankings compiled by Bloomberg.
An investor who used $10,000 to buy companies in the highest-rated industries and bet on declines in the lowest since the advance began on March 9 lost everything and would owe as much as $6,000 to cover bearish trades, the data show. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a8bE_SJ1WAiI
-The pound’s biggest five-month rally in 24 years is ending as the Bank of England floods the shrinking U.K. economy with newly printed cash and slowing inflation precludes higher interest rates to lure investors. The currency soared 23.5 percent from March 10 to Aug. 5 on speculation U.K. assets would rise as the worst financial crisis in six decades eased.
The sharpest increase since 1985 ended Aug. 6 after policy makers said the recession was deeper than anticipated and moved to spur the economy by expanding its purchases of U.K. debt 40 percent to $290 billion. Six days later, central bank Governor Mervyn King said inflation will probably fall below the Bank of England’s target. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=avULD0BWfzPM
-Pension Funds Pare Stocks, Ignoring Economic Rebound. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=amowlMWZN_dc
-Idled cash: more fuel for stocks, or fire hazard? One of the stock market’s favorite accepted nuggets of wisdom is the notion that there’s a pile of money waiting in the wings, itching to jump back into the market. Investors should be careful what they wish for: Such a move is more likely to signal a topping-out in the recent rally than a sign that it will ignite a new run in the market.
In addition, the long-term outlook is clouded. The amount of money investors have liquid when compared with their share holdings is right around the post-World War II average, suggesting that there is no guarantee of a new wave of money into stocks as a result of a pronounced shift in investing preferences. Read more here-
http://www.reuters.com/article/hotStocksNews/idUSTRE57G3SX20090817
-Nassim Taleb told CNBC that the economy will get worse because nothing has changed: “It is a matter of risk and responsibility, and I think the risks that were there before, these problems are still there. We still have a very high level of debt, we still have leadership that’s literally incompetent. They did not see the problem, they don’t look at the core of problem.
There’s an elephant in the room and they did not identify it.” Nassim Taleb, principal of Universa Investments and author of ‘The Black Swan,’ discusses, the markets, the economy and whether Fed Chairman Ben Bernanke should be reappointed. Watch video here-http://www.cnbc.com/id/15840232?video=1212567075&play;=1?__source=CNBC|newsnow|vid4|2009|
-The “Second American Revolution” Has Begun By Gerald Celente. Read more here-http://yonkerstribune.typepad.com/yonkers_tribune/2009/08/the-second-american-revolution-has-begun-by-gerald-celente.html
-Gerald Celente interview. Listen here-http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2009/8/14_Gerald_Celente_files/Gerald%20Celente%2008%3A14%3A2009.mp3
-Martin Armstrong’s August 7, 2009 Cycles & pattern projections. Armstrong talks about the market probably crashing here in this September 2009 cycle & then on to Dow 20,000 through inflation, Gold is in consolidation here then to explode to $2500-$3000.00 with a peak of about $5000.00! Read more here-
http://goldsilver.com/news/newsID/6135/tPath/3/
-U.S. Economy Faces ‘Bumpy’ Recovery, Economist Mickey Levy Says. The U.S. economy faces an uneven recovery from the deepest recession since the Great Depression rather than a rapid rebound, said Mickey Levy, chief economist at Bank of America Corp. in New York.
“My hunch is it’s going to be a bumpy recovery” because of temporary government efforts to boost growth, Levy said today in an interview on Bloomberg Radio. The “cash for clunkers” auto trade-in program, for example, is “borrowing from future auto sales” and “probably borrowing from current non-auto sales” as well, he said. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=amiCPCGx.OJw
-U.S. Initial Jobless Claims Rose by 15,000 to 576,000. More Americans unexpectedly filed claims for jobless benefits last week, indicating companies are trying to cut costs further even as the economy stabilizes.
Applications rose to 576,000 in the week ended Aug. 15 from a revised 561,000 the week before, the Labor Department said today in Washington. The number of people collecting unemployment benefits the week earlier was little changed at 6.24 million.
Companies may keep paring staff in coming months, albeit at a slower pace, and hiring linked to the government’s recovery effort may not gain speed until 2010. While the unemployment rate dipped last month, economists project it will reach 10 percent by early next year, restraining consumer spending.
“The improvement in the labor market has stalled,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto, who had forecast claims would rise to 570,000, “Consumer spending will be pushed back on its heels for a longer time than markets are expecting.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aMhGnVzXaSfM
-Social Security crunch coming fast. Here’s a frightening prediction: The public pension system’s trust fund could go into the red in the next year, far sooner than expected. Will it get the next huge bailout? Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/social-security-crunch-coming-fast.aspx?page=all
-Social Security could face a deficit within two years, according to U.S. Rep. Spencer Bachus. “The situation is much worse than people realize, especially because of the problems brought on by the recession, near depression,” said Bachus. Read more here-http://www.tuscaloosanews.com/article/20090818/NEWS/908189977/1007?Title=Bachus-discusses-Social-Security-health-care
-Pension Plans’ Private-Equity Cash Depleted as Profits Shrink. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=acWVaiPjU5iw
-Europe won’t fully recover from the worst recession since World War II until 2013 even if it returns to a “moderate” pace of economic growth, Morgan Stanley says. Read more here-
http://www.bloomberg.com/apps/news?pid=20601109&sid;=aESlrDgefSAo
-U.K. Has Record July Deficit as Recession Curbs Taxes. Britain had an 8 billion-pound ($13.2 billion) budget deficit in July, the largest for the month since records began in 1993, as the recession ravaged tax revenue and the cost of unemployment benefits surged. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aupHa8rR0Or4
-Darling Says U.K. Recovery at Risk, Treasury Must Keep Spending. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aQ3dscO2N1gk
-Germany in the Era of Hyperinflation. During the hyperinflation in Germany of 1920s, the country’s currency, the mark, went crazy. The government of the Weimar Republic may have been able to clear its debts, but it came at the cost of the citizens’ savings. It’s an era that is still part of the national psyche today. Read more here-
http://www.spiegel.de/international/germany/0,1518,641758,00.html
-Off the Deep End: A Look at the Decline of Dubai. Read more here-http://www.fastcompany.com/multimedia/slideshows/content/dubai.html?page=4
-Swine flu jab link to killer nerve disease: Leaked letter reveals concern of neurologists over 25 deaths in America. Read more here-
-U.S. Workplace Suicides at Record in 2008; Overall Deaths Down. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=auRRpbDk9BYc
-CIA Hired Blackwater for Assassination Program, NY Times Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJDlySvx3aIY
-Israel says UN covering up Iran’s nuclear arms drive. Read more here-http://www.breitbart.com/article.php?id=CNG.40d68219c5c73123c3b3b6ae91c0b1c5.421&show;_article=1
-Iran Gives UN Inspectors Wider Access, Official Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aUqTybhNy6ew
-Blackstone Group LP Chief Executive Officer Stephen Schwarzman’s $702 million compensation made him the highest-paid executive in the U.S. last year, the Corporate Library reported. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ap6saKW9XWVI
-Food Is New Real Estate as Cooking Shows Soar in Cable Ratings. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=agY50CybFhzo
-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/HistoricalPriceTrackingsystem.html
-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html
-Hope Diamond to get new setting for anniversary. The Hope Diamond is going bare to celebrate a half-century at the Smithsonian. The mysterious blue gem was donated to the National Museum of Natural History more than 50 years ago and the museum is celebrating by having a new setting designed. Starting in September, the 45.52 carat diamond will be exhibited as a stand-alone gem with no setting.
New York jeweler Harry Winston donated the fabled diamond to the museum and his firm is designing three possible new settings. Starting Wednesday the public is being invited to vote online for their favorite, at http://www.smithsonianchannel.com/hope The winning setting will be announced this fall and the gem will be shown in the setting starting in May, to mark the premiere of a Smithsonian Channel documentary on the diamond.
The Hope has been removed from its setting for cleaning from time to time, but this is the first time it will be on public view by itself. Previously it has been shown in a platinum setting, surrounded by 16 white pear-shaped and cushion-cut diamonds, suspended from a chain containing forty-five diamonds. The Hope will return to this original setting in late 2010.
“This is a rare and exciting opportunity for people to see the Hope Diamond as it has never been seen before,” said museum director Cristian Samper. Formed more that a billion years ago, the diamond was mined in India and later is believed to have been part of the French crown jewels, having been stolen during the French Revolution. It later came into the possession of Henry Philip Hope, whose name it carries.
The Hope Diamond was long thought to have a curse, bringing bad luck to its owners, but Smithsonian officials say it has been kind to them, drawing throngs of visitors. Read more here-http://www.google.com/hostednews/ap/article/ALeqM5j8zd_NkS7nbnC33unIu0oc5M-YSwD9A5NI900
COMMODITIES-OIL-GASOLINE-NAT GAS
-Commodities supercycle still with us and stronger than ever. In 2007, she claimed the current commodities super-cycle would last another 20 years. But given the economic implosion since that time, could it still be true? “Absolutely,” says Carmel Daniele, founder, CEO and CIO of CD Capital. Interview with The Gold Report. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=87737&sn;=Detail
-The U.S. Commodities Futures Trading Commission and the U.K. Financial Services Authority said they are boosting cooperation in their supervision of energy markets. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a8AYMPJAd4Dc
-China, unfazed by failures to invest in Rio Tinto Group and Unocal Corp., will boost spending on oil and mining acquisitions by at least half this year to take advantage of lower valuations after commodity prices slumped. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aTZisOrCq1BY
-China: The new Big Oil. The country is snapping up oil fields from Africa to South America to the Middle East. Soon it may be able to rival the Western giants. Read more here- http://money.cnn.com/2009/08/17/news/international/china_oil/index.htm
-One positive outcome of the financial crisis was that gasoline prices did plunge from their record highs down 60% peak to trough. Beginning at the end of 2008, however, gasoline prices have surged and are currently 61% above their December 2008 lows.
Today’s chart provides some perspective on the recent spike with a long-term view of the average US price for a gallon of unleaded gasoline. It is interesting to note that most gasoline price spikes were a result of Middle East crises and often preceded or coincided with a US recession.
So while gasoline prices are currently well below the record high levels of 2007, this recent rally has brought prices to a level well above what was witnessed from 1984-2004 a two decade span of relative energy price stability. Read more here-http://www.chartoftheday.com/20090814.htm?T
-Natural Gas Falls Below $3, 1st Time Since 2002, on Supply Glut. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aEyz8aqs0q2A
U.S.-CANADIAN DOLLAR
-Pimco Says Dollar to Weaken as Reserve Status Erodes. Pacific Investment Management Co., the world’s biggest manager of bond funds, said the dollar will weaken as the U.S. pumps “massive” amounts of money into the economy. The dollar will drop the most against emerging-market counterparts, Curtis A. Mewbourne, a Pimco portfolio manager, wrote in a report on the company’s Web site. The greenback is losing its status as the world’s reserve currency, he said.
“Investors should consider whether it makes sense to take advantage of any periods of U.S. dollar strength to diversify their currency exposure,” Mewbourne wrote in his August Emerging Markets Watch report. “The massive amounts of U.S. dollar liquidity produced in response to the crisis” have helped reduce demand for the currency, he wrote.
The Dollar Index, which tracks the greenback against a basket of currencies. It has fallen 12 percent from this year’s high in March as U.S. authorities pledged $12.8 trillion to combat the recession. China, the world’s largest holder of foreign-currency reserves, and Russia have both called for a new global currency to replace the dollar as the dominant place to store reserves.
“While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative,” Mewbourne wrote. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a3shh_XJwwH8
-Goldman Says Short Dollar Versus Loonie on Growth. Goldman Sachs Group Inc. said to short the U.S. dollar against its Canadian counterpart with a robust economic recovery unlikely and rising oil prices expected to benefit the Canadian currency.
The firm recommended establishing a short position, or bet that the U.S. currency will decline, with a target price of C$1.06. The position should be closed if the Canadian dollar weakens to about C$1.11. One Canadian dollar purchases 91.93 U.S. cents.
The U.S. dollar will remain weak as the economy does “not improve sufficiently this year for foreign investors to consider sizable” investments, according to a Goldman research note today. Canada’s currency will appreciate as oil prices rise, the note said. Crude oil for September delivery climbed above $70 a barrel this week and traded near the highest since June. Crude is Canada’s largest export.
The Canadian dollar has appreciated 12 percent against its U.S. counterpart so far this year. Bank of Canada Governor Mark Carney said at a July 23 conference that “the dollar is an important brake on the pace of growth right now” and that the bank “retains considerable flexibility” to use it “if necessary.” A stronger Canadian dollar squeezes exporters’ profits.
Canada’s central bank has not intervened in foreign- exchange markets to affect the dollar’s value since 1998 and Goldman is betting that will continue. “We doubt Canada as a G-7 nation will actively intervene to directly influence the exchange rate near current levels,” the note said. The Canadian currency is overvalued by 6 percent or 7 percent, the firm wrote, which is “not excessively strong.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aSfRYurrkWvw
WHAT’S DRIVING STOCKS HIGHER?
-Attempting to prevent a collapse of the financial markets, the Fed continues its program of quantitative easing (QE) with aggressive injections of money into the economy by purchasing over a trillion dollars worth of Treasury and agency debt and mortgage-backed securities.
The Fed intended to increase lending activity, yet the banks are simply building cash reserves. Like Japan’s experiment with QE, a massive injection of money into the banking system was almost simultaneous with a bounce in the country’s stock market.
Are investors really encouraged by economic reports and quarterly earnings that are “less bad” than anticipated? Or are false signs of recovery from government intervention propping up the stock market? With last week’s FOMC announcement that Fed purchases of Treasury debt will finish by the end of October and agency debt by year’s end, we may soon find out. Read more here-http://caseyresearch.com/displayCcs.php?e=true
BANKING CRISIS
-Toxic Loans Topping 5% May Push 150 Banks to Point of No Return. More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.
The number of banks exceeding the threshold more than doubled in the year through June, according to data compiled by Bloomberg, as real estate and credit-card defaults surged. Almost 300 reported 3 percent or more of their loans were nonperforming, a term for commercial and consumer debt that has stopped collecting interest or will no longer be paid in full.
The biggest banks with nonperforming loans of at least 5 percent include Wisconsin’s Marshall & Ilsley Corp. and Georgia’s Synovus Financial Corp., according to Bloomberg data. Among those exceeding 10 percent, the biggest in the 50 U.S. states was Michigan’s Flagstar Bancorp. All said in second- quarter filings they’re “well-capitalized” by regulatory standards, which means they’re considered financially sound.
“At a 3 percent level, I’d be concerned that there’s some underlying issue, and if they’re at 5 percent, chances are regulators have them classified as being in unsafe and unsound condition,” said Walter Mix, former commissioner of the California Department of Financial Institutions, and now a managing director of consulting firm LECG in Los Angeles. He wasn’t commenting on any specific banks.
Missed payments by consumers, builders and small businesses pushed 72 lenders into failure this year, the most since 1992. More collapses may lie ahead as the recession causes increased defaults and swells the confidential U.S. list of “problem banks,” which stood at 305 in the first quarter. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aTTT9jivRIWE
-Myron Scholes and Robert Merton shared the 1997 Nobel price for economics, and they are now united in calling for banks to give more accurate valuations on their illiquid assets. Financial institutions should use mark-to-market accounting or list the hard-to-value securities on public exchanges whenever possible, Scholes said in a Bloomberg Radio interview yesterday.
Scholes, winner of the Nobel with Merton for helping invent a model for pricing options, said investors need better data on prices to accurately value the debt and equity securities of banks. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=arI9M7cuFWjI
-Fed Says Banks Tightened Lending in Second Quarter. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=afw0L8L7C2UI
-FDIC May Add to Special Fees as Mounting Failures Drain Reserve. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aqxHLAHU_m2k
COLONIAL BANK-BIGGEST FAILURE SINCE WASHINGTON MUTUAL
-Colonial BancGroup Inc., the Alabama lender facing a criminal probe, had its banking operations closed by regulators and taken over by BB&T; Corp. in the biggest failure since Washington Mutual Inc. collapsed last year. Regulators also shut two companies in Arizona, one in Las Vegas and one in Pittsburgh, pushing the tally of failed banks this year to 77. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aOTAckySeznw or http://money.cnn.com/2009/08/14/news/companies/colonial_bancgroup/index.htm
DELINQUENCIES AT BANKS JUMPED IN THE LAST QUARTER
-On August 17, the Fed released its report on charge-offs and delinquencies that showed big jumps in all categories. The numbers are expressed as a percentage of the loans that are impaired. Delinquencies are loans where payment is over 30 days late. The chart below shows the delinquencies percentage for all loans to the second quarter of 2009. The number jumped to 6.49% and looks to be rising more. The level has exceeded the savings and loan crisis of 1991 when 745 were closed down.
To get an idea of just how serious this might be, I looked at the size of all loans in all banks, which is $6.9 trillion (Federal Reserve report H.8). Multiplying by the percentage of loans that are delinquent yields $448 billion. If half these loans are complete losses and the rest is completely recovered, then only half is the realized loss. That would be $224 billion. The difference between assets and liabilities of the banks is $1.2 trillion. The ratio of losses to this book value is just under 20%.
Some banks cannot afford to lose 20% of their capital base. If a bank already is highly leveraged, this loss could make them undercapitalized and too weak to continue. Obviously others will do just fine. Sometimes it is said that if a bank has 5% charge-offs, it may be ready for takeover. Hundreds of banks will likely be closing in the year ahead. And we start with a bankrupt FDIC to cover hundreds of billions of losses. Casey’s Daily Dispatch
U.S. DEFICIT AT RECORD $1.5 TRILLION-BALANCE SHEET
-A fiscal year 2009 deficit of $1.8 trillion was anticipated by the White House, $1.7 trillion by Congress. Reaching that level would produce a deficit four times last year’s $459 billion deficit, just as Congress is considering health care overhaul plans that could cost $1 trillion over 10 years. Read more here-http://www.usatoday.com/news/washington/2009-08-10-deficit_N.htm
-Buffett Says Federal Debt Poses Risks to Economy. The U.S. must address the massive amounts of “monetary medicine” that have been pumped into the financial system and now pose threats to the world’s largest economy and its currency, billionaire Warren Buffett said.
The “gusher of federal money” has rescued the financial system and the U.S. economy is now on a slow path to recovery, Buffett wrote in a New York Times commentary yesterday. While he applauds measures adopted by the Federal Reserve and officials from the Bush and Obama administrations, Buffett says the U.S. is fiscally in “uncharted territory.”
The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts and infrastructure projects, while the Treasury and the Fed have spent billions more on separate programs to rescue financial institutions and resuscitate the banking system. The U.S. budget deficit is forecast to reach a record $1.841 trillion in the year that ends Sept. 30.
“Enormous dosages of monetary medicine continue to be administered and, before long, we will need to deal with their side effects,” Buffett, 78, said. “For now, most of those effects are invisible and could indeed remain latent for a long time. Still, their threat may be as ominous as that posed by the financial crisis itself.”
The “greenback emissions” will swell the deficit to 13 percent of gross domestic product this fiscal year, while net debt will increase to 56 percent of GDP, Buffett said. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=a9mG8NMzMGTw
-The size of the Federal Reserve’s balance sheet rose 2.3 percent as the central bank bought more U.S. Treasuries and mortgage-backed securities. Fed assets gained $46.2 billion to $2.06 trillion in the week that ended yesterday, the central bank said today in Washington. Holdings of mortgage-backed securities jumped $66.6 billion to $609.5 billion, and the Fed’s portfolio of U.S. Treasury securities increased $7.1 billion to $736.1 billion. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a0WcpWt3hD.s
FOREIGN PURCHASES OF U.S. ASSETS SLOW
-China reduces holdings in US debt. China reduced its holdings of US government debt by the largest margin in nearly nine years in June, according to data from the US Treasury. China holds more US government debt than any other country and cut its holdings of US securities by more that 3% in June.
Japan and the UK second and third largest holders of US debt increased their holdings over the same period. China’s holding of US debt is about 7% higher than at the turn of the year. Read more here-http://news.bbc.co.uk/2/hi/business/8207174.stm or http://www.gata.org/node/7703
-Cross-border flows of capital investments of all kinds have dramatically fallen off. The big picture, as reported in the United States Treasury’s International Capital (TIC) System, shows a decline in the 12-month sum of flows through June.
The annual sum peaked in August 2006 at just under $1.2 trillion of foreign capital flows. That number has collapsed to under $200 billion. The 12-month sum gives a better indication of the situation than the latest monthly data, because numbers jump around surprisingly. The data here were reported August 17, 2009. A big component of flows, investments in all long-term securities over the last 12 months, has dropped almost to zero.
And the composition of investments has shifted, with the world moving away from riskier assets towards Treasuries and government-supported agency debt.
An even closer look into the Treasury debt investment by foreigners shows a dramatic shift from longer-term paper of over one year duration to shorter-term T-bills:
The shift to three-month Treasury bills as the investment vehicle of choice is probably due to foreigners fearing that higher interest rates on the longer-term paper could cause their investments to decline. Perhaps investors also want the flexibility of redeploying their money in other places within a short period of time.
It could be from a lack of confidence in the long-term prospects for the U.S. dollar. Then there is even some speculation that excess dollars created by the Federal Reserve in swap transactions could perhaps be reinvested in short-term U.S. Treasuries to provide liquidity for the U.S. government. An important reason for slowing investments is that the U.S. trade deficit is becoming less negative.
That means foreigners have less money to reinvest in the U.S. from their trade surpluses. The investments of choice, away from the less secure and longer-term and into shorter-term, government-supported debt, suggest that the appetite of foreigners for U.S. investment is waning. Casey Daily Dispatch
BIS-VIEW OF THE FINANCIAL CRISIS
-Increasingly, it seems, we are not alone in our steady pessimism about how long it will take for this crisis be resolved. Bud Conrad, chief economist of Casey Research sent over the annual report from the Bank for International Settlements, along with a snippet summing up their view of the outlook for the economy.
So far, the crisis has developed in five more or less distinct stages of varying intensity, starting with the subprime mortgage-related turmoil between June 2007 and mid-March 2008 (Graph II.1). Following this first stage, during which the primary focus was on funding liquidity, bank losses and writedowns continued to accumulate as the cyclical deterioration slowly translated into renewed asset price weakness.
As a result, in the second stage of the crisis, from March to mid-September 2008, funding problems morphed into concerns about solvency, giving rise to the risk of outright bank failures. One such failure, the demise of Lehman Brothers on 15 September, triggered the third and most intense stage of the crisis: a global loss of confidence, arrested only after unprecedented and broad-based policy intervention.
Stage four, from late October 2008 to mid-March 2009, saw markets adjust to an increasingly gloomy global growth outlook amid uncertainties over the effects of ongoing government intervention in markets and the economy. Stage five, beginning in mid-March 2009, has been marked by signs that markets are starting to show some optimism in the face of still largely negative macroeconomic and financial news, even as true normalization the end of the crisis still appears some way off. Read report here-http://www.bis.org/publ/arpdf/ar2009e2.pdf
A NATION OF PART TIME WORKERS
-Here’s another vivid reason why the unemployment rate and the “10% question” is meaningless. The percentage of workers not working full time for “economic reasons” is nothing like it has been in the past. Today’s chart, put together by the Atlanta Fed, show how many of these forced part-time workers exist compared to the start of the recession. As you can see, we’ve almost doubled this number, which represents vastly higher numbers than in past recessions. Read more here-http://www.businessinsider.com/chart-of-the-day-part-time-for-economic-reasons-2009-8
REAL ESTATE-MORTGAGES-FORECLOSURES
-U.S. Homeowners Cut Asking Prices $27.8 Billion, Led by Nevada. U.S. homeowners cut their asking prices by $27.8 billion with some of the biggest reductions in Nevada and Florida, states hardest hit by the property slump, Trulia Inc. said.
Owners slashed prices by 15 percent in Nevada and by 13 percent in Florida and Arizona in the year through Aug. 1, the San Francisco-based real estate data provider said today. A quarter of home sellers lowered prices at least once, by an average of 10 percent.
“Sellers are resetting their expectations in line with falling prices,” Pete Flint, Trulia’s chief executive officer, said in an interview. “We’re still clearly in a downturn even though we’re coming out of it.”
The median U.S. price of an existing single-family house dropped a record 15.6 percent to $174,100 in the second quarter, according to the National Association of Realtors, whose figures date to 1979. Sales increased 11 percent for new homes and 3.6 percent for existing homes, Commerce Department and Realtors data show, as buyers took advantage of discounts.
Idaho had the second-biggest average reduction at 14 percent, while prices were trimmed 13 percent in Hawaii. The combined value of reductions was $27.1 billion in the year through July 1, Trulia said in its previous monthly report. Sellers of higher-priced properties in states that haven’t been hard-hit during the housing recession may be “catching up with the rest of the country,” Flint said. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid;=av0pts0otNRc
-Southern California Home Prices Fall on Foreclosures. Southern California house and condominium prices fell 23 percent in July from a year earlier as foreclosures dominated sales, MDA DataQuick said. The median price dropped to $268,000 from $348,000 a year earlier, the San Diego-based research company said today in a statement.
The number of homes sold increased almost 19 percent from a year earlier to 24,104 for Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties. “There’s still quite a bit of distress out there,” John Walsh, Dataquick’s president, said in a statement. “Even if we are at or near bottom, history suggests we could bounce along that bottom for quite a while.”
Foreclosures accounted for 43 percent of sales, down from 45 percent in June and from a peak of 57 percent in February, MDA DataQuick said. Foreclosures as a proportion of all sales hit the lowest since June 2008. Homes priced at $500,000 and above were 20 percent of transactions, compared with 15 percent in March.
The July median price rose 1 percent from June, the third consecutive monthly increase, according to MDA DataQuick. That was due in part to a larger share of home purchases financed with loans of more than $417,000. About 15 percent of transactions involved such loans, the highest in 11 months. Values are likely to fall more in expensive coastal areas as employers cut jobs in the recession and homeowners reduce asking prices, said MDA Dataquick analyst Andrew LePage. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aN3quz_Z5r8U
-Fed Extends TALF Program for Commercial Real Estate. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aGPi.Lptz2cE
-Manhattan Office Sales Ground to Halt in First Half, CBRE Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aqOtTXdNGV6Y
-U.S. Commercial Property Values Fall as Rent Declines Forecast. Commercial real estate values in the U.S. fell 27 percent in the year through June and rents for offices, shops and warehouse space may continue to drop through 2010 as the recession saps jobs and consumer spending.
The Moody’s/REAL Commercial Property Price Indices fell 1 percent in June and are down 36 percent from their October 2007 peak, Moody’s Investors Service said in a report today. A rebound isn’t likely until the second half of next year, the National Association of Realtors forecast in a separate report.
Unemployment of 9.4 percent, falling industrial production and a drop in consumer spending curbed property demand, NAR said. Falling rental income and scarce credit are hurting both landlords and investors in securities backed by commercial property loans. Defaults and late payments on commercial mortgage-backed securities may surpass 7 percent by year-end, according to research firm Reis Inc.
“It’s too soon to call the bottom,” said Connie Petruzziello, a Moody’s analyst and co-author of the commercial property price report. The 1 percent drop in Moody’s index is the smallest monthly decline since February, when it fell by 0.6 percent. The measure fell more than 7 percent in both April and May. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aQ9I9q6Z0DaM
-Mortgage Delinquencies Rise as U.S. Home Prices Fall. Americans fell behind on their mortgage payments at a record pace in the second quarter as job losses and falling real estate prices thwarted government efforts to stabilize the housing market.
The share of loans with one or more payments overdue rose to a seasonally adjusted 9.24 percent of all mortgages, an all- time high, from 9.12 percent in the first quarter, the Mortgage Bankers Association said in a report today. The inventory of homes in foreclosure increased to 4.3 percent, the most in three decades of data, and loans overdue by at least 90 days, the point at which foreclosure proceedings typically begin, rose to 7.97 percent, the highest on record.
“We’ve seen a significant drop in the problem with subprime loans and we’ve moved now to a problem with prime fixed-rate loans,” Jay Brinkmann, the Washington-based trade group’s chief economist, said in an interview. “Job losses are driving it, and we expect that to continue into next year.”
Homeowners fall behind on their mortgage payments when they lose their jobs, and declining prices mean they can’t sell to pay off loans, Brinkmann said. Companies have shed 5.7 million jobs since January 2008, the biggest employment loss since the Great Depression. The median U.S. home price fell 16 percent in the second quarter from a year earlier, the steepest drop on record, according to the National Association of Realtors. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a6Mmclxw1JSQ
-47 percent of South Florida homeowners underwater on mortgages. Read more here-http://www.miamiherald.com/news/breaking-news/v-print/story/1182855.html
-Florida’s population declined for the first time since 1946 as the housing-market collapse cut migration, research shows, making it harder for the state to balance a budget dependent on sales taxes. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aZOI02HF8V80
-U.K. home sellers lowered asking prices in August by the most in eight months as banks kept up the squeeze on credit, Rightmove Plc said. The average cost of a home fell 2.2 percent to 222,762 pounds ($367,808) after gaining 0.6 percent in July, the owner of the U.K.’s biggest residential property Web site said today in a statement. Prices in London dropped 3.8 percent.
“In spite of pent-up demand, the market and pricing is boxed in by restrictive lending criteria put in place to ration mortgages given the lack of funds available to lenders,” Miles Shipside, Rightmove’s commercial director, said in the statement. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aDaiwk_06wCc
© 2009, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – August 25, 2009
Posted by Worldwide Precious Metals on Tuesday, August 25, 2009
The Goldbugg Report – August 18, 2009
August 18, 2009
WORLD FINANCIAL REPORT ON RADIO AUG 14 2009 SHOW
-Inflation could force gold to be new global currency.
-“Global Equities Melt Down” (Internal memo from PMI)
-China Encourages Silver Bullion for Investment.
“Global Equities Melt Down”
(Internal memo from PMI)
This is the description used by two of our major Wholesale Suppliers in conversation with PMI Traders, early this Morning.
Equity Markets world wide are moving down. The catalyst seems to be, according to the media, “a lack of confidence in China”. We disagree!!
The true culprit is the “lack of confidence in the US Markets and the continued actions of the US Government”.
Commodities, across the board are showing a “Sea of Red”, as traders are scrambling for Cash.
This liquidation is also taking place in Gold, and Silver and for the Precious Metals; we expect this to be a very brief look at lower prices.
This should be an excellent opportunity for buying which could prove out to be very beneficial for your Customers over the longer term.
Trading Department – Precious Metals International, Ltd.
GOLD
-Gold rises 113.8% over five year period. There is an old saying that in the land of the blind, the one-eyed jack is king. Similarly, in the land of little or no yield and plunging asset values, there is something to be said for that which holds its own, as gold did in USAGOLD’s Annual Survey of Investments for 2009.
When viewing the chart, please keep in mind that it covers the 365 days from July through June. In years past, the midyear starting point for our survey has not provided any distinct advantage to our readers, but this year it happens to cover precisely what many believe to be the most destructive period in financial markets since the Great Depression. As a result, what you see here are the performance rankings for key investments since the full inception of the crisis during the summer of 2008.
It was a very bad year for investors. Stocks and real estate fared miserably down 17.05% and 25.58% respectively. Those losses were based on averages. In some cases and locales, the losses were substantially worse. Gold stocks seemed to take their cue from the larger stock market (rather than gold itself) dropping 18.88%.
The best places to be, other than the skyrocketing commodities complex (up 33.09%), were green (as in cash, cd’s and Treasuries) and gold (as in coins and bullion). The trend was away from risk and toward safety. This year’s successful investor kept in mind veteran market analyst Richard Russell’s admonition: “In a secular bear market, he who loses least wins.”
In the five-year survey, gold tops the rankings with a 113.8% return. Of its primary competitors only gold stocks and fine wine* mounted respectable challenges (up 68.5% and 112.86% respectively). Stocks (down 17.79%) and real estate (down 25.03%) were the big losers over the period.
Diversification is the hallmark of the prudent investor, and the past five years have provided ample proof of the principle. A stock purchase of $100,000 in 2005 would have been worth $82,210 in 2009. By contrast, a $100,000 purchase of gold coins and bullion in 2005 would have been valued at $213,800 by 2009 a swing in net worth difficult to ignore. Read more here-
http://news.goldseek.com/GoldSeek/1250003100.php
-Inflation could force gold to be new global currency. Read more here-http://business.asiaone.com/Business/My+Money/Opinion/Story/A1Story20090807-159804.html
-James Turk gold and silver commentary. Read more here-http://goldmoney.com/commentary-back-toward-support.html
-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1249844182.php
-Frank Holmes on why gold is poised to go higher and how he will help get it there. Read more here-http://www.thedailybell.com/bellpage.asp?nid=476&fl;
-’Managed devaluation’ will multiply gold price, report says. Paul Brodsky and Lee Quaintance, principals in QB Asset Management in New York, have published a fascinating report speculating that massive inflation in the United States will be required to restore solvency to the country’s banking system, that other countries will stop facilitating the export of U.S.
dollar inflation, that the “shadow” gold price is really approaching $6,000, and that to achieve the necessary inflation central banks will arrange a “managed devaluation” of the dollar bringing gold closer to its “shadow” price. The QB report thus echoes much of what the British economist Peter Millar of Valu-Trac Investment Research wrote in his own report in 2006. Read more here-http://www.gata.org/node/7673
-Forget the monsoon, India’s gold imports set to bounce. Read more here-http://in.reuters.com/article/businessNews/idINIndia-41684020090811?pageNumber=1&virtualBrandChannel;=11584
SILVER
Gold to silver ratio at 80 to 1 with gold at $2,900 the silver price would be $36.25
Gold to silver ratio at 70 to 1 with gold at $2,900 the silver price would be $41.43
Gold to silver ratio at 60 to 1 with gold at $2,900 the silver price would be $48.33
Gold to silver ratio at 50 to 1 with gold at $2,900 the silver price would be $58.00
Gold to silver ratio at 40 to 1 with gold at $2,900 the silver price would be $72.50
Gold to silver ratio at 30 to 1 with gold at $2,900 the silver price would be $96.67
Gold to silver ratio at 20 to 1 with gold at $2,900 the silver price would be $145.00
Gold to silver ratio at 15 to 1 with gold at $2,900 the silver price would be $193.33
-China Encourages Silver Bullion for Investment. Watch video here-http://news.silverseek.com/SilverSeek/1249958982.php
-David Morgan silver commentary. Read more here-http://news.silverseek.com/SilverInvestor/1249613056.php
-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1249843696.php
-Roland Watson silver market update. Read more here-http://news.silverseek.com/SilverSeek/1249659630.php
-Is Silver Overvalued, Undervalued Or Priced Just Right? Read more here-http://news.silverseek.com/SilverSeek/1250038800.php
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Home Prices Collapsing Even Faster. The Case-Shiller has been signalling an improvement in the second derivative of housing prices for a few months, and in the latest report it even showed a sequential increase. But check out the NAR’s numbers for all of Q2. The year-over-year drop in the median sales price of single family homes showed its worst decline ever. They didn’t even have a second derivative gain improvement. Read more here-http://www.businessinsider.com/chart-of-the-day-sales-price-of-existing-homes-2009-8
-Chart of the week: Foreclosures Still Concentrated In The Bubble States. There are some signs that the foreclosure crisis is spreading across the country. Kansas foreclosures doubled, for example. But in the meantime, they still reside in four huge, bubble states California, Arizona, Nevada, and Florida, though they are only now starting to show signs of flattening. Read more here-http://www.businessinsider.com/chart-of-the-day-foreclosures-in-four-states-2009-8
-“I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. Corporations have been enthroned, an era of corruption in high places will follow, and the money-power of the country will endeavour to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic is destroyed.” Abraham Lincoln
-It is well that the people of the nation do not understand our banking system, for if they did, I believe there would be a revolution before tomorrow morning. Henry Ford
-Inflationism is a dreadful cancer that is gnawing at the backbone of the civilized order. Hans F. Sennholz-Bio here-http://en.wikipedia.org/wiki/Hans_Sennholz
-With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people. Friedrich von Hayek-Bio here-http://en.wikipedia.org/wiki/Friedrich_Hayek
-“ With a global recovery unlikely to be smooth, the two main risks to most asset values are inflation and the U.S. dollar both of which are decisively gold positive.” Daniel Sacks, Investec Global Gold Fund manager-Read more here-http://www.theglobeandmail.com/globe-investor/gold-may-hit-record-this-year-on-inflation-fears/article1247874/
-New European gold sales agreement cuts quota. European central banks agreed to a third five-year cap on gold sales and said planned disposals by the International Monetary Fund could be done within the accord.
The European Central Bank and 18 other banks agreed to sell no more than a combined 400 metric tons of the metal a year through September 2014. That’s less than the annual cap of 500 tons in the current agreement, which expires Sept. 26.
“It’s positive for gold,” John Reade, an analyst at UBS AG in London, said by e-mail. The agreement “removes the small chance that European central banks would have dumped gold onto the market in an unconstrained manner.”
Central banks sold 73 percent less gold in the first half and full-year disposals may drop to the lowest since 1994, according to estimates from London-based researcher GFMS Ltd. The IMF wants to sell 403 tons from its reserves of 3,217 tons, the third-largest holding after the U.S. and Germany. Read more here-http://www.gata.org/node/7668 or http://www.gata.org/node/7671 or http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=87265&sn;=Detail
-Tangibles are growing in strength. From the metals, natural resources, energy and food, these markets are rebounding strongly and they’re poised to continue rising in the years ahead. Demand is the driving force, making commodities a powerful market. The Chinese are astute investors. They’re buying up lots of hard assets and commodities for infrastructure, and they’re using their dollar reserves to buy these goods.
The world is on sale and China is the main buyer. The Chinese have already been focusing on resource rich developing countries, and less on monetary investments. They’re using their reserves to support and speed up overseas expansion and acquisitions by Chinese companies.
This is a growing tendency, and it’s not just China. Other countries are doing the same to lock in natural resources for the future. China’s economy is showing impressive strength, boosting raw materials’ consumption even more. Top Chinese officials have been commenting about this in recent weeks.
A research chief, for example, said China should buy gold and U.S. real estate instead of Treasuries. Another top economic official said China should use more of its $2 trillion reserves to buy energy and natural resources. He also believes their 2% gold reserve is too small, even though China has already increased their gold reserves about 75% over the last five years.
As for gold, its main purpose is money. Gold is the ultimate currency, it’s a safe haven and it thrives during economic uncertainty. Gold and commodities tend to move together in a general wave but it will outperform or underperform the other metals and commodities at times.
China is on the mend and its plans to add more gold to its reserves is very bullish for gold. China could easily overtake India in gold consumption this year, especially since it’s the first nation to rebound from the global recession. Aden Sisters-Read more here-http://www.kitco.com/ind/Aden/aden_aug132009.html
-Marc Faber, why the U.S. has a good chance of hyperinflation. Watch video here-http://articles.moneycentral.msn.com/video/default-ap.aspx?cp-documentid=746c9f1c-e6ce-4fc1-821f-934207a242f5%26tab=Market%20News or http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/a-pessimists-prediction-hyperinflation.aspx?page=all
-The global economy still faces turmoil as government try to figure out how to move out of fiscal rescue packages, which could lead to another two downturns, Deutsche Bank Chief Economist Norbert Walter said Thursday.
In addition, nervousness on the part of major dollar holders could pressure the greenback and lead to a very worrying 2010, Walter said. Norbert said recently in research notes “the world is in trouble.”
“I believe that the rescue packages brought on have been so costly for so many governments that the exit from this fiscal policy will be very painful, very painful indeed,” he said. “Some of us are already talking about a W-shaped recovery. I’d probably talk about a triple-U-shaped recovery because there are so many stumbling blocks here to get out of this.” Read more here-http://www.cnbc.com/id/32396144/
-Taleb: You Fools Don’t Understand That We’re Doomed. Watch video here-http://www.businessinsider.com/henry-blodget-taleb-you-fools-dont-understand-that-were-doomed-2009-8
-Entering the Greatest Depression in History. More Bubbles Waiting to Burst. After the last Great Depression, Keynesian economists emerged victorious in proposing that a nation must spend its way out of crisis. This time around, they will be proven wrong. The world is a very different place now. Loose credit, easy spending and massive debt is what has led the world to the current economic crisis, spending is not the way out.
The world has been functioning on a debt based global economy. This debt based monetary system, controlled and operated by the global central banking system, of which the apex is the Bank for International Settlements, is unsustainable. This is the real bubble, the debt bubble. When it bursts, and it will burst, the world will enter into the Greatest Depression in world history. Read more here-http://www.globalresearch.ca/index.php?context=va&aid;=14680
-Bank of England: recession was deeper than feared and recovery will be slow. The Bank of England warned today that Britain’s recession was deeper than feared and a recovery is likely to be slow and protracted. Read more here-http://www.telegraph.co.uk/finance/financetopics/recession/6015063/Bank-of-England-recession-was-deeper-than-feared-and-recovery-will-be-slow.html
-U.K. Unemployment Climbs to Highest Level in 14 Years. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aqN.ge6TftbY
-UK risks a Japan-style lost decade, BoE will warn. Britain has not yet shaken off the risk of slumping into a Japan-style “lost decade”, the Bank of England will this week indicate as it downgrades its growth forecasts, and casts deflation as a significant threat. Read more here-http://www.telegraph.co.uk/finance/economics/6001261/UK-risks-a-Japan-style-lost-decade-BoE-will-warn.html
-‘Lost Couple of Decades’ Looming for U.S. Economy. The U.S. economy may be just as sluggish during the next 20 years as Japan’s economy was in the last 20, according to Comstock Partners, a money manager founded and run by Charles Minter. Stimulus programs and a surging money supply aren’t likely to “solve a problem of excess debt generation that resulted from greed and living way beyond our means,” the firm wrote yesterday in an unsigned report on its Web site.
“We could wind up with a lost couple of decades.” The U.S. is headed for “a deleveraging period” in which the amount of so-called private debt, including consumer borrowing, collapses as government borrowing explodes, Comstock wrote. Assuming that private borrowers pay down debt at the same pace as they did in Japan after its 1980s economic bubble burst, the savings rate will climb to about 10 percent in 2018, the report said. The estimate was made in a study by the Federal Reserve Bank of San Francisco that Comstock cited.
It’s more than double the 4.6 percent rate for June. Citing the study in addition to its own research, Comstock wrote that reduced borrowing may curtail growth in U.S. consumer spending by 0.75 percentage point annually on average during the next nine years. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aX39_VW6pf3U
-Retail Sales in U.S. Unexpectedly Declined in July. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aqQ7lelIST9g
-Poor sales lead to shuttered U.S. stores. Small business owners say weak spending is their biggest problem, according to a new survey and few see improvement on the horizon. Read more here-http://money.cnn.com/2009/08/11/smallbusiness/poor_small_business_sales.smb/index.htm
-Over 30,000 U.K. firms in danger of failing by end of 2010. Analysts predict that over 30,000 companies could go into liquidation before the end of next year, after official figures showed that company failures have reached their highest ever level. Read more here-http://www.telegraph.co.uk/finance/financetopics/recession/5990424/Over-30000-firms-in-danger-of-failing-by-end-of-2010.html
-Consumer, Celebrity Bankruptcies May Hit 1.4 Million. Consumer bankruptcies show no sign of abating after rising more than a third this year and may hit 1.4 million by Dec. 31 as jobs are lost and loans are harder to get, according to the American Bankruptcy Institute.
More than 126,000 consumers filed for bankruptcy in the U.S. last month, 34 percent more than in July 2008, the ABI said in its latest report on Aug. 4. The increase came after a 36.5 percent rise in personal bankruptcies nationwide in the first six months, to 675,351, according to the ABI research group, which interprets data collected by the National Bankruptcy Research Center.
“Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,” ABI Executive Director Samuel Gerdano said in a statement. The group, composed of lawyers, accountants, bankers and judges, is based in Alexandria, Virginia.
Debt problems don’t stop with sub-prime borrowers. Celebrities who filed for bankruptcy in July included movie actor Stephen Baldwin, who sought protection from creditors after lenders began foreclosure procedures against his home. Lenny Dykstra filed for Chapter 11 bankruptcy in a petition that says the former Major League Baseball All-Star owes between $10 million and $50 million. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=au04p.PrHKhA
-IMF puts total cost of crisis at £7.1 trillion. The cost of mopping up after the world financial crisis has come to $11.9 trillion (£7.12 trillion) enough to finance a £1,779 handout for every man, woman and child on the planet. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5995810/IMF-puts-total-cost-of-crisis-at-7.1-trillion.html
or http://www.thedailybell.com/bellpage.asp?nid=479&fl;=1
-A special report on ageing populations. Age is creeping up on the world, and any moment now it will begin to show. The consequences will be scary. Read more here-
http://www.economist.com/opinion/displaystory.cfm?story_id=13888045
-Israeli paper says strike on Iran could delay bomb. A major Israeli newspaper ran a front-page story on Wednesday quoting an unidentified “senior defence official” as saying Israel believed a military strike could disrupt what it says is an Iranian nuclear arms programme.
Under a photograph of Israeli Prime Minister Benjamin Netanyahu sitting the previous day in the cockpit of an F-15I long-range fighter-bomber, mass-selling Maariv quoted the official as saying Israel could carry out such a strike without U.S. approval but time was running out for it to be effective. Read more here-http://in.reuters.com/article/oilRpt/idINLC60776820090812
-10 biggest CEO paychecks. Including salary, bonuses, stock and options, these public company CEOs took home pay packages last year worth up to $104 million. Read more here-
http://money.cnn.com/galleries/2009/news/0904/gallery.biggest_ceo_paychecks/index.html or http://www.reuters.com/article/businessNews/idUSTRE57C5AX20090813?feedType=RSS&feedName;=businessNews&rpc;=23&sp;=true
-Back-to-School Shopping Trip Means $999 Bill. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aj5kO8T.h8Aw
-Vintage Bugatti Le Mans Racer May Fetch $3.4 Million at Auction. One of the earliest Bugatti racing cars is expected to fetch up to 2.4 million euros ($3.4 million) at a sale in France, said auction house Bonhams.
The 5-liter “Type 18” was driven by the manufacturer’s eponymous founder, Ettore, at Le Mans in 1912. It will be a highlight of the inaugural sale by Bonhams at the annual “Weekend de l’Excellence Automobile” at Reims on Sept. 26. Read more here-http://www.bloomberg.com/apps/news?pid=20601088&sid;=acT_DRdmJljk
RARE COLOURED 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/HistoricalPriceTrackingsystem.html
-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html
-Every Argyle pink diamond is 100% natural in colour and clarity. None are ever altered in any way. The transformation from rough diamond to polished stone is managed by Argyle Pink Diamonds’ artisans, and Argyle remains sole custodian from the day it is unearthed until the day it is sold as a polished diamond. Argylepinkdiamonds.com.au
-The process of preparing an Argyle pink diamond for sale is a specialised one. A team of highly trained artisans spend time ‘listening to the stone’, so to speak, before deciding how best to unlock its colour and brilliance with its cut.
The importance of their judgement can’t be underestimated, as the cut can affect the fire or scintillation of the diamond, while colour may be lost if too much of the diamond is polished away. Polished with such artistry and passion it’s no wonder an Argyle pink diamond fascinates like no other. Argylepinkdiamonds.com.au
-Argyle pink diamonds are rare; in fact they are beyond rare. With just an estimated decade of supply remaining in the mine, as time passes the Argyle pink diamond becomes evermore precious. Exactly what gives a pink diamond its color is largely unknown and the subject of ongoing debate, but it’s this intrigue that adds a delightful inimitability to each stone.
It is thought that pink diamonds obtain their colour as a result of pressure beneath the Earth’s surface. As pressure raises the diamond closer to the surface, it is believed that its structure becomes altered, thus absorbing light and producing color.
What is known is that from one hundred miles deep within the Earth’s surface comes the treasure that is the pink diamond. It is so remarkable that nothing compares to its colour and brilliance, and it is substantially more valuable than its white diamond equivalent.
Although the Argyle mine supplies approximately ninety percent of the world’s pink diamonds, astonishingly, a whole year’s worth of production of stones over half a carat would fit in the palm of your hand. The larger rare violet diamonds would barely fill a teaspoon.
They are highly sought after by investors, jewellers and their customers, celebrities, and diamond aficionados. They are prized by all who possess them and revered for their unique provenance, intrinsic beauty and extreme rarity. Argylepinkdiamonds.com.au
-About Argyle Pink Diamonds. Pink Diamonds, produced at Rio Tinto’s Argyle Mine in Western Australia, are highly coveted as the world’s most sought after gems. The Argyle Diamond mine produces more than 90 per cent of the world’s pink diamonds, which are sold in a broad range of colors and sizes to an international customer base. The best stones are reserved for the annual Pink Diamond Tender.
Rio Tinto’s Argyle Pink Diamonds business is located in Perth, Western Australia, alongside its cutting and polishing factory. Pink diamonds’ value is directly related to their rarity. For every colored diamond, there exist at least 10,000 colorless ones because the physical conditions needed to color a diamond naturally occur very scarcely.
Rio Tinto’s Argyle mine occupies the traditional land of the Gidja and Mirriuwong speaking people and neighboring language groups who have a very different view on how the Argyle diamonds became colored.
The Aboriginal people believe that the Argyle mine was created when three women were trying to trap a barramundi fish, however the barramundi was too clever and jumped through the net and landed at the site where the mine was established. It is believed that the colors of the diamonds come from different parts of the barramundi as the fish wiggled through the net, with the pink diamonds coming from the heart of the barramundi. Diamonds.net-https://www.argylepinkdiamonds.com.au/en/docs/Press%20release%20Pink%20tender%209%20Aug.pdf
-About Rio Tinto’s Argyle Diamond Mine. Rio Tinto’s Argyle Diamond mine (100% owned by Rio Tinto), in Australia, is the world’s only consistent supplier of rare pink diamonds and provides a large proportion of the world’s colored diamonds. Production commenced in 1983 and at its peak the mine produced more than 40 million carats per annum.
The discovery of the Argyle diamond deposit is one of innovation, patience, foresight and meticulous attention to detail in an area that is remote, even for Australians. The search for diamonds in the Kimberley region began in 1972 with a number of exciting finds proving uneconomic. However, in October 1979 diamonds were found embedded in an ant hill in the East Kimberley region of Western Australia.
In a classic exploration exercise these discoveries were followed up along a creek bed and led to what is known as the AK1 pipe, the remnant of an ancient volcano and the site of the vast Argyle deposit. Today most of the valley floor is occupied by the Argyle open pit. The Argyle Diamond mine is currently transitioning from an open pit mine to an underground mine, which on current estimates will extend its life to 2018. Diamonds.net-https://www.argylepinkdiamonds.com.au/en/docs/Press%20release%20Pink%20tender%209%20Aug.pdf
-Rare “vivid pink” diamond could break sale record. A rare, 5-carat pink diamond will be sold in Hong Kong this December by Christie’s, which expects the stone to hover near world record prices, thanks in part to the buying prowess of top Asian jewellery collectors.
The stone, set in a so-called “cushion-cut” ring by famed jewellers Graff Diamonds, is expected to fetch between $5-$7 million, in reach of the current world auction record for a pink diamond a 19.66-carat stone that sold in Geneva for $7.4 million in 1994.
While just a quarter the size of the record-holding pink gem and not quite flawless, the stone’s “vivid pink” is considered near perfect and the auction house has touted it as one of the best colored stones to appear in recent years.
“There are pink diamonds and then there are pink diamonds,” said Francois Curiel, the international head of Christie’s jewellery department. “It is extremely rare for a stone of such top quality to appear on the market with top notes in color, cut, clarity and carat weight. This 5-carat vivid pink gem combines the best of all criteria,” Curiel added.
While the South African-mined diamond isn’t quite rated flawless given minor blemishes, Christie’s said that these could be removed by minor repolishing. Christie’s has a track-record of putting rare polished stones up for sale in Asia, given its confidence in the depth of the Asian market for the world’s top gemstones and artwork.
While the world’s most expensive jewel ever sold at auction is the “Wittelsbach” blue diamond, a 17th-century deep greyish-blue stone that fetched $24 million last year, top red and pink gemstones are also known for stratospheric valuations. “In the fascinating realm of natural color diamonds, those of a distinct pink hue are among the rarest and most sought after,” Christie’s said. Read more here-http://www.reuters.com/article/lifestyleMolt/idUSTRE5720ZO20090803
COMMODITIES-OIL
-Credit Suisse forecasts growth period for long-term commodity demand. Credit Suisse analysts say they continue to like the long-term story for metal demand, suggesting demand will remain at strong levels in the next 10-15 years. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page67?oid=87321&sn;=Detail
-Is U.S. ‘cash for clunkers’ program salvaging metals prices. Since the U.S. car scrappage scheme started last month, the spot price for aluminum is up 11%. palladium has increased 5% and platinum’s up 6%. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=87373&sn;=Detail
-Crude Oil May Climb to $95 in Early 2010: Technical Analysis. Crude oil may reach $95 a barrel by early next year after rising to a seven-week high this week, according to technical analysis by Auerbach Grayson.
Oil is set to reach $83 a barrel, which corresponds with the 38.2 percent Fibonacci retracement of the range generated by the September contract’s high of $145.96 on July 14, 2008, and the low of $44.28 touched on Feb. 18. The next target of $95 would be a 50 percent retracement.
“The oil market is in a strong position for a further move to the upside,” Richard Ross, a technical analyst at Auerbach Grayson, a brokerage in New York, said in a telephone interview. “There was a 70 percent pullback from the peak last summer to the trough. A 50 percent retracement brings you right to $95.” Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid;=a.iYx2FpVhsc
-T. Boone Pickens: I’m long oil. Oil man turned wind power fan T. Boone Pickens sees the price of a barrel of oil rising slightly to $75 by the end of this year and $85 next year. “I’m long oil,” said Pickens in an interview on the sidelines of U.S. Senate Majority Leader and Nevada Democrat Harry Reid’s National Clean Energy Summit, a meeting of industry leaders and policy makers. Pickens has written a blueprint for U.S. energy policy, called the Pickens Plan, that focuses on converting heavy vehicles like big long-distance trucks, to natural gas. Read more here-http://www.reuters.com/article/ousiv/idUSTRE5795OP20090811
-Pemex Needs Oil at $70/Barrel to Sustain Projects. Petroleos Mexicanos, Mexico’s state- run oil company, needs oil to average above $70 a barrel to sustain a $19.5 billion investment plan this year aimed at developing deep-sea wells, Energy Minister Georgina Kessel said.
“Pemex needs to maintain its current levels of investment to develop its reserves,” Kessel, who is also the oil producer’s chairwoman, said in an interview yesterday. “Prices above $70 to $75 a barrel are appropriate to help develop those projects.”
Latin America’s largest oil producer plans to spend a record amount this year and $20 billion annually next year through 2012 to fund exploration in waters deeper than 500 meters (1,640 feet) and at its Chicontepec development. Output is slumping as production at Cantarell, the company’s largest field, drops at a rate twice as fast as Pemex forecast after last year falling the most since 1942. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=asGzrQaF6XmY
-Suncor Shuts Alberta Refinery for 2nd Time in a Month. Suncor Energy Inc. shut units at its Edmonton oil refinery in Canada for the second time in a month and Royal Dutch Shell Plc reported a fault at its Alberta plant, cutting fuel supply just as the region recovers from shortages.
Suncor shut units yesterday after the facility lost steam and hydrogen, the Calgary-based company said in a message on a community hotline. Black smoke was released from the “upset,” the message said. Hydrogen is essential for diesel production. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aWoZOy1EXd9c
U.S. DEFICIT-DEBT-TRADE GAP
-U.S. Posted Record Year-to-Date Budget Gap in July. The U.S. budget deficit reached a record for the first 10 months of the fiscal year and broke a monthly high for July as the recession curbed revenue and the government ramped up spending to rejuvenate the economy.
The shortfall so far for the fiscal year that ends Sept. 30 totalled $1.27 trillion compared with a $389 billion year-to-date gap in 2008, the Treasury said today in Washington. The excess of spending over revenue for July climbed to $180.7 billion compared with a $102.8 billion gap in July 2008 as the government spent more than in any month in U.S. history.
Tax receipts are sliding and spending is surging even as some economists say the recession may have ended. The government is trying to spark business and consumer spending through a $787 billion stimulus plan spanning tax cuts, infrastructure projects and a goal to create or save 3.5 million jobs. President Barack Obama also is pushing a health-care overhaul that may cost $1 trillion over a decade.
“Spending is bound to increase as the year goes along” and money from the stimulus package is distributed, said Stan Collender, managing director of Qorvis Communications in Washington and a former U.S. House and Senate Budget Committee analyst. “That’s good news given the state of the economy. You want to do that, to get the recovery going.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aFygL0KuxEEo
-Soaring deficit may defy forecasts. Stagnant unemployment, shrinking tax revenue and a struggling economy threaten to quadruple the size of last year’s federal budget deficit, raising more questions about the timing of costly proposals to overhaul health care. As the White House and Congressional Budget Office (CBO) prepare to release new deficit estimates this month, several economists say the news is likely to be as bad as or worse than forecasts.
“This is going to be a very depressing outlook,” predicts former CBO director Douglas Holtz-Eakin, top adviser to Republican John McCain in last year’s presidential election. “They have just a nightmare in terms of these health care bills, which do nothing but make things worse.”
A fiscal year 2009 deficit of $1.8 trillion was anticipated by the White House, $1.7 trillion by Congress. Reaching that level would produce a deficit four times last year’s $459 billion deficit, just as Congress is considering health care overhaul plans that could cost $1 trillion over 10 years.
Lawmakers are struggling to pay for a plan with a mix of tax increases on upper-income people and Medicare spending reductions aimed at doctors, hospitals, drugmakers and insurers. Some town-hall forums across the U.S. this month have been disrupted by protests for and against proposals.
While revenue continues to decline, government spending is rising as a result of the $787 billion economic stimulus plan passed six months ago. Stimulus spending will increase in the next few months, says Treasury chief economist Alan Krueger.
Deficits of $1.8 trillion this year and $1.3 trillion in 2010, as predicted by the White House, would add to the federal debt. The current $11.7 trillion debt already equals about $38,500 for every U.S. resident. The recession, now in its postwar-record 21st month, has dealt a worse blow to the budget than the administration expected:
• The economy is set to shrink by 2.6% this year, more than twice what the White House predicted in February and May.
• As a result, tax revenue is down by $353 billion over 10 months, which is about what the White House thought it would lose for the entire year.
• Unemployment, projected at 8.1% this year by the White House, was 9.4% in July. Spending for jobless benefits, Medicaid and Medicare has soared as people have lost work and health insurance. Jobless benefits are costing more than twice what was spent last year.
“The deficit picture is very challenging,” White House budget director Peter Orszag wrote on his blog last month. Sen. Judd Gregg, R-N.H., top Republican on the Senate Budget Committee, says having a deficit at “previously unthinkable levels shows an incredible lack of fiscal responsibility.”
Former CBO director Robert Reischauer, president of the non-partisan Urban Institute, an economics and social policy think tank, says administrations tend to believe that “the harder and faster one falls, the more rapid and steep the recovery.” Read more here-http://www.usatoday.com/news/washington/2009-08-10-deficit_N.htm
-Drowning in debt: Obama’s spending and borrowing leaves U.S. gasping for air. Read more here-http://www.nydailynews.com/opinions/2009/08/09/2009-08-09_drowning_in_debt_obamas_spending_and_borrowing_leaves_us_gasping_for_air.html?print=1&page;=all
-A runaway deficit may soon test Obama’s luck. Read more here-http://www.ft.com/cms/s/0/c24385ce-85ef-11de-98de-00144feabdc0.html
-U.S. Economy: Trade Gap Widens Less Than Forecast on Exports. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=amQbR0Kx3RjM
-The Biggest Holders of US Government Debt. Watch slideshow here-http://www.cnbc.com/id/29880401?slide=16
-Fiscal Meltdown! Hopefully deficits don’t matter, because if they do, then boy are we screwed. Today’s chart was put together by Diapason Securities analyst Sean Corrigan (via Alphaville), and it shows the stunning rise of outlays and similar collapse in receipts. The blue line is the real killer, though, as it shows just how meagre our tax revenue is compared to outlays. Read more here-http://www.businessinsider.com/chart-of-the-day-fiscal-meltdown-2009-8
GEITHNER ASKS CONGRESS FOR HIGHER U.S. DEBT LIMIT
-U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.
“It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,” Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.
A Treasury spokeswoman declined to comment on the letter. Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner’s letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway.
The latest request comes as the Treasury is ramping up borrowing to unprecedented levels to fund stimulus and financial bailout programs and cope with a deep recession that has devastated tax revenues. It is expected to issue net new debt of as much as $2 trillion in the 2009 fiscal year ended September 30 and up to $1.6 trillion in the 2010 fiscal year, according to bond dealer forecasts. Read more here-http://www.reuters.com/article/newsOne/idUSTRE57706N20090808 or http://online.wsj.com/article/SB124970470294516541.html
BANKING CRISIS-NO END IN SIGHT-TOXIC ASSETS
-U.S. Bank Failures Rise to 72 With Collapses in Florida, Oregon. U.S. bank failures rose to 72 this year with the collapse of two lenders in Florida and one in Oregon amid the worst economic slump since the Great Depression.
Regulators shut First State Bank and Community National Bank, both based in Sarasota, Florida, and Community First Bank in Prineville, Oregon, the Federal Deposit Insurance Corp. said in statements yesterday. The FDIC was named receiver. Closing the lenders, with combined assets of $769 million and deposits of $662 million, will cost the deposit insurance fund about $185 million.
Regulators are closing banks at the fastest pace in 17 years as losses mount from unpaid real-estate debt. The FDIC is offering to share losses with potential buyers, reviving a practice used during the U.S. savings-and-loan crisis in the late 1980s. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3r00w0QCe64
-TARP Panel Says Smaller Banks May Need Fresh Capital. Regional and some smaller U.S. banks may need $12 billion to $14 billion in additional capital to cope with troubled loans still on their books, the Congressional Oversight Panel said today in a monthly report.
The panel, which reports to lawmakers and was created to monitor the $700 billion Troubled Asset Relief Program, said the biggest U.S. banks appear prepared to handle more loan losses, particularly the 19 banks that regulators put through stress tests earlier this year. Banks with assets of $600 million to $100 billion may face bigger challenges, the panel said.
Banks of that size “will need to raise significantly more capital, as the estimated losses will outstrip the projected revenue and reserves,” the report said, citing its own loan analysis. The panel is led by Elizabeth Warren, a law professor at Harvard University. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=ai2h2tlUTCjY
-Bad assets may need more support. The U.S. Treasury Department should consider expanding programs to cleanse troubled assets from bank balance sheets if current efforts fail to restart markets or if economic conditions worsen, a U.S. bailout watchdog panel said on Tuesday.
The Congressional Oversight Panel said in its latest monthly report that toxic loans and securities continue to pose a threat to the financial system, particularly for smaller banks that face mounting losses on commercial real estate loans. These banks may need similar stress tests and capital support afforded to larger institutions, the panel added.
It also advocated that stress tests for the largest 19 institutions be repeated if the economy worsens beyond the worst-case assumptions used in initial tests conducted in April. Despite improved financial market conditions, the panel said a “continuing uncertainty is whether the troubled assets that remain on bank balance sheets can again become the trigger for instability.” Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE57A0JO20090811 or http://money.cnn.com/2009/08/11/news/economy/TARP_report/index.htm?postversion=2009081103
-Next Bubble to Burst Is Banks’ Big Loan Values. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&sid;=a04oVutXQybk
-Old Banks, New Lending Tricks. Lenders haven’t sworn off risky financial products. They’ve come up with a slew of new ones. That didn’t take long. The economy hasn’t yet recovered from the implosion of risky investments that led to the worst recession in decades and already some of the world’s biggest banks are peddling a new generation of dicey products to corporations, consumers, and investors. Read more here-http://www.businessweek.com/print/magazine/content/09_33/b4143020536818.htm
UNEMPLOYMENT
-Beware the government’s job figures. In a phone conversation yesterday, John Williams at Shadow Government Statistics warned me not to read too much good news from the better-than-expected jobs figure. The government’s seasonal adjustments aren’t, well, adjusting properly. They’re still keying off “typical” fluctuations in employment.
But of course today’s economic climate is anything but typical. Yesterday the official unemployment rate ticked down a tenth of a percent to 9.4%, but according to Williams it should have ticked up a tenth of a percent to 9.6%. Read more here-http://blogs.reuters.com/rolfe-winkler/2009/08/08/beware-the-jobs-number/
-The number of Americans filing first-time claims for jobless benefits unexpectedly rose last week, while the number of people on unemployment rolls dropped to the lowest since April, signalling the labour market may be stabilizing as the recession eases.
Applications rose to 558,000 in the week ended Aug. 8 from a revised 554,000 the week before, the Labour Department said today in Washington, while staying under 600,000 for a sixth time. The number of people collecting unemployment benefits fell by 141,000 in the week ended Aug. 1 to 6.2 million. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=azzuTZ4KgoU0
-U.S. State unemployment rates continue to climb. Read more here-http://www.examiner.com/x-2508-Frugal-Family-Examiner~y2009m8d9-State-unemployment-rates-continue-to-climb
-The Labour Department reported that the unemployment rate actually decreased from 9.5% to 9.4% during July. This is the first decrease in the unemployment rate since April 2008. For some perspective on the current state of the labour market, today’s chart illustrates the unemployment rate since 1948.
Today’s chart illustrates that despite this month’s encouraging decline, there was only one general period in the post-World War II era during which the unemployment rate was higher than the current rate of 9.4% (i.e. June 1982 – June 1983).
It is worth noting, however, that a one-month decline in the unemployment rate (even a small decline) after a significant spike (i.e. the unemployment rate spikes by 1.5 percentage points or more) has tended to occur slightly after a recession had ended. Read more here-http://www.chartoftheday.com/20090807.htm?T
STOCKS-THE LATEST FED BUBBLE-INSIDER SELLING-PULLBACK COMING
- Are the government programs supporting the financial sector reinflating global stock markets even as economies stumble? The Federal Reserve has spent the past year cleaning up after a housing bubble it helped create. But along the way it may have pumped up another bubble, this time in stocks.
“This is the most speculative momentum-driven equity market since the early 1930s,” Gluskin Sheff economist David Rosenberg wrote in a note to clients Monday. Of course, stocks have rallied in part because investors perceive the worst-case scenario a 1930s-style Depression is off the table. And while the gains have been remarkable, they come after an even bigger decline. The S&P; is still down 16% since Lehman Brothers collapsed in September.
But while most people take the rise in stocks as a hopeful sign for the economy, some see evidence that the Fed has been financing a speculative mania that could end in another damaging rout. Read more here-http://money.cnn.com/2009/08/11/news/economy/bubbly.fortune/index.htm?postversion=2009081114
-History shows that insiders are worth paying attention to, because they’re the ones on the front lines. And insider sales now stand at levels not seen since late 2007, right before the current bear market began. Here’s the big picture:
An insider gauge tracked by Market Profile Theorems, a Seattle research shop, moved into bearish territory on July 31 – for the first time since November 2007.
An insider sell-buy ratio tracked by Thomson Reuters has been hovering around bearish levels not seen for years. It recently registered a 53, meaning insiders pulled $53 out of the market for every $1 in stock they purchased.
Another insider sell-buy ratio, tracked by Vickers Stock Research, is now “well within the bearish range,” says David Coleman, who analyzes insider activity for Vickers. It hasn’t been so high since November 2007.
Also consider the Barron’s “Insider Spotlight,” a weekly rundown of the top 10 insider purchases and sales. In the past two weeks, the buyers have accumulated $53.9 million in stock. Meanwhile, the sells amount to $640.2 million. That’s a historically very high ratio of 1:11.9.
Although the level of insider selling is alarming, it’s important to note that the very low levels of buying are particularly alarming. Insiders sell stock for many reasons, but they generally only buy stock for one reason: they believe the stock is going up.
Despite the fact that the media is reporting an end to the recession, a bottom in housing, and a trough in earnings, we are witnessing a vote of zero confidence from the people who know these companies better than anyone else. Could this be a sign that the underlying economy is still in fact very weak? We think so. Chris Wood Casey Research
-RBS uber-bear issues fresh alert on global stock markets. Three-month slide could hit record lows, Royal Bank of Scotland chief credit strategist Bob Janjuah predicts. “We are now in the middle of a parabolic spike up,” he said in his latest confidential note to clients.
“I expect this risk rally to continue into and maybe through a large part of August. What happens after that? The next ugly leg of the bear market begins as we get into the July through September ‘tipping zone’, driven by the failure of the data to validate the V (shaped recovery) that is now fully priced into markets.”
The key indicators to watch are business spending on equipment (Capex), incomes, jobs, and profits. Only a “surge higher” in these gauges can justify current asset prices. Results that are merely “less bad” will not suffice. He expects global stock markets to test their March lows, and probably worse. The slide could last three months. “A move to new lows is highly likely,” he said. Read more here-http://www.telegraph.co.uk/finance/markets/6018076/RBS-uber-bear-issues-fresh-alert-on-global-stock-markets.html
-Templeton’s Mobius Says Stocks Face 30% ‘Correction’. Mark Mobius said global stocks may drop as much as 30 percent following their recovery from last year’s rout as companies take advantage of the rebound to sell more shares.
“When you have these rapid increases, almost without correction, you will definitely have a correction at some point, so we can expect a lot of volatility,” Mobius, the executive chairman of Templeton Asset Management Ltd., said in an interview in Kuala Lumpur today. “Increases of 70 percent can be followed by decreases of 20 to 30 percent.” Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid;=a2uzw71az3O0
-Dow Theory shows buy signal but pullback due. Read more here-http://www.reuters.com/article/ousiv/idUSTRE57932P20090810
-VIX Signals S&P; 500 Swoon as September Approaches. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aK8qWUROcAn4
REAL ESTATE-MORTGAGES-FORECLOSURES
-As homeowners head ‘underwater,’ another housing crisis looms. Almost half of homeowners with a mortgage could be underwater by 2011, says Deutsche Bank. We asked how that will play out. Read more here-http://money.cnn.com/2009/08/12/real_estate/housing_mortgages_underwater.fortune/index.htm?postversion=2009081212
-Home price declines in the U.S. accelerated in the second quarter, dropping by a record 15.6 percent from a year earlier, as foreclosures weighed on values. The median price of an existing single-family home dropped to $174,100, the most in records dating to 1979, the National Association of Realtors said today.
Total sales rose 3.8 percent to a seasonally adjusted annual rate of 4.76 million from the first quarter and fell 2.9 percent from 2008’s second quarter. Prices fell in 129 out of 155 metropolitan areas from a year ago and 39 states experienced sales increases from the first quarter, the Chicago-based realtors group said. Sales in U.S. housing market at the heart of the global recession are beginning to stabilize, said Patrick Newport, an economist for Lexington, Massachusetts-based IHS Global Insight.
“I don’t think we’re at a bottom yet in home prices,” said Scott Anderson, a senior economist at Wells Fargo & Co. in Minneapolis. “There’s also a pretty big shadow supply of houses. People are kind of waiting for the bottom but there’s a pent-up supply out there.” Home prices are falling even as a survey of economists indicates that the U.S. economy is recovering from the worst recession since the 1930s. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=axsovog3CuAE
-U.K. Housing Market Showed Signs of Improvement. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aWUfCAKhqg5A
-Almost one-quarter of U.S. mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb, Zillow.com said.
Homeowners are being hurt by price declines. The estimated median value for single-family houses slid to $186,500 in the period, a 12 percent drop from a year earlier and the 10th consecutive quarterly decrease, the Seattle-based real estate data service said in a report today.
“The negative-equity rate will rise and spin off more foreclosures,” Stan Humphries, Zillow’s chief economist, said in an interview. “I see a substantial downside risk to prices and don’t think we’ll see a bottom until the middle of next year.”
The U.S. housing market is being hindered even as the pace of job cuts and price declines slows. Payrolls fell by 247,000 in July, after a 443,000 loss in June, the Labor Department said. Home prices in 20 major cities declined 17 percent in May from a year earlier, the smallest drop in nine months, according to the S&P;/Case-Shiller index.
Home values dipped in the second quarter from a year earlier in almost 90 percent of the 161 U.S. metropolitan areas surveyed by Zillow, the company said. Twenty-three percent of mortgage holders were underwater at the end of June, Zillow said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=arpJHI9U42Rs or
http://www.reuters.com/article/ousiv/idUSTRE57A0K720090811
-Foreclosure filings in the U.S. climbed to a record for the third time in five months in July as falling home prices and the recession left more homeowners unable to keep up payments or refinance.
A total of 360,149 properties received a default or auction notice or were seized last month, according to data seller RealtyTrac Inc. One in 355 households got a filing, the highest monthly rate in RealtyTrac records dating to January 2005, the Irvine, California-based company said in a statement.
“We’re in a deep hole,” Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., said in an interview. “There is a whole new wave of foreclosures tied to the cyclical dynamics of the economy.”
Foreclosures increased as the U.S. recorded another 247,000 job losses in July and home prices fell, leaving an increasing number of mortgage holders owing more than their properties were worth. The median price of an existing single-family house dropped 15.6 percent to $174,100 in the second quarter, the most in records dating to 1979, the National Association of Realtors said yesterday. Almost one-quarter of U.S. mortgage holders are underwater, property data firm Zillow.com said Aug. 11.
“There are a slew of factors showing fundamental weakness on the demand side: tighter underwriting, job loss, investors who’ve been badly burned,” said Stuart Gabriel, director of the UCLA Ziman Center for Real Estate in Los Angeles. “We have not seen the bottom of the housing market.” Read more here-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aGAr2pZ9UC1o
-These luxury homes have been stuck on the market for months. Read more here-http://money.cnn.com/galleries/2009/fortune/0908/gallery.unsold_million_dollar_houses.fortune/index.html
-The incredible shrinking home. The size of newly built homes fell in 2008 for the first time in almost 15 years. Is the McMansion era on the wane? Read more here-
http://money.cnn.com/2009/08/07/real_estate/shrinking_home/index.htm?postversion=2009081115
© 2009, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – August 18, 2009
Posted by Worldwide Precious Metals on Tuesday, August 18, 2009
The Goldbugg Report – August 11, 2009
August 11, 2009
WORLD FINANCIAL REPORT ON RADIO AUG 7 2009 SHOW
-New use for silver could send the metal soaring.
-Indicators suggest gold poised for big breakout by end Q3.
-Gold Near Summer Doldrum Lows Prior to Traditional Strong Autumn and Winter.
GOLD
-Indicators suggest gold poised for big breakout by end Q3. In an assessment of the current gold market, Donald W. Doyle, chairman of top coin dealers Blanchard & Co. sees very positive signs for the gold price in the short term. The slow trading months of summer are usually a time when gold prices decline, but economic analysts at Blanchard and Company, America’s largest precious metals investment firm, say that indicators this year have them believing the metal is poised for a big breakout by the end of the third quarter.
Specifically, inflation, possible hyper-inflation, dollar weakness, and supply/demand and investor demand fundamentals are all positive for the price of gold toward the end of the summer, says Donald W. Doyle, Chairman and CEO of Blanchard and Company. While gold remains range bound, it does so at levels above $900 per ounce, which Doyle says he sees as a springboard to greater price gains, and even new record highs, through the remainder of the year and beyond.
“Gold is performing strongly at the same time the stock market is making a mild rally and as the dollar continues to stay at a level that we consider to be inordinately high,” Doyle says. “Typically, gold would be declining but that’s not happening, and there are solid reasons why.” Doyle says demand is central to gold’s current sustained high price levels, with Chinese and Russian central banks adding to their holdings and investor demand continuing at record levels.
“The fundamentals for gold, and particularly investment demand, are very strong,” Doyle says. “Sales of gold by the U.S. Mint, which have always been a good proxy for U.S. investment demand, are approaching those of all of 2008 a banner year for gold and it’s only the beginning of August.” Through July of 2009, the U.S. Mint has sold 756,500 ounces of gold as compared to 247,500 ounces through July 2008 an increase of more than 300 percent for the same time period. The Mint sold 860,500 ounces of gold during all of 2008.
The other catalyst for gold’s future price rise, Doyle says, is the likelihood of inflation and dollar weakness, both of which are very real considering the record amounts of liquidity and stimulus that are making their way into the global economy. “For some time now, we have been in the middle of a disinflationary recession, hardly a propitious time for gold to boom,” Doyle says. “However, despite the short-term outlook for inflation, the longer-term picture looks to be just the opposite, particularly in the wake of record government deficits and extraordinary easing in monetary policy.”
Doyle also says the case for gold now is being made by people who, in the past, recommended only stocks. In Merrill Lynch’s “Metals Strategist,” Merrill predicts that the unintended consequence of the bailouts will be a return of inflationary pressures to the commodity markets. If the Fed fails to keep foreign capital interested in financing its twin deficits, the U.S. dollar could spiral downward, providing strong support to commodity prices. The weaker dollar will then help gold break through to new record price levels of $1200-$1500 per ounce.
“Morgan Stanley’s analysts are divided on which threat is worse for the global economy, deflation or inflation, but say that gold is a safe bet in either outcome,” Doyle noted. “Morgan Stanley looked at the possibility of hyperinflation hitting the U.S., and their conclusion is an interesting one.”
“With policymakers around the world throwing massive conventional and unconventional monetary and fiscal stimuli at their economies, we think that it is worth exploring the black swan event of very high inflation or even hyperinflation. While such an outcome is clearly not our main case, the risk of hyperinflation cannot be dismissed very easily any longer, in our view.” Morgan Stanley research note, via Financial Times
Doyle added that gold is renowned as a hedge against inflation as inflation goes up, the price of gold goes up along with it. The five highest years of inflation in the U.S. from the end of World War II were 1946, 1974, 1975, 1979, and 1980. During those five years, the average real return on stocks, as measured by the Dow, was minus 12.33 percent, while the average real return on gold was 130.4 percent. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=87109&sn;=Detail
-Why Gold Could Clear $1,300 by Year-End. Gold may be nearing its next major leg up. No investment ever goes straight up or straight down. During the last bull market in gold, the precious metal rose 2,329% from a low of $35 in 1970 to a high of $850 in 1980. However, during that time, there was a period of 18 months in which gold fell nearly 50% (see the chart below).
As you can see, from mid-1971 to December 1974, gold rose 471%. It then fell 50%, from December ’74 to August ’76. After that, it began its next leg up, exploding 750% higher from August ’76 to January 1980.
Now, in its current bull market (2001 to March 2008), gold rose over 300% from $250 to a little over $1,000. And just like in the mid-70s, it began showing signs of weakness after its first big rally up to $1,014 in March ’08. At one point, it even fell to $700, a 30% retraction.
Granted, it wasn’t a full 50% retraction like the one that occurred from 1974-76. But we are experiencing a financial crisis. And gold is the most common catastrophe insurance. If we were to go by the historic pattern of the gold market in the ‘70s, gold should experience upwards resistance for 19 months after its first peak today. Gold’s recent peak was $1,014 in March ’08 (roughly 17 months ago).
If this bull market parallels the last one, then gold should renew its upward momentum in a very serious way starting in October 2009. And this next leg up should be a major one (the biggest gains came during the second rally in gold’s bull market in the ‘70s). The chart certainly forecasts a major move.
As you can see, gold has formed a long-term inverse head and shoulders formation (two smaller collapses book-ending a major collapse). Typically a head and shoulders predicts a massive collapse. However, when the head and shoulders is inverse, as is the case for gold today, this typically predicts a MAJOR leg up.
Indeed, any move above the “neckline” of 1,000 would forecast a MAJOR move up to $1,300 or so. Going by history, this is precisely the move we should expect: remember based on historical trends (the gold bull market of the ‘70s) gold should begin its second and largest leg up in September or October 2009.
Watch the gold chart closely over the next month or so. If gold makes a move above $980 perhaps add to your current positions. If it clears $1,000, hold on tight, cause the next leg up in this secular bull market has begun. Graham Summers-Read more here-http://www.kitco.com/ind/Summers/aug042009.html
-Gold Near Summer Doldrum Lows Prior to Traditional Strong Autumn and Winter. Read more here-http://news.goldseek.com/GoldSeek/1249394049.php
-There is no denying gold’s store-of-value relevance throughout the history of the world. It has been and will always be the ultimate form of currency. Even today gold’s alluring and timeless qualities transcend every political, social, and monetary boundary that man puts into place. Gold’s core fundamentals will forever be rock solid.
Another key element to gold’s fundamentals is simple economics. And it is economics, supply and demand, that will always dictate gold’s price over time. On the demand side we have seen a big increase over the years due in large part to population growth and ease of access.
Gold is not just a metal for kings anymore. Over time a large global distribution network has been built that sells gold, in small or large quantities, to anyone who wants to buy it. And with such a rapidly growing world population, especially in the last 100 years, a greater number of people want to own this precious metal.
On the supply side, the onus is on the miners to bring enough gold to market to meet demand. But the miners can’t just turn a spigot and spew gold at will. One of the many reasons why gold is precious is its rarity. Simply put, this metal is hard to find. And when it is found, economically extracting it from the earth presents its own challenges.
So far the miners have been able to supply gold to the people. But they’ve really had to ramp up their efforts in the last century to meet skyrocketing demand. Interestingly over 80% of the gold mined in the history of the world has happened since 1900, with over two-thirds of this volume in just the last 50 years. We’ve also seen a double in world production just since 1980. This massive production increase is driven by the demand of a growing populace hungry for gold!
But will the mining industry constantly be able to keep up with growing demand? I’ll give my opinion on the answer to this question in a bit, but in the mean time I’ll say it will continue to be a growing challenge. Mining gold is not as simple as harvesting a crop. This yellow metal is finite, once it is mined there is that much less remaining hidden in the earth.
And these miners have the same geological landscape to work with today as those miners thousands of years ago. The only difference is the low-hanging fruit has already been picked. Gold producers must now search for and mine their gold in locations that may not be very amenable to mining. Many of today’s gold mines are located in parts of the world that would not have even been considered in the past based on geography, geology, and/or geopolitics.
And these factors among many are attributable to an alarming trend we are seeing in global mined production volume. According to data provided by the US Geological Survey, global gold production is at a 12-year low. And provocatively this downward trend has accelerated during a period where the price of gold is skyrocketing. Scott Wright-Read more here-
http://www.321gold.com/editorials/wright/wright073109.html
-According to the diligent statistical elves of Barron’s Market Lab, the amount of U.S. Treasury Gross Public Debt outstanding is $11.611 trillion. A year ago, according to the same elite statisticians, that value was $9.533 trillion. In one year, the true deficit of the U.S. government was therefore $2.0178 trillion. That, my fellow Gold bugs, is a true accomplishment! How does one spend Two Trillion Dollars more than one receives in a single year?
Now, the deficit reported by the U.S. government will be less than that value due to something called the unified budget. Essentially what that means is that the money going into such schemes as the Social Security System is used to buy U.S. government debt. Such transactions are used to mask the true deficit from the public. Now, those of you in the U.S. should not worry about this. You will indeed get all the green pieces of paper upon retirement you have been promised. They just may not buy anything.
Two essential problems now exist. First, the Presidential Approval Index for the Obama Regime is negative, and has been so for some time. Despite massive spending by the U.S. government, voters are discovering that change can mean many things. The Obama Regime, facing fading popularity, has only one policy choice. That choice is to spend more money. Clearly, not enough money is going to people to maintain their support. So, look for more deficit spending from the U.S. government.
Policies of the Obama Regime and U.S. Federal Reserve should make $Gold one of the better investments for the years ahead. Once debt monetization occurs, no political will is going to develop to remove it! A strong dollar is not likely to emerge from these policies. Investors just need to make purchases of gold with calm thinking.
Rushing to buy Gold when some analysts are promoting a rumor on dollar devaluation before year end in order to sell newsletters may not be calm thinking. Should you feel compelled to buy Gold this week, do so knowing that the Federal Reserve and the Obama Regime will be doing all they can to make your purchases profitable! Ned W. Schmidt-Read more here-
http://www.kitco.com/ind/Schmidt/aug032009.html
-Central Bank net gold sales show huge drop in first half 2009. A report by GFMS for Societe Generale suggests the volume of Central Bank gold sales this year is likely to be among the lowest on record.
In a report released Monday, precious metals consultancy GFMS, for Societe Generale, looked at the recent rate and volume of gold sales from official sources and concluded that in the first half of the current year the net sales volume was a relatively minuscule 39 tonnes down a massive 73% year on year. Indeed in the second quarter, GFMS estimates that banks were net buyers of gold after being net sellers in the first quarter. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=87094&sn;=Detail
-Gold scrap sales could undermine a late-year gold price surge GFMS. Looking at fundamentals, GFMS chairman reckons that a late surge in gold scrap sales if the gold price takes off could stop it in its tracks. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=86995&sn;=Detail
-U.K. Royal Mint Doubles Gold Output as Demand Swells. The U.K.’s Royal Mint, established in the 13th century, doubled production of gold coins in the second quarter as demand surged for bullion to diversify investments.
Output climbed to 16,910 ounces from 8,030 ounces a year earlier, according to data obtained by Bloomberg News under a Freedom of Information Act request. First-half production jumped 86 percent to 45,406 ounces, the figures show.
Demand for physical gold as a store of value and hedge against inflation has increased as governments spend trillions of dollars to combat the worst recession since World War II. Bullion holdings in gold-backed exchange-traded products rose to records in the second quarter. Gold is trading about 7 percent lower than the record $1,032.70 an ounce reached in March 2008.
“There’s still interest in gold as a safe-haven asset,” said Stephen Briggs, an analyst at RBS Global Banking and Markets in London. Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid;=aF3LXxMlYpJ8
-Peter Brimelow: Is gold gearing up (again) to break $1,000? Read more here-http://www.gata.org/node/7655
-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 9.8 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 US stock market has been in a bear market for the entire 21st century and is currently trading 78% off its 1999 highs. The recent five-month rally, however, has the Dow (priced in gold) putting in a significant test of resistance of an accelerated downtrend that began in mid-2007. Read more here-http://www.chartoftheday.com/20090731.htm?T
-When Chow Sang Sang opened its third jewellery megastore in Hong Kong in April, it was not a quiet affair. The 464-square-meter space was packed with publicists, fashion models, art installations, drummers and a diamond necklace priced at 5.7 million Hong Kong dollars.
Vincent Chow, the grandson of the company’s founder and now its general manager, was at the 5,000-square-foot store to oversee the proceedings — and to take a hand at banging on the drums himself.
But although Mr. Chow, 62, is overseeing a rapid expansion in the family jewelry business, he is staying firmly focused on the commodity that made his family’s fortune. “We started as goldsmiths,” Mr. Chow said in a recent interview. “Today gold still makes up half of our sales.” Gold, is solid and eternal. “In hard times,” he said, “people cling to it.” Read more here-
SILVER
Gold to silver ratio at 80 to 1 with gold at $2,800 the silver price would be $35.00
Gold to silver ratio at 70 to 1 with gold at $2,800 the silver price would be $40.00
Gold to silver ratio at 60 to 1 with gold at $2,800 the silver price would be $46.67
Gold to silver ratio at 50 to 1 with gold at $2,800 the silver price would be $56.00
Gold to silver ratio at 40 to 1 with gold at $2,800 the silver price would be $70.00
Gold to silver ratio at 30 to 1 with gold at $2,800 the silver price would be $93.33
Gold to silver ratio at 20 to 1 with gold at $2,800 the silver price would be $140.00
Gold to silver ratio at 15 to 1 with gold at $2,800 the silver price would be $186.67
-New use for silver could send the metal soaring. Pure Bioscience Looks For Silver Lining. Pure Bioscience, a El Cajon, Calif., company has a silver-based molecule it thinks can be used in a whole range of products, from cleaning products to agriculture to lotions and cosmetics and, perhaps someday as a drug.
The company is expected to announce Thursday that one of its development partners, FTA Therapeutics, will team with the Cleveland Clinic to develop Pure’s molecule for several applications, such as treating wounds and acne. Last month, the U.S. Environmental Protection Agency approved the use of Pure’s molecule for sanitizing surfaces that come in contact with food. Read more here-http://www.forbes.com/2009/07/30/silver-pure-bioscience-technology-breakthroughs-silver.html?partner=dailycrux
-As I have been writing about for the past month or so, I think that big change is coming to the silver market. I believe that this change will be historic in nature. Since there are never any guarantees, I will present my reasons for expecting this great change in silver and leave it for you to decide on the merits of my argument.
The first thing I see is a change in the pattern of investment accumulation of physical silver over the past few months. While pure retail demand appears to have cooled off from an anecdotal viewpoint given the overall choppy price action, actual demand statistics remain remarkably strong. In other words, reports from retail dealers indicate sluggish new buying interest, yet the official numbers indicate otherwise.
For instance, despite a sharp $3.50 decline from the $16 level in early June, no metal was liquidated in the combined holdings of the silver EFTs. This was very much at odds with the normal pattern of some liquidation in past price declines. Instead, combined silver holdings rose to new records. Plus, a number of new investment vehicles buying physical silver were introduced during this period.
By my count, as many as 15 million ounces of silver may have been accumulated by existing and new ETF vehicles in the past month, adding to the hundreds of millions of ounces accumulated and taken off the market over the past few years. This contrasted with a notable liquidation in gold ETF holdings, even though the gold price declined in much smaller percentage terms over the same time period.
In addition, Silver Eagle sales from the US Mint have accelerated over the past two months, with July recording the second largest monthly sales of the year. Gold Eagle sales, while still very strong for the year, recorded the second lowest monthly sales for the year in July. The Mint is on a pace that could result in more than 28 million ounces of Silver Eagles being produced and sold this year, the most in history and roughly three times larger than the average for the past decade.
To put this number in perspective, the 28 million ounces potentially consumed in new Silver Eagles would represent more than 75% of all the silver mined annually in the US, the world’s eighth largest producer. This takes silver off the market and tightens physical supply. For comparison purposes, Gold Eagle sales, on the current pace, will consume 15% of gold mine production in the US, the world’s fourth largest producer.
I reference these statistics to make a point. It would appear to be a contradiction for there to be weak anecdotal retail demand combined with strong actual demand data. If retail buyers are not responsible for the strong actual silver buying, then who is? My conclusion is that there may be big and determined institutional type silver buying underway.
Perhaps some big investors have discovered what many retail investors have previously known, namely, the great investment silver represents. If my guess is accurate, the entry of new large investors could bring big change to the silver market. Read more here-http://news.silverseek.com/TedButler/1249414304.php
-Two days is a short time in gold and silver price prediction. A stutter in gold and silver prices in late July had some analysts predicting the end of the gold bull market, but an equally rapid recovery shows the monetary precious metals may have life in them yet. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=87014&sn;=Detail
CHART OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week-Shades Of 1929. We’ve put together an amazing, fool-making rally since the market hit its lows in early March. Of course, before you break out the champagne, remember that a strong bull run can happen during a long-term decline. We have eclipsed most such precedents. But we did have one big bull run of nearly the exact same length and magnitude between November, 1929 and April, 1930. And you know what happened after that. Read more here-http://www.businessinsider.com/chart-of-the-day-history-repeating-2009-7
-The economic miracle that has been the United States was not produced by socialized enterprises, by government-upon-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures, as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline. Milton Friedman
-”The modern mind dislikes gold because it blurts out unpleasant truths.” Joseph Schumpeter-Bio here-http://en.wikipedia.org/wiki/Joseph_Schumpeter
-No currency can hold up in the face of an economy that survives on borrowed money and debt. Richard Russell
-The big money is made if you catch a major trend and stick with it long enough to make substantial gains. Our premise is that the era of paper assets peaked in the year 2000, and commodities were at the bottom. We also believed that the paper money time bomb was ticking and astute investors around the world would seek the safety and time-tested soundness of real money gold and silver.
These two precious metals silver and gold represent the top tier of all commodities, because they are readily accepted around the world as a means of final payment. Additionally, in times of financial stress, the metals are a store of value. David Morgan-Read more here-http://news.silverseek.com/SilverInvestor/1249012084.php
-Gold will revisit $1,000 as investment demand and jewellery purchases rebound and supply decreases annually, a senior World Gold Council official said. “On the supply side, gold mining production has been decreasing at a rate about 4 to 5 percent per year after reaching a peak production in 2001,” Jason Toussaint, managing director of exchange traded gold, said today. “Even if demand stays the same, prices must go up.” He declined to give a timeframe for the increase.
Gold, traditionally a popular hedge against financial turmoil due to its store of value, has risen 5.7 percent this year and briefly traded above $1,000 in February. It reached a record $1,032.70 on March 17, 2008. “Investors are much more focused on wealth preservation than upside returns because they are much more focused on risk management within portfolios,” Toussaint said in an interview at a Singapore conference. “We will see that continue.”
Demand for gold will also rise as pension funds, sovereign funds and other asset managers seek to preserve their wealth against inflation, Toussaint said. Only 3 percent to 5 percent of assets at large institutions are allocated to gold, he said. “Many pension funds around the globe do not have any exposure to gold currently,” he said. “The feedback that we’ve got so far is positive,” he said without elaborating. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=aPmTV_Se5jJw
-The global credit crunch has cost governments more than $10 trillion, the International Monetary Fund (IMF) says. Read more here-http://news.bbc.co.uk/2/hi/business/8177814.stm
-We predict the Dow to land on 10,400 to 10,800 as a maximum high before selling this year. This was our month’s ago forecast. When the selling becomes a crash our forecast sees a 5600 to 6500 Dow. Roger Wiegand-Read more here-http://www.kitco.com/ind/Wieg_cor/roger_jul302009.html
-Tudor Investment Corp., the $10.8 billion hedge fund firm run by Paul Tudor Jones, told clients that the gain in U.S. stocks in the past 100 days is a “bear- market rally.” “Investor psyche is still fragile,” Greenwich, Connecticut-based Tudor said.
Slowing growth in China and the return of front-page stories on swine flu are “further catalysts for global equity markets to pause in September,” the letter said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aRxNALRApIoY
-The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation’s plate and struggling to find money to pay the tab.
The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion. Read more here-http://news.yahoo.com/s/ap/us_plummeting_taxes
-Martin Armstrong, How ALL Systems can Collapse Overnight. Subtitled, “The 3rd Century economic collapse. Are there lessons from the past that equal solutions for the future?” Martin takes us on a 3rd century history lesson and combines his knowledge of cycles, waterfall collapses, rule of law, history of money and how it influences the political arena to say, YES, it can and is happening to us now. BUT if we are smart we can learn from history to avoid repeating our mistakes. Read more here-
http://economicedge.blogspot.com/2009/07/martin-armstrong-how-all-systems-can.html
-Boomers, some 80 million strong, accounted for 47% of national spending and now they are saving. They provided 78% of spending growth up until recently. What we find of special interest is that boomers aged 54 to 63, even though told over and over again to prepare for retirement only 31% are prepared.
If the Dow falls to 4,000 and house prices fall another 20%, how much smaller will the percentage shrink? The number of plus 55 year olds re-entering the workforce to survive, is cutting off jobs for younger members of society. In addition about 50% of corporations are now looking for new college graduates.
This is the situation that existed during the late 1940s, 50s and into the 1960s. Those who got jobs were lucky and they kept them. If you can believe it these grads were fortunate to make $400 a month. This is where we are again headed. Bob Chapman
-For the first time, more than 34 million Americans received food stamps, which help poor people buy groceries, government figures said on Thursday, a sign of the longest and one of the deepest recessions since the Great Depression. Enrolment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in May, the latest month for which figures are available. Read more here-http://www.forbes.com/feeds/reuters/2009/08/06/2009-08-06T152646Z_01_N06328040_RTRIDST_0_FOODSTAMPS-USA.html
-Will China keep buying U.S. bonds? Read more here-http://www.gata.org/node/7644
-Nobel Prize-winning economist Joseph Stiglitz said he expects a “very slow recovery” in the U.S. economy and that a replacement for Federal Reserve Chairman Ben S. Bernanke should be considered. “There are lots of potholes in the road,” Stiglitz, a Columbia University economics professor, said in an interview today with Bloomberg Television today. “There are problems in commercial real estate. We know that there will be more foreclosures in the mortgage market” and “we know we don’t know the state of the banks.”
Policy makers are seeing the first signs of a recovery from the worst economic slump in the post World War II era, and the risk of further shocks as unemployment approaches 10 percent. Credit markets are improving and yet “the fundamental problem of lack of aggregate demand is still there,” Stiglitz said. “It’s going to be a slow, very slow recovery,” said Stiglitz, 66, formerly chief economist at the World Bank and chairman of the White House Council of Economic Advisers under Bill Clinton.
When asked whether Bernanke should be reappointed so he can remain Fed chief after his current term expires Jan. 31, Stiglitz replied: “That’s a hard question.” A replacement is “something we ought to consider,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a2qn.Qd82fDw
-Weather experts on Wednesday reduced the number of projected hurricanes in the north Atlantic this season to four, two of them major hurricanes with winds above 178 kilometers (111 miles) per hour. Read more here-http://au.news.yahoo.com/a/-/world/5776793/experts-predict-quieter-atlantic-hurricane-season/
-Quick tests for swine flu are accurate almost 70 percent of the time at best, suggesting doctors shouldn’t rely on the results alone to make treatment decisions, the U.S. government reported. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aXoTEabd_r5U
-WHO maintains 2 bln estimate for likely H1N1 cases. Read more here-http://www.alertnet.org/thenews/newsdesk/L4634663.htm
-Plague-Spreading Fleas Gain Ground, May Spur Deadly Human Cases. Plague-spreading fleas are expanding their territory, putting more people at risk of catching the lethal illness, a World Health Organization official said.
Three people in China were reported the past week to have died from pneumonic plague, the pneumonia-causing form of the bacterial disease. Centuries after bubonic plague, the most common form, killed millions in medieval Europe, the scourge remains entrenched in parts of Africa, Asia and the Americas. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aPOXqMh_fzr4
-U.S. Child Born in 2008 May Cost $221,190 by Age 18. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aU.K_V4cjcxo
-Senators, Advisers Urge Obama to More Than Double Afghan Forces. Read more here-http://www.bloomberg.com/apps/news?pid=20601070&sid;=avtKW.636Q6Y
-Government map shows dire Afghan security picture. Almost half of Afghanistan is at a high risk of attack by the Taliban and other insurgents or is under “enemy control,” a secret Afghan government map shows, painting a dire security picture before presidential elections.
The threat assessment map, a copy of which was obtained by Reuters, shows 133 of Afghanistan’s 356 districts are regarded as high-risk areas with at least 13 under “enemy control.” Read more here-http://www.reuters.com/article/newsOne/idUSSP43015420090805
-Iran’s Khamenei Endorses Ahmadinejad for Second Term. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZeDoVurlz4g
-Iran fuel imports possible target in nuclear standoff. The United States and Israel are discussing the feasibility of curbing Iran’s imports of gasoline and other refined oil products if Tehran refuses to enter negotiations over its nuclear program, an Israeli official said on Monday.
U.S. officials refused to say whether they were considering such a curb, which would represent a critical escalation of existing sanctions against the Islamic state and would hit the average Iranian hard in the pocket book. Read more here-http://www.alertnet.org/thenews/newsdesk/N03523563.htm
-Iran is ready to build an N-bomb it is just waiting for the Ayatollah’s order. Read more here-http://www.timesonline.co.uk/tol/news/world/middle_east/article6736785.ece
-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/HistoricalPriceTrackingsystem.html
-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html
-Rare “vivid pink” diamond could break sale record. A rare, 5-carat pink diamond will be sold in Hong Kong this December by Christie’s, which expects the stone to hover near world record prices, thanks in part to the buying prowess of top Asian jewellery collectors.
The stone, set in a so-called “cushion-cut” ring by famed jewellers Graff Diamonds, is expected to fetch between $5-$7 million, in reach of the current world auction record for a pink diamond a 19.66-carat stone that sold in Geneva for $7.4 million in 1994.
While just a quarter the size of the record-holding pink gem and not quite flawless, the stone’s “vivid pink” is considered near perfect and the auction house has touted it as one of the best colored stones to appear in recent years.
“There are pink diamonds and then there are pink diamonds,” said Francois Curiel, the international head of Christie’s jewellery department. “It is extremely rare for a stone of such top quality to appear on the market with top notes in color, cut, clarity and carat weight. This 5-carat vivid pink gem combines the best of all criteria,” Curiel added.
While the South African-mined diamond isn’t quite rated flawless given minor blemishes, Christie’s said that these could be removed by minor repolishing. Christie’s has a track-record of putting rare polished stones up for sale in Asia, given its confidence in the depth of the Asian market for the world’s top gemstones and artwork.
Last May, before the financial crisis began to bite the global auction market, Christie’s sold a squash-ball-sized, 101.27-carat diamond in Hong Kong for $6.2 million. “Asian collectors rank among our most important group of buyers. Hong Kong is firmly alongside New York and Geneva as a top center for the best jewels,” said Kate Malin, a spokeswoman for Christie’s in Asia.
Despite this, some major gems have disappointed in Asia, including a 72.22-carat “D” flawless white diamond that failed to hit its reserve price in a Sotheby’s Hong Kong sale last April, falling short of its 10-12 million pre-sale estimate.
While the world’s most expensive jewel ever sold at auction is the “Wittelsbach” blue diamond, a 17th-century deep greyish-blue stone that fetched $24 million last year, top red and pink gemstones are also known for stratospheric valuations. “In the fascinating realm of natural color diamonds, those of a distinct pink hue are among the rarest and most sought after,” Christie’s said. Read more here-http://www.reuters.com/article/lifestyleMolt/idUSTRE5720ZO20090803 or http://www.diamonds.net/news/NewsItem.aspx?ArticleID=27409
OIL-GASOLINE-NAT GAS
-Warning: Oil supplies are running out fast. Catastrophic shortfalls threaten economic recovery, says world’s top energy economist. The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.
Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr. Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.
In an interview with The Independent, Dr. Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years at least a decade earlier than most governments had estimated. Read more here-
http://www.independent.co.uk/news/science/warning-oil-supplies-are-running-out-fast-1766585.html
-Oil May Set 2009 High, Won’t Fall Below $66: Technical Analysis. Crude oil remains in a technical rally that may bring prices to a new 2009 high above $73 a barrel, while keeping the market from falling below $66, according to National Australia Bank Ltd.
Oil may extend its three-week uptrend as long as it can settle above $72 a barrel in New York, according to Gordon Manning, a Sydney-based technical analyst. Such a move would also raise the market’s support level, potentially offering traders an entry point in case of a decline. Read more here-http://www.bloomberg.com/apps/news?pid=20601072&sid;=a5_LfbnfFLPg
-FTC Issues Rules to Block Oil Market Manipulation. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aoin33r5A_sI
-Petro-Canada Short Gasoline at Over 50 Outlets, Sends Rail Cars. Petro-Canada dispatched rail cars from Montreal after a storm-related power outage July 18 shut units at its refinery near Edmonton, Alberta, causing a shortage of the fuel at more than 50 of the company’s filling stations.
“We are doing a number of things to alleviate the supply situation,” said Sneh Seetal, a company spokeswoman, in a telephone interview. Between July 20 and July 24, the company loaded 32 rail cars in Montreal with fuel to augment the shortage, she said.
Following a shutdown of units due to the storm, the company completed repairs on a catalytic cracker and on July 27 began production at its 135,000-barrel-a-day refinery. “Really we’ve moved from a production problem to an inventory and delivery problem, Seetal said.
More than 50 Petro-Canada stations have run out of supply, mainly in the province of Alberta. A “handful of sites” in Saskatchewan, Manitoba and British Columbia also have been affected, she said. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aEG2FHlb08m0
-Business Books: Costly gas is good for you. The rising price of fuel will slash school busing, nearly empty the skies of airplanes, and turn many resorts into ghost towns. But Americans will become fitter, breathe cleaner air, and eat healthier food.
That’s the future Christopher Steiner paints in “$20 Per Gallon: How the Inevitable Rise in the Price of Gasoline Will Change Our Lives for the Better.” Read more here-http://www.reuters.com/article/newsOne/idUSTRE56M59Y20090723
-Natural Gas Falls Most in Two Months on Bulging Stockpiles. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=arWlQHRYs1HI
BAD LOANS ARE NEXT WAVE OF CRISIS
-Rising delinquencies among consumer and corporate borrowers are the “next wave” of the financial crisis and may affect banks that have avoided losses so far, said Deutsche Bank AG Chief Executive Officer Josef Ackermann.
“This crisis has consisted of a series of earthquakes, with changing epicenters,” Ackermann said late yesterday at an event in Zurich. “Bad loans are the next wave. Banks that have fared relatively well so far will also be affected by this.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUKAk1bKBVl8
CONSUMERS HIT HARD
-American Incomes Head Down, Threatening Recovery in Spending. Household income in the U.S. is weakening as the influence of the government’s stimulus plan wanes, prompting economists, Federal Reserve officials and a Nobel laureate to warn that consumer spending may struggle.
“Consumers have started to change their behavior and they are going to save more,” said Richard Berner, co-head of global economics at Morgan Stanley in New York and a former researcher at the Fed. “You have pressure on wages, you have employment still declining.”
Wages and salaries, which drive recoveries in spending, fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department figures released yesterday. The Obama administration’s tax cuts, extended jobless benefits and a one-time Social Security bonus have helped mask the damage done by the worst employment slump since the Great Depression.
Personal incomes, which include interest income, dividends, rents and other payments as well as wages, tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, yesterday’s Commerce report showed. Excluding the effects of the stimulus plan, June incomes would have dropped 0.1 percent after no change in May, according to the report. In May, one-time additional payments to Social Security recipients boosted incomes 1.3 percent.
One of every 10 American workers will be without a job by early 2010, economists project, shaking the confidence of those still on payrolls and discouraging spending. It may take as long as 15 years for consumers to fully repair finances battered by the decline in home values, stocks and employment, said Edmund Phelps, winner of the Nobel prize in economics in 2006. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aRU6ZUwzT9iA or http://www.bloomberg.com/apps/news?pid=20601087&sid;=av57GRI3gom0
-Consumer bankruptcies jump 34%. Bankruptcy filings spike in July as households are squeezed by unemployment. Read more here-http://money.cnn.com/2009/08/04/pf/consumer_bankruptcy_filings/index.htm?postversion=2009080417
BANKS STILL HAVE MAJOR PROBLEMS AHEAD
-No end in sight for bank bailouts. Even as the industry recovers, winding down last year’s rescue programs and new ones put in place by the Obama administration may be easier said than done. Read more here-http://money.cnn.com/2009/08/04/news/economy/banks_programs/index.htm
-Banks still getting sicker. The economy may have turned, but banks will be cleaning up after their lending mistakes for years. Several big banks may already be doomed to fail. The economy may have pulled out of its plunge, but you’d never know by a look at many big banks.
Even after a rousing market rally that spurred new capital into giant institutions such as Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500), numerous large banks around the country are still struggling with deteriorating finances.
Two dozen banks with at least $5 billion in assets get the lowest one-star rating on Bankrate.com’s safety and soundness test, which is based on an assessment of regulatory filings for the quarter ended March 31.
More than half of those banks are ranked “troubled” or worse by research firm Bauer Financial, using the same data. Three of these banks, with a total of $45 billion in assets, have made public statements indicating they could soon collapse.
“There are some big ones in fairly dire straits,” said Karen Dorway, director of research at Coral Gables, Fla.-based Bauer. “If you see some of these fail, it could add to the stress on local economies.” Read more here-http://money.cnn.com/2009/08/05/news/economy/banks.gruesome.fortune/index.htm
-U.S. banks may need to boost reserves for potential losses on home-equity loans after the Federal Deposit Insurance Corp. issued guidance in response to a slump in property prices from their peak in 2006. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aTBXy1zSZvr4
-Big Texas bank on verge of failure. Guaranty Bank, which counts Carl Icahn as one if its backers, is teetering on the edge of insolvency. But it may not be easy for regulators to find a buyer. Read more here-http://money.cnn.com/2009/07/31/news/companies/guaranty.headache.fortune/index.htm
-Five More U.S. Banks Are Shut Down, Bringing 2009 Tally to 69. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3KVKk_i5_cM
-U.K. banks swamped by a wave of personal debt. The banks are braced for big losses on mortgages and personal loans. Read more here-http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6736009.ece
FDIC IN TROUBLE
-As we all know, the Federal Deposit Insurance Corporation (FDIC) guarantees depositors that they’ll get their money back if a bank fails, at least up to a certain amount. To fund its operations, the FDIC collects small fees from the banks that are held in reserve for the purpose of taking over troubled banks and paying off depositors.
Since the Great Depression, a period marked by widespread runs on banks, the FDIC has done a good job of fulfilling its mandate. So how are they doing in this crisis? In a nutshell, they are in trouble. The FDIC insures 8,246 institutions, with $13.5 trillion in assets. Not all of them are going bankrupt, of course.
Yet as of late July, a disturbing 64 banks had gone belly up this year the most since 1992 costing the FDIC $12.5 billion. At the end of Q1, the agency was already asking for emergency funding. And worse, much worse, is likely yet to come. The following chart shows the total assets on the books of the FDIC’s list of 305 troubled banks.
The list doesn’t include the biggest banks that are considered too big to fail, as they are being separately supported with bailouts. By contrast, if the banks on this list fail, the FDIC is on the hook to have to step in and take them over and, of course, make depositors whole. Read more here-http://www.kitcocasey.com/articles/2901/the-fdic-is-in-trouble/
U.S. DOLLAR
-The Greenback Is Broken. The U.S. dollar index, which tracks the dollar against other major currencies, fell below its important June low of 78.33 late last week. On Monday morning, it was trading at an 11-month low. The bear trend from March continues with no meaningful support in sight.
Roughly two years ago, when the dollar was in its previous bear market run, the dollar index had moved under a multidecade support level at 80 (see Chart 1). At the time, the subprime-mortgage crisis was just unfolding. Read more here-http://online.barrons.com/article/SB124931281428701713.html?mod=BOLFeed
INTEREST RATES
-ECB holds rates at 1 percent, sees downturn slowing. The European Central Bank kept interest rates on hold at a record low on Thursday and said the euro zone economy would remain weak over the rest of the year, although the rate of contraction is slowing down. Read more here-http://www.reuters.com/article/ousiv/idUSTRE5752AO20090806 or
http://www.bloomberg.com/apps/news?pid=20601087&sid;=a91GN1kRjTFM
-The Bank of England expanded its bond purchase program beyond its original limit in an effort to spur lending and fight a recession that’s deeper than previously anticipated. Bond yields plunged after the Monetary Policy Committee, led by Governor Mervyn King, kept the key interest rate at 0.5 percent and increased its purchase program by 50 billion pounds ($84 billion) to 175 billion pounds.
The European Central Bank left its rate at 1 percent and President Jean-Claude Trichet said officials are “satisfied” on the ECB’s own purchase plan. The Bank of England’s move suggests policy makers, who based the decision on quarterly forecasts prepared this month, assessed that their stimulus plan and record low interest rates weren’t enough to quell the threat of deflation.
While services grew at the fastest pace in 1 1/2 years in July, unemployment is rising and banks have kept restricting access to credit. “These are exceptional amounts of money being pumped into the economy,” said Nick Kounis, an economist at Fortis Bank Nederland Holding NV and a former U.K. Treasury official. “Their forecasts are probably worse then we thought, at least for inflation.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aPwLrU0E47xI
-The Bank of Canada may extend a commitment to leave its main interest rate at a record low if a stronger currency threatens to prolong the country’s recession, said Derek Holt, economist at Scotia Capital in Toronto.
Governor Mark Carney kept the benchmark rate at 0.25 percent last month. At the time, he said the currency is a major risk to economic growth, adding he has the “flexibility” to deal with it. Finance Minister Jim Flaherty yesterday echoed Carney, saying “steps could be taken to dampen” the dollar. Read more here-
http://www.bloomberg.com/apps/news?pid=20601082&sid;=arAakOGBblVI
INFLATION
-Nobel Prize-winning economist Gary Becker said he is concerned that Federal Reserve Chairman Ben S. Bernanke may bend to political pressure and fail to raise interest rates quickly enough to contain inflation.
Becker, a University of Chicago professor, warned that there is a “big risk” of inflation as the economy recovers, largely because of the hundreds of billions of dollars in excess reserves that banks have on deposit at the Fed. He said Bernanke “has the tools” to control inflation, by selling Treasury bonds rather than by purchasing them, and by reversing the central bank’s emergency programs expanding credit.
Since March 2008, the Fed has taken steps to combat the credit crisis that included increasing lending to banks, support for the commercial-paper market and a lifeline to insurer American International Group Inc. Bernanke announced in June that the Fed will begin winding down the programs this year, letting a plan expire in October and trimming the size of the Term Auction Facility and Treasuries-lending programs.
“Will he do that if that has a risk of slowing down the recovery? He’ll be under political pressure not to do so, so that’s a big uncertainty,” Becker said in a July 31 interview. “I think he’ll do something, surely to try and control that, but I’m not sure he’ll have the will to do it sharply enough.” Becker won the Nobel Prize for economics in 1992. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aE5ENFwffyIg
-China’s central bank warned that monetary easing by developed nations threatens to cause “severe” inflation and currency volatility. “Failure to manage the degree of easing may lead to concerns about mid- and long-term inflation and exchange-rate stability,” the People’s Bank of China said in a quarterly monetary policy report, posted on its Web site yesterday.
China, the owner of $801.5 billion of Treasuries, pressed the U.S. at a summit in Washington last month for economic polices to protect the dollar’s value. The Bank of England is poised to end a five-month program of bond purchases, part of so-called “quantitative easing,” according to a Bloomberg News survey of firms bidding at government debt auctions.
“The discussion about quantitative easing and the reversal of it is going to capture the market’s attention for the rest of this year,” said Tai Hui, head of Southeast Asian economic research at Standard Chartered Plc in Singapore.
“The fact that China is talking about it, again, is reflecting its concern about its holdings of U.S. Treasuries.” Quantitative easing is the creation of new money to purchase government or private assets, including bonds, to encourage new bank lending. Read more here-http://www.bloomberg.com/apps/news?pid=20601013&sid;=aJw_ze9izVj0
CURRENT ECONOMIC DOWNTOWN IS WORST SINCE GREAT DEPRESSION
-U.S. Economy Is in a Multiple-Dip Depression. The grand benchmark revision of the national income accounts on July 31, 2009 confirmed that the U.S. economy is in its worst economic contraction since the first down-leg of the Great Depression, which was a double-dip depression. The current economic downturn increasingly will be referred to as a depression, and it is far from over.
There will be intermittent blips of new activity, such as the current cash-for-clunkers automobile giveaway program that appears to be generating a one-time spike in auto sales. Yet, this downturn will continue to deteriorate, proving to be extremely protracted, extremely deep and particularly non-responsive to traditional stimuli.
As discussed in recent writings, the economy suffers from underlying structural problems tied to consumer income, where households cannot keep up with inflation and no longer can rely on excessive debt expansion for meeting short-falls in maintaining living standards.
The structural issues are not being addressed meaningfully and cannot be addressed without a significant shift in government economic and trade policies, which under the best of circumstances still would drag out economic woes for many years. John Williams-Read more here-http://www.321gold.com/editorials/williams/williams080509.html
-U.S. Recession Worst Since Great Depression, Revised Data Show. The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.
The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said yesterday in Washington. Gross domestic product has shrunk 3.9 percent in the past year, the report said, indicating the worst slump since the Great Depression. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a5_5Vq2hV3EQ
BOB CHAPMAN-THIS IS NOT A RECOVERY
-The stock market continues its bear market rally, which is very similar to the rallies in 1930 and 1932. What we are seeing at this stage of the rally is the shares of smaller companies and companies with low ratings outperforming better issues on low volume. 85% of the market has broken out above its 50-day moving average, but the quality of leadership is very questionable.
After 50 years of observing markets we know from experience that these kinds of rallies at this stage end the overall rally. This is a low-quality rally and it is very overbought. That is enunciated by low volume and short covering. The gains at this juncture should be miniscule leaving those who are still long a chance to exit what will end up being a trap.
Keep in mind as well that the depression is not ending and unemployment is still climbing. We see no signs of a sustainable recovery. Most of the important earnings reports have been made and absorbed by the market. As long as companies are laying off and cutting back on hours they won’t be increasing inventory, especially with retail sales continuing to slide.
There are no signs of a sustainable recovery. Even if inventories are increased it will be a one shot deal. The recovery, if there is to be one, will be production led. How can that happen as layoffs continue and banks continue to cut back on lending? Any recovery is contingent on bank lending. Plus, we are seeing continued deleveraging in all sectors.
The credit is not available to support higher production. Capacity utilization is hanging around 85, which means there is already major idle capacity. Consumers are simply not buyers. That happened in the last recession in 2002, but that lack of participation was supplanted by the real estate bubble. We are seeing twice as much asset deflation and triple the job losses of the last slowdown.
That means recovery is a long way off. All stimulus packages do is prolong the agony, worsen and distort the systemic problems. Forty percent of total disposable income is coming from government programs, whereas the remainder, wages and salaries from the private economy, are declining at a 3.1% rate. If you add in inflation, which no one seems to talk about anymore, you have at least a 10% annual loss in purchasing power.
Even $3 billion in rebates in “cash for clunkers” is not going to have any lasting economic effect. It is just a prolongation of the problem although workers deserve a break, after the Treasury and the Fed commit American taxpayers for $23.7 trillion, most of it going to bail out Wall Street, banks and insurance companies.
The administration just threw the workers a $3 billion bone. It should also be noted that what amounts to zero financing has been going on for nine years. The market was saturated and to keep the assembly lines working and workers employed to fend off recession. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1249492124.php and http://news.goldseek.com/InternationalForecaster/1249245364.php
-Bob Chapman On Gold, Silver, A Bank Holiday And The Monetary Elite. Read interview here-http://www.rightsidenews.com/200908025787/editorial/bob-chapman-on-gold-silver-a-bank-holiday-and-the-monetary-elite.html
PETER SCHIFF-HAPPY DAYS ARE NOT HERE AGAIN
-Have you heard the great news? The recession is over! It’s true; I saw it on TV. Why fret about growing unemployment lines when banks are paying big-time bonuses again? Proof of the turn was apparently revealed by the 2nd quarter GDP figures that showed that the economy declined by only 1%.
After four consecutive quarters of negative GDP, the green shoots now assume that growth will resume over the summer. But before we pop the corks, it may be worthwhile to ask, “what really has changed, and what is responsible for our new lease on life?”
In truth, because of the continued profligacy of the government and Federal Reserve, the imbalances that caused the current recession have actually worsened. We are now in an even deeper hole than when the crisis began. Rather than wrapping up a recession, we are actually sinking into a depression. If things look better now, it’s just because we are in the eye of the storm. Read more here-http://www.321gold.com/editorials/schiff/schiff080109.html
-Peter Schiff on the Glenn Beck show, July 31 2009 “Depression is beginning.” Watch video here-http://www.youtube.com/watch?v=dfjgWx3zQ6Q&eurl;=http%3A%2F%2Fgoldismoney.info%2Fforums%2Fshowthread.php%3Ft%3D395717&feature;=player_embedded
U.S. UNEMPLOYMENT
-U.S. Initial Jobless Claims Fall More Than Projected. The number of Americans filing claims for jobless benefits fell more than economists predicted, a sign some employers have stopped paring staff as the recession eases.
Applications dropped by 38,000 to 550,000 in the week ended Aug. 1, figures from the Labor Department showed today in Washington, the fifth straight time claims were under 600,000 after being above that level since January. The total number of people collecting unemployment insurance rose.
The pace of job cuts isn’t slowing fast enough to keep unemployment from rising. A report tomorrow will show the jobless rate jumped to the highest in 26 years in July, economists surveyed by Bloomberg News predict. Stagnating wages and falling home values also mean consumer spending, about 70 percent of the economy, will be slow to recover.
“These numbers signal the worst is behind us, but we are not out of the woods yet,” said David Semmens, an economist at Standard Chartered Bank in New York. “We are not going to see strong consumer spending with numbers that look like this.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aDOKOhrVP9f8
-ADP Says U.S. Companies Decreased Payrolls by 371,000. Companies in the U.S. cut fewer jobs in July as the worst recession since the Great Depression eased, a private report based on payroll data showed today. The estimated 371,000 drop, higher than economists had forecast, followed a revised 463,000 decline the prior month, figures from ADP Employer Services showed today. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=atpkMd27KY44
-The price of U.S. recession is paid in jobs. Long after President Barack Obama’s first term ends in 2013, millions of U.S. families will still be paying the price for the recession.
From auto workers in Detroit too old for retraining, to Hispanic migrants in Arizona with no homes to build, to new college graduates competing with experienced workers for scarce jobs, more and more people are facing long-lasting unemployment.
Since the recession began in December 2007, the jobless rate has climbed 4.6 percentage points to 9.5 percent, the biggest jump since the Great Depression. Worse, the mean duration of unemployment is now almost 6 months, the highest on record. Read more here-http://www.reuters.com/article/newsOne/idUSTRE5720J120090803
-Job options narrow as U.S. recession bites. Former corporate executive Don Yows took an entry-level job that set his career in information technology back by two decades.
Rick Cumins is selling off his gun collection to make ends meet as his real estate business falters. Options are dwindling in the United States even for those with experience, skills and education as the world’s largest economy sheds jobs in the face of recession.
A loss of 467,000 more jobs in June pushed the unemployment rate to 9.5 percent. Economists expect official data coming out on Friday to show another 320,000 jobs lost in July. Read more here-http://www.reuters.com/article/newsOne/idUSTRE5745RU20090805
-Silicon Valley Unemployment Skyrockets. Unemployment in the Valley is now higher than it was after the dotcom bust. The job market is so bad that some folks are giving up, quitting the tech industry, and going into healthcare (and green-tech, which isn’t exactly thriving right now, either). Read more here-http://www.businessinsider.com/chart-of-the-day-silicon-valley-unemployment-2009-7
-Finance Jobs Vanish Into Thin Air. The severe bloodletting in the construction industry is slowly waning. The pace of layoffs is coming well off its peak, according to ADP, probably since companies don’t have much more room to cut. But financial services? Despite the improved picture, the layoffs continue at a steady clip, with little month-over-month improvement. Read more here-http://www.businessinsider.com/chart-of-the-day-construction-vs-financial-sector-employment-2009-8
MAPPING THE GLOBAL RECESSION
-Moody’s Economy.com has mapped the geographic spread of the worst global downturn since the Depression. All of North America is in recession now. In Europe only Norway, Slovenia and Slovakia have avoided a similar fate, although Moody’s reckons these countries are on the brink of a downturn.
Emerging Asia looks cheerier, although the small export-led economies of Singapore and Hong Kong are shrinking, as are Malaysia and Thailand. Even the BRICs are looking a bit diminished, with downturns in both Brazil and Russia. At least India and China are growing (the latter at a pace that is causing worries about overheating).
Data for Africa are spotty but the continent’s biggest economy, South Africa, is in recession. The IMF expects global GDP to shrink by 1.4% this year, with rich countries’ economies contracting by around 3.8%. Read more here-http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=7933596&story;_id=14119302
ROUBINI-RECESSION WON’T END UNTIL YEAR END-COMMODITY PRICES MAY RISE IN 2010
-The global economy is still in a recession that won’t end until the end of the year, said Nouriel Roubini, the New York University economist who predicted the global financial crisis.
“There is now potentially light at the end of the tunnel,” Roubini said today at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia. Roubini was dubbed Dr. Doom for predicting the crisis. “I don’t think this recession will be over until the end of the year.”
Roubini, chairman of Roubini Global Economics and a professor at NYU’s Stern School of Business, predicted on July 23 that the global economy will begin recovering near the end of 2009 before possibly dropping back into a recession by late 2010 or 2011 because of rising government debt, higher oil prices and a lack of job growth. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aQwbwmRnTEsg
-Commodity prices may extend their rally in 2010 as the global recession abates, said Nouriel Roubini, the New York University economist who predicted the financial crisis. “As the global economy goes toward growth as opposed to a recession, you are going to see further increases in commodity prices especially next year,” Roubini said today at the Diggers and Dealers mining conference in Kalgoorlie, Western Australia. “There is now potentially light at the end of the tunnel.” Read more here-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aUZbo8LjO3kw
THANK GOD FOR GOVERNMENT SPENDING
-The better-than-expected -1% GDP was tempered, somewhat, by the staggering 11% spike in Federal Government spending (hello stimulus!). Today’s chart looks back at the Y/Y GDP change with the same number sans government spending. As you can see from the divergence, the government boost provides a big help. Read more here-
http://www.businessinsider.com/chart-of-the-day-gdp-vs-government-spending-2009-7
THANKS CASH FOR CLUNKERS
-It wasn’t pretty, and it wasn’t by much, but Ford managed to report year-over-year sales growth in July. It was the first such gain since 2006, and they were helped in large part by Cash-For-Clunkers, which powered blistering car sales in the final week of the month. Of course, all those sales will come out of future sales but that’s another problem. Read more here-
http://www.businessinsider.com/chart-of-the-day-fords-sales-2009-8
AFTER RESCUE NEW WEAKNESS SEEN AT A.I.G
-The dozens of insurance companies that make up the American International Group show signs of considerable weakness even after their corporate parent got the biggest bailout in history, a review of state regulatory filings shows.
Over time, the weaknesses could mean trouble for A.I.G.’s policyholders, and they raise difficult questions for regulators, who normally step in when an insurer gets into trouble. State commissioners are supposed to keep insurers from writing new policies if there is any doubt that they can cover their claims. But in A.I.G.’s case, regulators are eager for the insurers to keep writing new business, because they see it as the best hope of paying back taxpayers.
In the months since A.I.G. received its $182 billion rescue from the Treasury and the Federal Reserve, state insurance regulators have said repeatedly that its core insurance operations were sound that the financial disaster was caused primarily by a small unit that dealt in exotic derivatives.
But state regulatory filings offer a different picture. They show that A.I.G.’s individual insurance companies have been doing an unusual volume of business with each other for many years investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good.
Insurance examiners working for the states have occasionally flagged these activities, to little effect. More ominously, many of A.I.G.’s insurance companies have reduced their own exposure by sending their risks to other companies, often under the same A.I.G. umbrella. Read more here-http://www.nytimes.com/2009/07/31/business/31aig.html?_r=2&partner;=rss&emc;=rss&pagewanted;=print or http://finance.yahoo.com/banking-budgeting/article/107445/after-rescue-new-weakness-seen-at-aig.html?sec=topStories&pos;=5&asset;=&ccode;
-After $182 billion taxpayer rescue, is AIG on the verge of collapse? To summarize, AIG’s core insurance companies seem to be like a shell game which AIG was able to continue operating because it was able to keep the cash moving from the affiliate that one state regulator had just examined to the one that another state regulator was about to examine.
Unfortunately, it would not surprise me if this was happening and continues to happen at all big U.S. insurance companies. Moreover, I would be shocked if former AIG CEO Hank Greenberg who has heaped scorn on his successors was unaware of this practice. Is it too early to write off that $182 billion? Peter Cohan-Read more here-
-AIG breakup nets Wall Street $1 billion bonanza: report. Wall Street banks and lawyers could collect nearly $1 billion in fees from the Federal Reserve Bank of New York and American International Group Inc to help manage and break apart the insurer, The Wall Street Journal said on Wednesday, citing its own analysis. Read more here-
http://www.reuters.com/article/newsOne/idUSTRE57508M20090806
REAL ESTATE-MORTGAGE-FORECLOSURE
-”Shadow” inventory lurks over U.S. housing recovery. The storm may have subsided, but clouds continue to hover over the U.S. housing market as homeowners waiting for prices to rise get ready to flood the market with fresh inventory. Many home owners held off selling during the housing market’s downturn, but with the market showing signs of stabilization, they may now be ready to sell.
Many analysts agree the market may have turned an important corner after Case-Shiller home price index for May rose for the first time in nearly three years, but a massive supply of unsold homes is waiting in the wings and could easily swamp the recovery before it can gather speed.
“The number of homes listed officially on the market, while still at historically high levels, might be only the tip of the iceberg,” said Stan Humphries, chief economist at real estate website Zillow.com in Seattle, Washington. Read more here-http://www.reuters.com/article/ousiv/idUSTRE56U5YZ20090731
-‘Underwater’ U.S. Mortgages May Hit 48%, Deutsche Bank Reports. Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said. The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.
As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.
“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote. Seven markets in states with the fastest appreciation during the five-year housing boom including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas may find 90 percent of borrowers underwater, according to the report.
The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Weaver and Shen. Home prices will decline another 14 percent on average, the analysts wrote. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=adBYDzUMt68k or http://www.reuters.com/article/ousiv/idUSTRE5745JP20090805
-U.S. foreclosures spreading to regions formerly spared. The U.S. foreclosure crisis is spreading, and areas that previously appeared immune are now seeing the numbers rise, according to a report yesterday from RealtyTrac Inc., of Irvine, Calif., which tracks filings nationwide.
Some high-foreclosure states (California and the Midwest) saw their numbers drop. But states relatively untouched in the past (Oregon, Idaho, Utah, and South Carolina) experienced increases in foreclosure filings, which RealtyTrac chief executive officer James J. Saccacio suggested may be more directly related to growing unemployment than fallout from subprime and adjustable-rate loans.
Nationally, one in every 84 homes had a foreclosure notice filed against it in the first six months of the year, RealtyTrac said. In the Philadelphia region, it was one in every 168 houses. Read more here-http://www.philly.com/philly/business/20090731_U_S__foreclosures_spreading_to_regions_formerly_spared.html
-Homebuilders Eliminate Frills as First-Time Buyers Drive Sales. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=akCaYx29BrI8
-Pending Sales of Existing Homes in U.S. Surge 3.6%. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5QWWeMXezCw
-No sector of U.S. real estate has been spared from the wrath of the credit crisis. The USDA recently reported the national average price of farm real estate (includes land and buildings) declined 3.2 percent in 2009 from a year earlier. While crop and real estate prices soared at the peak of the bubble, farm values were jumping on average by 13% per year.
But global demand for U.S. agriculture may not be enough to curb weak farm prices. Following the “golden age of American agriculture,” nominal farmland prices fell from a 1920 high of $69 per acre to a Great Depression low of $30 per acre in 1933. Then again, following the inflationary commodity boom of the 1970s, the nominal per-acre price of farmland fell 27 percent from 1982 to 1987.
It took until 1951 for nominal farmland prices to exceed the 1920 peak, and until 1995 for prices to rebound after the 1980s collapse. Can demand for food from developing countries continue its rapid growth? Will inflationary forces on crop prices return in time to prevent another disaster for U.S. farmers? Casey Charts
-U.S. Farmland Values Fall for First Time Since 1987. U.S. farmland values declined last year for the first time since 1987 as the country suffered the worst housing crisis since the Great Depression.
The value of all land and buildings on farms averaged $2,100 an acre at the start of this year, down 3.2 percent from a revised $2,170 a year earlier, the U.S. Department of Agriculture said today in an annual report. The change compares with a 19 percent drop in urban home prices.
Agricultural commodities including corn, wheat and soybeans plunged from records last year, as the recession worsened and the world’s farmers increased production of some crops. The USDA expects net-farm income to drop 20 percent this year to $71.3 billion from last year’s record. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJGBaR9SyOjQ
© 2009, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – August 11, 2009
Posted by Worldwide Precious Metals on Tuesday, August 11, 2009
The Goldbugg Report – August 04, 2009
August 4, 2009
WORLD FINANCIAL REPORT ON RADIO JULY 30 2009 SHOW
-Is Rich Dad Right About $15,000 Gold? Peter Cooper
-Gold demand seen leaving ETFs for futures, real metal. GATA
-Silver bought at any price under $30 will be the buy of the century. Howard Ruff
GOLD
-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1248674940.php
-The summer months are generally quiet as people focus on holidays, rather than markets. This year, however, is shaping up to be an exception because of a weak US dollar.
We can see from the above chart how the US Dollar Index has been slipping. The bear market rally that began last year has ended. More to the point, it looks like the long-term downtrend in the Dollar Index is resuming.
The Dollar Index closed Friday at 78.75, not far above its low of 78.40 made in June. Watch this June low. If the Dollar Index makes a new low, I expect the dollar’s decline to accelerate rapidly. A collapse in the dollar may prove to be the spark that sends gold higher, and over $1,000 per ounce.
The above gold chart is very powerful. An inverted “head & shoulders” pattern has been forming for more than one year. Normally, “H&S;” patterns form at important bottoms when selling has exhausted itself. It is rare for an inverted “H&S;” to form within an uptrend, and therefore it is extraordinary that one has now formed within gold’s decade-long uptrend. It is also unusual to see it forming a complex double right shoulder. But there is an important message here.
This pattern is telling us that the decline in gold last year after the Lehman collapse was a classic selling climax. Gold was dumped in the rush by hedge funds and others to de-leverage. That selling led to a bottom that was marked by emotion, not logic.
It has been my view that gold will climb above $1,000 this year and stay there. I thought it would happen in the first quarter, and while gold did reach $1,000, it failed to stay there. The next time I expect there will be a different result. Gold will hurdle $1,000 and keep climbing. That moment is rapidly approaching. James Turk-
http://goldmoney.com/commentary-the-summer-doldrums-are-ending.html
-Gold to Target Record Above $970 Resistance: Technical Analysis. Gold may extend a recent rally and target its record high as so-called momentum indicators suggest “there’s plenty of fuel in the tank to propel a multi-week advance,” BNP Paribas SA said, citing trading patterns. Gold’s current advance has scope to replicate the powerful April-to-June uptrend, Andrew Chaveriat, the bank’s New York- based technical strategist, wrote in a report yesterday.
Projecting a similar rise off the July 8 low of $905.10, gold may target $1,030 by early September, a target that coincides with the revisiting of the March 2008 record high of $1,032.70, Chaveriat wrote. Bullion’s eight-week stochastic indicator is “well below” the oversold zone, he said. The precious metal is down 8.1 percent from its peak on March 17, 2008. Bullion’s high this year was $1,006.29 an ounce, reached Feb. 20.
“In order to confirm scope for a rally toward $1,030, gold must overcome robust resistance at $957 and $970, representing the 61.8 percent and 76.4 percent retracement points of the June to July decline,” Chaveriat wrote, referring to percentages that are part of the Fibonacci sequence. Resistance levels are where sell orders may be clustered. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low.
A break of a level of support indicates a price may move to the next level. A failure indicates a trend may stall. Other key Fibonacci levels include 38.2 percent and 50 percent. “However, given this month’s swift rise, daily momentum is overbought, and combined with the proximity of $957 and $965 resistance, this might cause a near-term pause in the rally and perhaps a pullback toward $942/$932 support,” he said.
“If such a consolidation or dip occurs, it should be followed by renewed gains breaking $957/$965/$970 resistance, opening a re-test of the $990 June high,” Chaveriat added. “Breaking $990 is possible next month, opening the $1,000 psychological barrier and February high.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601091&sid;=aIbDlt7LsS3w
-Is Rich Dad Right About $15,000 Gold? Read more here-http://news.goldseek.com/PeterCooper/1248786797.php
-The bottom line is gold’s quest for $1000 is nearing fulfillment. Not only are its fundamentals very bullish (including big inflation coming), but for the first time ever its technicals support such a move. $1000 is no longer overextended or overbought, but actually within multi-year and multi-month trends.
It won’t require much buying by traders to push it over $1000 now, and $1000 won’t feel excessive given gold’s high base. And gold $1000 is not just a curiosity, but a potential major driver of large new investment demand. Big round numbers are widely reported, which drives interest among a far greater population of investors.
$1000 could even prove, in retrospect, to be the point when gold investment started growing desirable among average mainstream investors. It is a critical psychological milestone with very bullish implications. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton072409.html
-China May Overtake India in Gold Demand, Council Says. China may overtake India to become the world’s top gold consumer this year, the World Gold Council said, as the nation became the first of the major economies to rebound from the global recession.
Jewelry demand in China expanded in the first quarter while dropping in India, Marcus Grubb, a managing director at the London-based council, said today at a conference in Hong Kong. Chinese gold demand will keep rising, he said.
China’s economy grew 7.9 percent in the second quarter after a 4 trillion yuan ($586 billion) stimulus package spurred record lending and consumption. India’s gold purchases slumped 54 percent in the six months ended June after a decline in the rupee pushed up the cost of owning bullion, cooling demand from housewives and jewelers, the Bombay Bullion Association said.
“There is a possibility that China might overtake India as the world’s largest gold consumer this year,” Hou Huimin, deputy head of the China Gold Association, said by phone from Beijing today. “India’s gold consumption is reportedly dropping this year due to the financial crisis.”
Total demand from India in the first quarter fell 83 percent to 17.7 metric tons, from 107.2 tons a year earlier, according to figures from the World Gold Council. Purchases in China rose 1.8 percent to 105.2 tons from 103.3 tons. Total Chinese demand for gold was six times that of India in the first quarter, the council said in May. Read more here-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=atBLFVabOk4c
-The Day the Dollar Died and the Day Gold was Reborn. If your money is dollars, you live in an inflationary world. If your money is denominated in gold, you live in a deflationary world. In other words if your purchasing power is dollar denominated, costs have exploded upward. But if you maintained your purchasing power in gold, costs have decreased by almost 2/3rds of their original price from 1971! Check out the table below. Using the price data from above lets construct a table measuring cost in percentage terms from 1971 to 2009.
Of all the investment vehicles out there right now, Gold seems poised to have a lot of action in the coming months and years. I believe little by little is it going to be recognized for what it really is, real money. Gold is not an “I owe you” (I.O.U). It is not debt. It has been real money since the dawn of civilization. Do you have any real money? If yes, make sure you’ve got your plan or strategy mapped out. If no, it’s time to take action. Read more here-http://www.kitco.com/ind/Downey/jul272009.html
-Gene Arensberg: Gold running into a Comex wall. Gene Arensberg’s new Got Gold Report, excerpted from Brien Lundin’s Gold Newsletter, elaborates on the shorting that is growing rapidly in the Comex gold market while futures market conditions are improving for silver. Arensberg’s commentary is headlined “Gold Running into a Comex Wall.” Read more here-
-Gold moves in a mysterious way well perhaps not! People trust gold more than governments and the political establishment. That is gold’s inherent strength that makes it a good investment throughout difficult economic times. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=86722&sn;=Detail
-Gold will remain range-bound at $950/oz into 2010-BMO’s Bart Melek. BMO Global Commodity Strategist Bart Melek says gold’s “impressive seven-year run” will continue well into 2011, as commodities will rally. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page57?oid=86735&sn;=Detail
-Central Banks USD over-exposure good for gold, bad for dollar? US liabilities to foreign governments at end-May totalled a whopping $2.3 trillion dollars or 17% of GDP but the maturity curve is shifting to the short end, partly but not wholly as a result of quantitative easing. In principle this should be good for gold. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=86932&sn;=Detail
-The predicted growth in consumer electronics in the future looks set to be a good end market for gold. The world’s fourth most-traded commodity is no longer just being used in jewellery, but also plays a significant role in several industries. The industrial demand for gold in 2008 was estimated at 430 t, which is about 12% of total end user consumption.
The main consuming industry for gold is the electronics industry, which, in 2007, used over 300 t of gold in bonding wire, which is used in semiconductor chips and electroplated coatings on contacts and connectors, organisation for gold-mining companies World Gold Council head of industrial applications Dr Richard Holliday tells Mining Weekly.
“Gold is mostly used in computers and mobile phones. It is not unusual for a computer to contain over $5 of gold on the circuit boards. “As the consumer electronic market grows, it is important that gold retains its position as ‘the material of choice’,” he adds. Read more here-http://www.miningweekly.com/article/all-that-glitters-is-indeed-gold-2009-07-31
-Cenbank sales under gold pact well below limit: WGC. Official sector gold sales under the Central Bank Gold Agreement (CBGA) have totalled only 140 tonnes so far in the pact’s final year, well short of the maximum 500 tonnes allowed, the World Gold Council said. France and Sweden are the two principal remaining sellers, the WGC said in an emailed statement on Wednesday, although the possibility exists for a further sale by the European Central Bank.
The 15 signatories of the pact, which also include the central banks of Spain, Germany and Italy, agreed in 2004 to limit gold sales to the market to 500 tonnes in any one year. “With 140 tonnes of sales, according to our numbers, it looks like we have had over 100 tonnes less than was sold over the same period of last year,” said Barclays Capital analyst Suki Cooper.
“Given the current pace, it is likely this is going to be the lowest annual sales-per-quota year since the start of the very first agreement.” The first CBGA was signed in 1999, and limited sales to 400 tonnes per year to avoid flooding the market with bullion and consequently destabilising the gold price.
However, with bullion an increasingly attractive portfolio diversifier for central banks after a period of instability in the currency markets, fewer are selling gold, while talk emerged earlier this year of Asian banks considering new purchases. Read more here-http://af.reuters.com/article/investingNews/idAFJOE56S0CJ20090729?feedType=RSS&feedName;=investingNews
-Gold tunes out weak ETF buying as speculation soars. Read more here-http://www.reuters.com/article/hotStocksNews/idUSTRE56S3MW20090729 or http://www.gata.org/node/7635
-Gold demand seen leaving ETFs for futures, real metal. Read more here-http://www.gata.org/node/7636
-King World News interviews Eric Sprott on markets and metals. Listen here-http://www.gata.org/node/7632
-Financial Tube interviews GATA’s Douglas on commodities, gold, silver. Listen here-http://www.thefinancialtube.com/video/4852/725-Adrian-Douglas-on-Commodities
SILVER
Gold to silver ratio at 80 to 1 with gold at $2,700 the silver price would be $33.75
Gold to silver ratio at 70 to 1 with gold at $2,700 the silver price would be $38.57
Gold to silver ratio at 60 to 1 with gold at $2,700 the silver price would be $45.00
Gold to silver ratio at 50 to 1 with gold at $2,700 the silver price would be $54.00
Gold to silver ratio at 40 to 1 with gold at $2,700 the silver price would be $67.50
Gold to silver ratio at 30 to 1 with gold at $2,700 the silver price would be $90.00
Gold to silver ratio at 20 to 1 with gold at $2,700 the silver price would be $135.00
Gold to silver ratio at 15 to 1 with gold at $2,700 the silver price would be $180.00
-Clive Maund Silver market update. Read more here-http://news.silverseek.com/CliveMaund/1248656034.php
-Ted Butler silver commentary. Old-time country music fans will recognize the title as one of the late Tammy Wynette’s greatest hits. Men and women are alike in uncountable ways, yet are also remarkably different. In every species, the female is from Venus, the male from Mars. Sometimes, even relationships that have endured for the longest time end in divorce. Today, I write of the pending divorce I see in a relationship that the world has grown comfortable in observing for hundreds of years.
As such, when it becomes obvious that the two will part ways, most will be shocked and in disbelief. Yet there will be no reconciliation and the split should prove permanent. The divorce I speak of is in the price relationship between gold and silver. Gold will still be gold, of course, and will remain as it has been since the dawn of civilization, valued by the world’s inhabitants for its beauty and rarity.
As will silver. Each will exist forever, as they have existed through the ages. Each will rise and fall in price based upon supply and demand and investment flows and the presence (or absence) of manipulation. Nothing can change that. What will change is the price relationship they have shared in everyone’s living memory. They are about to begin separate journeys. In the coming price relationship dissolution, silver will be the cause of the break up.
That’s because it is the price of silver, relative to gold, that is out of line. Just like a spouse long-abused in a one-sided relationship, silver will be the one to blossom once the marriage is terminated. Certainly, I am not suggesting that gold has abused silver, as inert materials can’t possible abuse anything. The abuse of the silver price has come from the long-running manipulation.
It is the coming end of the silver manipulation that will set silver free to begin its own new price life. Just like a marriage that never should have occurred, given the real facts, silver has no business being less than 2% of the price of gold. Whether it deserves to be equal to gold in price is debatable, but it certainly doesn’t make sense for gold to be 70, or 50, or even 20 times more than the price of silver.
On any reasonable and objective measurement, from annual production to existing inventories, the gold/silver price relationship is lopsided. You may think my divorce analogy is a bit extreme, but the coming price out-performance of silver compared to gold will reward those who back the real winner. The current price relationship is on the rocks. Those that can switch gold holdings to silver should do so without delay. Read more here-http://news.silverseek.com/TedButler/1248708118.php
-It’s time for real investors to indulge their financial lust. One of the inexorable investment laws is “buy low, sell high.” Silver and gold have seen sharp dips in the last few days. Silver is now a lot better buy at $13.50 than it was at $16 awhile ago. If your holdings have dipped, think of this as an opportunity to buy more.
When silver goes to $25 an ounce, everyone, including many of my subscribers will want some, and I will get emails from some people asking, “Isn’t silver too high?”
Silver bought at any price under $30 will be the buy of the century, and some day you will brag about how smart you were. $13.50 is a lot better than $30. I hope that silver stays down for a while so my new subscribers have a chance to get in cheaply. Don’t give up the ship! Buy, buy, buy! Howard Ruff-Read more here-http://www.kitco.com/ind/Ruff/ruff_jul162009.html
-China offers silver bullion for investment. Watch video here-http://www.cctv.com/program/bizchina/20090723/102545.shtml
-China offers silver bullion for investment. China has introduced its first-ever investment opportunity for silver bullion. The bars are available in 500 grams, 1 kilogram, 2 kilograms and 5 kilograms with a purity of 99.9 percent.
Figures show that gold was 50 times more expensive than silver in 2007. But now that figure has reached to over 70 times, the highest in the past five years. Analysts say that silver has been undervalued in recent years. They add that the metal is a wise investment for individual investors, and could be a good way to cash in.
Wang Chunli, GM of Beijing Caibai Shopping Mall said “We are the first to offer silver bullion as an investment opportunity. The price for the first batch of the bullion is set very low, close to the cost of the raw material. The investment threshold is not high, and is more suitable for the general public. Silver is much cheaper than gold.” Read more here-
http://www.cctv.com/program/bizchina/20090723/101308.shtml
-New and accessible silver investment trust goes live in the US. Gold and silver ETF investment has slowed recently as the markets have become more cautious; does the market have room for another instrument and are either silver or gold top-heavy? Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page32?oid=86662&sn;=Detail
-ETFs could give silver further boost. Read more here-http://www.marketwatch.com/story/story/print?guid=76B82298-8208-4AAB-BB17-4DFD32D4A068
CHART OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: China’s Incredible Run. Chinese shares crashed 5% Wednesday, setting off a mild panic about Asian stocks and currencies. Chinese stocks have had a massive rally this year, by far outpacing the S&P;’s meteoric rise since March. So perhaps a pull back shouldn’t be that much of a surprise. Read more here-
http://www.businessinsider.com/chart-of-the-day-china-vs-us-2009-7
-”The engine which drives Enterprise is not Thrift, but Profit.” John Maynard Keynes
-When any welfare scheme is being proposed, its political sponsors always dwell on what a generous and compassionate government should pay to Paul; they neglect to mention that this additional money must be seized from Peter. Henry Hazlitt
-The stock market is no longer the sum product of informed, or Captains of Industry, action. It is a rigged casino and asset bubble that is used to paper over declining US living standards. Bill King The King Report 23 July 2009
-Throughout all my years of investing, I’ve found that the big money was never made in the buying or the selling…the big money was made in the waiting. Jesse Livermore
-Inflation is like sin, every government denounces it and every government practices it. Frederick Leith-Ross (1887-1968), chief economic advisor to UK government from 1932 to 1945
-By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. John Maynard Keynes, The Economic Consequences of the Peace, Chapter VI (1919)
-Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair. Sam Ewing (1920–2001), American journalist & humorist, The National Enquirer, 2 September 1997 issue
-The world’s financial system lies in ruins, as do the fiscal balances of almost every major Western nation, after having to bail out their banks and splashed billions of dollars of rescue money into the broader economy. Everyone is suffering, as unemployment climbs, house prices fall, and companies rack up losses or even face collapse. Edmund Conway The Telegraph, London 29 July 2009
-Whether ancient or modern, monarchy or republic, coin or paper, each nation descends pretty much the same slippery slope, expanding government to address perceived needs, accumulating too much debt, and then repudiating its obligations by destroying its currency. James Turk and John Rubino
-We can’t forget we’re still in a bear market. Sure, the rally has been a strong one. The markets are going higher and there’s no news bad enough to stop the rise. But all signs point to this being the third and final stage of a bear market rally. If you recall, Stage 3 of a bear market rally is when we see potential panic buying. As we stated back in early April in when will this rally end:
Panic buying is the inverse of panic selling. Panicked sellers dump stocks at any price because they think they’re all going much lower. Panic buying, on the other hand, is when investors rush back in because they’re afraid they’ll miss the rest of the rally (the dot-com bubble is the perfect example of this). If that starts, watch out. Dow 10,000 or 11,000 – followed by a sharp downturn will shortly follow.
We’re on the verge of panic buying right now. The Investment Company Institute reports more than $6.6 billion of new money flowed into long-term stock and bond funds last week. That’s more than double $3.15 billion from the previous week. It is clear individual and professional investors are getting concerned about they’ll “never be able to get in.” Knowing how bear market rallies act, I wouldn’t be so sure of that. Andrew Mickey-Read more here-http://news.goldseek.com/GoldSeek/1248793312.php
-Corporate insiders more bearish than at any time in nearly two years. Corporate insiders have recently been selling their companies’ shares at a greater pace than at any time since the top of the bull market in the fall of 2007. Does that mean you should immediately start lightening your equity exposure?
It depends on whom you ask. But, first, the data. Corporate insiders are a company’s officers, directors and largest shareholders. They are required to report to the SEC whenever they buy or sell shares of their companies, and various research firms collect and analyze those transactions.
One is the Vickers Weekly Insider Report, published by Argus Research. In their latest issue, received Monday afternoon, Vickers reported that the ratio of insider selling to insider buying last week was 4.16-to-1, the highest the ratio has been since October 2007. I don’t need to remind you that the 2002-2007 bull market topped out that month. Mark Hulbert-Read more here-http://www.marketwatch.com/story/story/print?guid=884853C9-C9E4-4619-95CC-0AC9EC55AC67
-IMF chief cautious on economic recovery. It is good news that financial markets are doing better but 2009 will still be a bad year for the world economy, International Monetary Fund Managing Director Dominique Strauss-Kahn said on Wednesday.
In an interview with France 24 television, he also said the U.S. dollar was likely to remain the world’s reserve currency and called the return to generous bonuses for workers in U.S. banks scandalous. “It’s good that financial markets are doing better. It’s good that companies are starting to have better results. But 2009 will be a bad year,” he said. “We are only halfway through. The rest of the year will not be good. And the pick-up that we see really only exists as of 2010. So we mustn’t get wrapped up in it.”
Even when the economy has recovered, unemployment will remain high and rise for some time, he said. Asked whether the IMF’s Special Drawing Rights (SDRs), an international reserve asset, could replace the U.S. dollar as the world’s main reserve currency, he said: “We are far, very far from having a situation in which the supremacy of the dollar would be contested.” Read more here-http://www.reuters.com/article/marketsNews/idUSLT4043720090729
-Bernanke: This may be worse than Great Depression. Fed chief says growth will resume at 1% in the second half of this year. Federal Reserve Board Chairman Ben Bernanke discussed the economy with average Americans on Sunday, saying the current financial crisis could be even more virulent than the Great Depression.
“A lot of things happened, a lot came together and created probably the worst financial crisis, certainly since the Great Depression and possibly even including the Great Depression,” Bernanke said at the start of a town-hall meeting in Kansas City.
Bernanke defended the Fed’s extraordinary moves, which have included slashing interest rates to zero, pumping billions of dollars to keep credit markets open, and buying Treasurys and mortgage debt to keep long-term interest rates low.
“I was not going to be the Federal Reserve chairman who presided over the second Great Depression,” he said. The event is being televised over three nights, beginning Monday, by U.S. public television network PBS. Members of the public, screened by PBS, were able to ask questions.
Many questioners expressed unhappiness with the “too big to fail” doctrine. One asked when Bernanke would get around to firing the leadership of banks that had to accept government assistance.
Another participant said the only thing that was clear to him in the whole crisis was that his small business was “too small to save.” At first, Bernanke tried to argue that the Fed moved to save big banks to protect the global economy, but by the end, Bernanke simply agreed that “too-big-to-fail has got to go.” Read more here-
http://www.marketwatch.com/story/story/print?guid=86E26A1D-706A-43AD-B3A6-628817AAE3E3 or http://online.wsj.com/article/SB124865498517982625.html
-U.S. Assures ‘Concerned’ China It Will Shrink Deficit. Treasury Secretary Timothy Geithner pledged to rein in the U.S. deficit as China underscored concern about preserving the value of its $801.5 billion of Treasury holdings.
The U.S. will ensure a “sustainable” deficit by 2013, Geithner said at the beginning of the first round of Strategic and Economic Dialogue talks under President Barack Obama in Washington. China is “concerned about the security of our financial assets,” Assistant Finance Minister Zhu Guangyao said. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=ahbrpBhqRYVQ
-Deficit: What caused it, why it matters. The government is spending more than it’s bringing in. A lot more. The result is a deficit. Here’s why that gap must be brought under control. Read more here-http://money.cnn.com/2009/07/30/news/economy/federal_budget_deficit/index.htm?postversion=2009073009
-The next great bailout: Social Security. Fortune’s Allan Sloan takes a look at the troubled retirement program, why it’s more important now than ever and how lawmakers can repair it. Read more here-http://money.cnn.com/2009/07/29/news/economy/fixing_social_security.fortune/index.htm
-The number of states that have exhausted their unemployment insurance fund and now must borrow from the federal government to meet weekly payment obligations continues to rise. So far, 18 states have tapped the feds for a total of $12 billion. Read more here-http://caseyresearch.com/displayCcs.php?e=true
-U.S. Initial Jobless Claims Rise by 25,000 to 584,000. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aNg3FgKf5cMk
-Detroit area jobless rate tops 17%. Government report shows unemployment continues to rise in the Motor City. California’s Riverside area also ranks high. Read more here-
http://money.cnn.com/2009/07/29/news/economy/metro_area_unemployment/index.htm
-U.S. Consumer Confidence Falls More Than Forecast. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=a8mBvuKvJlrk
-British economic collapse rivals Great Depression. The collapse in Britain’s economy now rivals the worst days of the Great Depression, it has emerged. Read more here-
-Credit card crisis to grip Britain, IMF warns. Britain’s credit card debt crisis will get significantly worse in the coming months with a wave of consumer payment defaults, the International Monetary Fund has warned. Read more here-http://www.telegraph.co.uk/finance/personalfinance/borrowing/creditcards/5914853/Credit-card-crisis-to-grip-Britain-IMF-warns.html
-El Nino May Ease Worst Texas Drought, Cut Florida Storm Risk. The return of an El Nino climate pattern to the Pacific Ocean may relieve the worst Texas drought in 90 years and may reduce the threat of hurricanes ravaging orange groves in Florida.
El Nino, characterized by warming waters in the Pacific, “could bring relief” in the fall and winter to Texas, where farms are suffering from the lack of rain, the National Weather Service said July 16. The El Nino will last through the Northern Hemisphere winter and into 2010, presaging winter storms in the Southwest and a reduction in Atlantic hurricanes, the U.S. National Oceanic and Atmospheric Administration said July 9. Read more here-http://www.bloomberg.com/apps/news?pid=20601124&sid;=aQFVJ1f9GKTA
-Victor Vangelakos lives in a luxury condominium tower on the Caloosahatchee River. He never has to worry about the neighbors making too much noise. There are no neighbours.
Vangelakos, 45, his wife Cathy and their three children are the only residents in the 32-story Oasis I condo on the east edge of downtown Fort Myers. Read more here-
-Glenfiddich 50-Year $16,000 Whisky Tempts Investors. Read more here-http://www.bloomberg.com/apps/news?pid=20601093&sid;=agn9kiqcLGMg
PLATINUM-PALLADIUM
-Platinum May Rise to $1,500 on Supply Disruptions, Merrill Says. Platinum prices may climb above $1,500 an ounce “in the next couple of years” as demand recovers amid supply constraints in South Africa, the world’s biggest producer, according to Banc of America Securities- Merrill Lynch.
The precious metal has almost halved from last year’s high of $2,301.50 an ounce as investors liquidated physical positions and demand from industrial users saw a sharp drop, prompting miners to reduce investments, Michael Widmer, the bank’s London- based metals strategist, wrote in a report dated July 24.
“Miners are curtailing capital expenditure,” Widmer said. “Mine safety remains an issue and disruptions led to output falling short of planned production. These factors should support gradual price rises as demand recovers.”
The metal has rebounded 28 percent this year, outpacing silver and gold, as signs of an economic rebound spurred demand. Platinum declined 39 percent last year, the steepest loss since at least 1988. Platinum, the second-most expensive precious metal after rhodium, is used in jewelry, computer screens and pollution- control devices for cars.
South Africa’s miners, which account for three-quarters of global output, “faced a host of problems in recent years” that subdued supply growth, including power shortages and safety issues, Widmer wrote. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=aAvPrV3mh0Vw
-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/HistoricalPriceTrackingsystem.html
-Watch BTV interview of Harold Seigel on colored diamonds and his website http://www.rarecoloreddiamonds.com/. Watch video here-http://www.rarecoloreddiamonds.com/watchnow.html
-Christie’s jewellery, jadeite and watch sales fell 53 percent to $129.6 million in the first half of 2009 despite reporting that diamond prices at auction remained. The auction house reported sales of $275 million for the jewellery, jadeite and watch unit in the same period of 2008. “Diamond prices remained very much in line with those achieved at the same time last year,” the company said in a statement.
Two jewellery sales took place in New York realizing a total of $30.4 million. Highlights in New York included a perfect pear shaped diamond of 30.02 carats, which went for $4 million. Christie’s added that colored diamonds continued to be in strong demand with a pear-shaped blue flawless gem of 6.29 carats selling for $3.5 million. Read more here-
http://www.diamonds.net/news/NewsItem.aspx?ArticleID=27300
7 MORE U.S. BANKS FAIL-NUMBER 2 TEXAS BANK EXPECTS TO FAIL
-7 regional banks fail. 6 subsidiaries of a Georgia bank go down, bringing the tally to 16 for the state in 2009. A N.Y. bank is the first FDIC-insured bank in the state to fail since 2004. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aTvSvyYr_sEE or http://money.cnn.com/2009/07/24/news/companies/bank_failure/index.htm
-No. 2 Texas bank expects to fail. In filing, Guaranty Financial says it’s ‘critically’ short of capital, and is talking to investors about recapitalization. Read more here-
http://money.cnn.com/2009/07/24/news/companies/guaranty_financial.reut/index.htm or http://www.latimes.com/business/la-fi-guaranty25-2009jul25,0,7142268.story
MORE THAN 1,000 U.S. BANKS MAY FAIL-BANK BONUSES
-More than 1,000 banks may fail, analyst estimates. RBC’s Cassidy sharply raises gloomy view, urges avoiding banking stocks. In 2008, analyst Gerard Cassidy forecast 200 to 300 bank failures, but now he says the environment has deteriorated since then. See 2008 story on bank failures.
“Residential mortgage delinquencies remain at record levels, home-equity loan defaults are steadily rising and residential construction and land loan non-performing assets are skyrocketing for lenders with excess exposure to the weakest housing markets in the U.S.,” Cassidy wrote in a note to clients. “In conjunction with the slowdown in the economy, credit deterioration has accelerated in the commercial and industrial and commercial real estate loan areas,” he said.
Since the mortgage-fueled credit crunch erupted in 2007, 34 banks have failed in the U.S. While Washington Mutual became the biggest bank failure in history last year, Cassidy expects most of the banks that collapse will be relatively small, with less than $2 billion in assets. See story on latest banks to fail.
Cassidy and his colleagues have developed an early-warning system for spotting future trouble at banks using a calculation known as the Texas Ratio. It measures credit problems as a percentage of the capital a lender has available to deal with them.
The formula divides the number of a bank’s non-performing loans, including those 90 days delinquent, by its tangible equity capital plus money set aside for future loan losses. Cassidy came up with the ratio after covering Texas banks in the 1980s. He noticed that when problem assets grew to more than 100% of capital, most of the Texas banks in that precarious position ended up failing.
Among the 50 largest U.S. commercial banks by assets, Sterling Financial of Spokane, Wash., had the highest Texas Ratio at the end of the fourth quarter. The ratio of 54% was up from 45.4% in the third quarter and 15.6% at the end of 2007, according to RBC data. Read more here-http://www.marketwatch.com/story/story/print?guid=E2F58082-D9BB-4EBA-AEAE-2E6CEE571BD3
-Get ready for banking’s next headache. A weak economy and frozen financing markets could spell trouble for regional banks with big commercial loan portfolios. Read more here-
http://money.cnn.com/2009/07/24/news/economy/banks.commercial.fortune/index.htm
-Banks Paid $32.6 Billion in Bonuses Amid U.S. Bailout. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=alEag0rb.3KU
-No profits? Here’s a fat bonus! Citi and Merrill Lynch paid big bonuses despite losing money last year while fellow TARP recipients Goldman and JPMorgan paid more than they earned. Read more here-http://money.cnn.com/2009/07/30/news/companies/bonuses_tarp/index.htm?postversion=2009073015
IMF-U.S.-U.K. BUDGET GAPS TO LEAD G-20 THIS YEAR
-The budget deficits of the U.S. and U.K. will be the largest this year of the world’s top 20 advanced and emerging economies and clear plans to cut spending are needed to ease investor concerns, an International Monetary Fund staff report said.
The U.S. budget gap will be 13.5 percent of the country’s economy this year, and the U.K.’s will be 11.6 percent, as financial rescue efforts swell government debt worldwide, the Washington-based IMF said today in its first report on the fiscal state of the Group of 20 nations. As a result, U.S. government debt next year will almost match the size of the world’s largest economy, the IMF said.
The report urged countries to weigh “complicated tradeoffs” between stimulating growth and easing investors’ worries about inflation. Without identifiable exit plans, stimulus of about 2 percent of the size of the group’s economies this year and 1.6 percent in 2010 may have less of an impact on recovery, the report said.
“The positive growth impact of fiscal expansion would be enhanced by the identification of clear strategies to ensure that fiscal solvency is preserved over the medium term,” the staff report said. “Without such strategies rising interest rates and risk premiums could erode the effectiveness of stimulus measures.”
The report also predicts advanced economies’ debt as a share of gross domestic product will increase by 2014 to 120 percent, an increase of about 40 percentage points from this year and the biggest jump since the end of World War II. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=asKO159nWghs
INFLATION
-Once the global economy begins a temporary recovery (perhaps in the next 6–9 months), we expect that the bull market in commodities is likely to resume. We also expect that the Fed, despite its statements to the contrary, will be faced with additional rounds of money printing as the U.S. government deficit balloons to $2 trillion dollars and remains above a trillion dollars for the balance of the next decade.
We also anticipate a pickup in inflation by year-end and a rise in interest rates later on this year. Contrary to the consensus view that deflation is what lies ahead we believe otherwise, especially in the long term. I can’t guarantee that inflation will be the outcome, but what I’m relying on is over 5,000 years of recorded history to back up my inflation thesis.
I would be surprised to see a nation that imports most of its goods, runs up trillion dollar budget deficits, and whose central bank is monetizing $1.75 trillion of government bonds, would see the value of its currency appreciate. The U.S. has been fortunate so far to have its currency accepted as the world’s reserve currency.
This privilege, afforded to no other nation, allows the U.S. to “export its inflation” to the rest of the world, a privilege that is being increasingly challenged by the major nations of the world. The days of the Dollar’s hegemony are drawing to a close. We are now in the beginning stages of its demise. James J. Puplava-Read more here-
http://www.financialsense.com/stormwatch/update.html
-Today Starbucks announced that it was spending as much on worker health insurance premiums as it is on coffee. Here’s why: Health insurance premium inflation has gone crazy over the last 10 years vastly outstripping relatively modest wage-inflation growth. Somehow, the blue line has to be bent down. Read more here-
http://www.businessinsider.com/chart-of-the-day-changes-in-health-insurance-premiums-2009-7
STOCK AND COMMODITY MARKET MANIPULATION 101
-CFTC Weighing Strict Position Limits on Energy, Gensler Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=at2Y0f4GM9vo
-Market manipulation and insider trading with the exchange’s OK. It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices. It is called high-frequency trading and it is suddenly one of the most talked-about and mysterious forces in the markets.
Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.
These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk. Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.
And when a former Goldman Sachs programmer was accused this month of stealing secret computer codes software that a federal prosecutor said could “manipulate markets in unfair ways” it only added to the mystery. Goldman acknowledges that it profits from high-frequency trading, but disputes that it has an unfair advantage.
Yet high-frequency specialists clearly have an edge over typical traders, let alone ordinary investors. The Securities and Exchange Commission says it is examining certain aspects of the strategy.
“This is where all the money is getting made,” said William H. Donaldson, former chairman and chief executive of the New York Stock Exchange and today an adviser to a big hedge fund. “If an individual investor doesn’t have the means to keep up, they’re at a huge disadvantage.” Read more here-http://www.gata.org/node/7619
-New York senator urges ban on ‘high-frequency’ trades. Read more here-http://www.gata.org/node/7620 or http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aqUBs5ZbSMeI
-The U.S. Securities and Exchange Commission will review so-called flash orders used by four equity markets, NYSE Euronext Chief Executive Officer Duncan Niederauer said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aR1QRozxMTOk
-High-Frequency Traders Say Speed Works for Everyone. Frank Troise, the head of electronic equity trading products at Barclays Plc, says using computers to execute orders in milliseconds is no different than brokers jockeying for position years ago on the floor of the New York Stock Exchange.
“This has been going on for quite awhile, and it’s now at a fever pitch,” says Troise, 43, who is based in New York. “There’s always been an advantage to executing with speed.” Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a9my6XCRc69Y
-Goldman Says Curbing Speculators May Disrupt Markets. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=abDChEECtFsI
-SEC rule on ‘naked’ short-selling now permanent. Read more here-http://finance.yahoo.com/news/SEC-rule-on-naked-apf-3523034809.html?x=0&sec;=topStories&pos;=main&asset;=&ccode;
S&P; 500 EARNINGS-PE RATIO NOW AT 723
-Today’s chart provides some perspective on the current earnings environment by focusing on 12-month, as reported S&P; 500 earnings. Today’s chart illustrates how earnings are expected (38% of S&P; 500 companies have reported for Q2 2009) to have declined over 98% since peaking in Q3 2007, 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.
Read more here-http://www.chartoftheday.com/20090724.htm?T
-S&P; 500 PE ratio is now at 723! The historic rule of thumb is that the S&P500; is correctly valued with a price/earnings or PE ratio of 14, the market normally hits the area of 7 at true bear market bottoms, and 21 at bull market tops. There are 2 types of PE ratio that S&P; produce the first ratio is called the OPERATING Earnings.
This is basically the PE ratio calculated with all the bad news stripped out, it is the make believe PE ratio that has very little to do with reality and only has any validity in the fantasy land of CNBC and Wall Street analysts. The other ratio are as REPORTED or real earnings, the giveaway is in the name as these are the earnings that are actually reported to the SEC via the 10Q form each quarter.
These reported earnings are the only reality, as another giveaway is that during every boom these 2 ratios fantasy and reality actually close up they become very close in value, and during every bust we get huge divergences. For example during the last bust the highest Reported PE ratio recorded was 46 which was also the highest PE ratio ever recorded in history! At this same time, the operating PE was 29.
Today with 53% of companies’ results reported for the 2nd quarter 2009 the Operating PE is surprise, surprise “only” at 22.87. So according to CNBC and Wall Street the S&P; 500 is fairly valued so please ignore reality, live in denial and BUY!!! Unfortunately the reality shown by the as reported PE is a truly mind blowing 723. I repeat 723, the previous all time high was 46. Despite this incredible PE ratio the S&P500; has been rising in value and rising strongly, this can only mean a few things. Ceri Shepherd-Read more here-http://news.goldseek.com/TrendInvestor/1248787086.php
REAL ESTATE-MORTGAGES-FORECLOSURES
-Residents of Cleveland, OH and Phoenix, AZ take note: If you bought a home anytime in the 21st century, you’re almost certainly underwater, based on today’s Case-Shiller data. It’s as though the current decade didn’t exist at all. Meanwhile, the two markets up the most since 2000 are the twin seats of global power, New York and Washington, DC. It may not be fair, but it’s how it is. Read more here-http://www.businessinsider.com/chart-of-the-day-housing-case-shiller-2009-7
-Today’s chart is pretty self-explanatory. It’s the price of a single family house in Palm Springs, CA. Watch it do a round trip from 2001 to 2009. The dip started in 2008, and we took a stab at what that buyer was probably thinking. Read more here-http://www.businessinsider.com/chart-of-the-day-real-estate-deal-2009-7
-U.K. House Prices Increased in July, Nationwide Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aHic46O10lMo
-U.S. New-Home Sales Climb 11%, Most in Eight Years. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aOdEKR9_Lz7s
-Slide in Home Prices Is Slowing Down, Index Shows. Read more here-http://www.nytimes.com/2009/07/29/business/economy/29housing.html
-Las Vegas Home Prices Drop 41% on Foreclosure Sales. The Las Vegas area’s median home price dropped 41 percent in June from a year earlier as foreclosed properties reduced the value of single-family houses and condominiums, MDA DataQuick said today.
The median price fell to $135,000 last month from $230,000 a year earlier, the San Diego-based real estate research company said today in a statement. The number of homes sold increased 44 percent to 5,519.
About 70 percent of existing houses and condos sold in the Las Vegas-Paradise metropolitan area last month were foreclosures, up from 59 percent a year earlier, MDA DataQuick said. Discounts on foreclosed properties boosted sales to the highest since December 2006, when 5,780 homes changed owners. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aBS9PdEmYIgg
-Las Vegas-based Station Casinos Inc. filed for bankruptcy protection Tuesday, making it the latest casualty in the recession-wracked gambling industry. Despite months of haggling, the company failed to reach a prearranged agreement with all its lenders. Bondholders control $2.3 billion of the company’s $5.7 billion in debt. Read more here-
http://online.wsj.com/article/SB124881967460688103.html
-San Diego high-rise condo market goes from frenzy to fizzle. Read more here-http://www.latimes.com/business/la-fi-condobust27-2009jul27,0,881890.story
-U.S. Properties Worth $2.2 Trillion at Default Risk. About $2.2 trillion of U.S. commercial properties bought or refinanced since 2004 are now worth less than the original price, raising the threat of more foreclosures, Real Capital Analytics said.
Prices have fallen so far that about $1.3 trillion of properties have either lost their owners’ down payment or are close to it, Robert White, president of the New York-based research firm, said in a report. The analysis includes only office, industrial, multifamily and retail properties. Hotels and raw land would “add billions more to the total,” he wrote.
“The sad fact is that many of these assets are healthy performing assets,” said Dan Fasulo, managing director of Real Capital. “Conditions have changed so much in the lending arena that many owners are going to have significant troubles refinancing.”
The report details the magnitude of the crisis in commercial real estate, where the collapse of securitized mortgages have combined with the recession to send prices plummeting and push landlords into default. U.S. commercial property prices are down 35 percent since the peak in October 2007, according a survey from Moody’s Investors Service.
The real estate market is stalled because buyers and sellers are far apart on values, said Raymond Torto, global chief economist at CB Richard Ellis Group Inc., the world’s biggest commercial property brokerage. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=agyb1t2XNasM
-Commercial mortgage delinquency up 585%. Delinquencies on commercial mortgage backed securities soared $10 billion in June, hitting a 12-month high of almost $29 billion, according to Realpoint Research.
California led the nation with the highest amount of delinquent loans, closely followed by Texas and Florida. Late loans across the country are up an “astounding” 585 percent from a year ago when just $4 billion were delinquent, reported the Horsham, Pa.-based research firm. The low point for delinquency was March 2007 when $2 billion was delinquent. Read more here-
http://atlanta.bizjournals.com/atlanta/stories/2009/07/20/daily104.html?t=printable
-Las Vegas, Fort Myers, Florida Lead U.S. Cities in Foreclosures. Las Vegas and Cape Coral-Fort Myers, Florida led U.S. metropolitan areas in foreclosures in the first half of the year as unemployment and falling home prices forced home-loan defaults, RealtyTrac Inc. said.
The Las Vegas area had the highest rate of foreclosure filings, with 7.5 percent of households receiving a default or auction notice or being seized by a lender. That rate was six times the national average. The Cape Coral-Fort Myers region, on Florida’s Gulf Coast, was second, with a rate of 7.2 percent.
“Foreclosure activity continued its upward trajectory nationwide and in the majority of metro areas in the first half of the year,” James Saccacio, chief executive officer of RealtyTrac, said in a statement. “While some of the markets that had the highest saturation of foreclosures over the past few years have seen declining rates, new markets like Provo, Utah, and Boise, Idaho, have seen large increases.”
Home prices in 20 major U.S. metropolitan areas dropped 17.1 percent in May from a year earlier, according to the S&P;/Case-Shiller index. Nationwide, home prices have fallen 21 percent since peaking in July of 2006, according to the National Association of Realtors in Chicago.
The U.S. unemployment rate rose to 9.5 percent in June, the highest in almost 26 years, the U.S. Labor Department said on July 2. That brought the total number of lost jobs to about 6.5 million since the recession started in December 2007, the Labor Department said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aZejjD7U1FNw or http://www.reuters.com/article/newsOne/idUSTRE56T0P020090730
-Big cities: Big changes in foreclosure rates. Among the 20 largest U.S. metropolitan areas, these cities have recorded the biggest year-over-year changes in foreclosure rates. Read more here-http://money.cnn.com/galleries/2009/real_estate/0907/gallery.Big_city_changes_in_foreclosure_rates/index.html
ISRAEL VS. IRAN
-It’s Crunch Time for Israel on Iran. After years of failed diplomacy no one will be able to call an attack precipitous. Relations between the U.S. and Israel are more strained now than at any time since the 1956 Suez Canal crisis. Mr. Gates’s message for Israel not to act on Iran, and the U.S. pressure he brought to bear, highlight the weight of Israel’s lonely burden.
Striking Iran’s nuclear program will not be precipitous or poorly thought out. Israel’s attack, if it happens, will have followed enormously difficult deliberation over terrible imponderables, and years of patiently waiting on innumerable failed diplomatic efforts. Absent Israeli action, prepare for a nuclear Iran. John Bolton-Read more here-
http://online.wsj.com/article/SB10001424052970203609204574316093622744808.html
-Iran vows to hit Israel’s atomic sites if attacked: report. Read more here-http://www.reuters.com/article/newsOne/idUSTRE56O0ME20090725
-The U.S. would seek international backing for stiffer sanctions on Iran should the Persian Gulf nation rebuff talks aimed at curbing its nuclear program, Defense Secretary Robert Gates told reporters in Amman. “We would try to get international support for a much tougher position,” Gates said today in the Jordanian capital. He added that any new sanctions wouldn’t be incremental. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=avxQyljVdxpY
-Clinton says Iran’s nuclear pursuit is “futile.” U.S. Secretary of State Hillary Clinton said on Sunday that Iran would not be allowed to have a nuclear weapon and reiterated Washington’s commitment to protect close ally Israel from any threat posed by Tehran.
“We are going to do everything we can to prevent you (Iran) from getting a nuclear weapon. Your pursuit is futile,” she told NBC’s “Meet the Press” program, adding that Iran did not have the right to develop a nuclear weapon. Clinton annoyed ally Israel last week by saying the United States would cope with a nuclear Iran by arming its allies in the Gulf and extending a “defense umbrella” over the region. Read more here-http://www.reuters.com/article/newsOne/idUSN2651064120090726
H1N1 FLU
-WHO says pandemic gaining speed, sees winter risks. The H1N1 flu virus is starting to infect older people, and pregnant women and the obese are at highest risk, the World Health Organisation said on Friday. In a statement, the United Nations agency said school-age children remain most affected by the newly discovered virus that has been spreading fast in schools and is gaining momentum in broad communities alongside seasonal flu.
“It remains a top priority to determine which groups of people are at highest risk of serious disease so steps to best protect them can be taken,” it said, estimating that vaccine manufacturers should have H1N1 shots ready soon. “Manufacturers are expected to have vaccines for use around September. A number of companies are working on the pandemic vaccine production and have different timelines,” the statement on the WHO website read.
About 800 people have died from the new virus whose fast international transmission caused the WHO to declare in June that a flu pandemic is under way. But for most patients, H1N1 is causing mild and manageable symptoms. “For the moment we haven’t seen any changes in the behaviour of the virus,” WHO spokesman Gregory Hartl said earlier on Friday, while warning the virus could change as it circulates, especially in flu-conducive wintry conditions.
“We do have to be aware that there could be changes and we have to be prepared for those,” he told a Geneva news briefing. Read more here-
http://www.reuters.com/article/marketsNews/idUSLO6472720090724
-H1N1 flu could strike up to 40 percent in 2 years. Read more here-http://news.yahoo.com/s/ap/20090724/ap_on_he_me/us_med_swine_flu
-H1N1 flu spreads to remote corners of the world-WHO. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSLR35367220090727
-Argentina Flu Death Mystery Sparks Probe for Virus Mutation. Scientists wondering why swine flu has killed more people in Argentina than almost any other nation are studying whether a more dangerous mutant has emerged.
The Latin American country has reported more than 130 deaths from the pandemic H1N1 flu virus since June. Analyses of specimens taken from two severely ill patients showed subtle genetic differences in the virus, the International Society for Infectious Diseases said in a report via its ProMED-mail program yesterday.
Scientists from Columbia University and Argentina’s National Institute of Infectious Diseases now plan to decode the complete genomic sequences of at least 150 virus samples over the next 10 days to gauge the frequency of the changes and whether they are linked to more severe illness. Major changes in the pandemic virus could erode the effectiveness of vaccines being prepared to fight the scourge. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aljo5vnxK3z8
-Military planning for possible H1N1 outbreak. Read more here-http://edition.cnn.com/2009/US/07/28/military.swine.flu/
-Pandemic Shot May Be Available as Early as September. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ac_tPfIEQzTA
© 2009, Worldwide Precious Metals.
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The Goldbugg Report – August 04, 2009
Posted by Worldwide Precious Metals on Tuesday, August 4, 2009
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