Newsroom
The Goldbugg Report – September 29, 2009
September 29, 2009
-Gold to reach $1,500 this fall?
-The record high of $50/oz (Silver) remains a viable price target in the coming years. Why?
-King World News interviews Ted Butler on the silver market.
GOLD
-Gold to reach $1,500 this fall? Post summer doldrums, we’re beginning to see a nice fall run up in the gold price according to seasoned bullion dealer, investor and newsletter writer Greg McCoach. He sees a number of factors culminating in ever-increasing prices going forward. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89689&sn;=Detail
-Gold is due a correction but then it will hit $1,400. Dominic Frisby-Read more here-http://www.moneyweek.com/investments/precious-metals-and-gems/gold-price-is-due-a-correction-but-then-it-will-hit-usd1400.aspx
-Demand for gold, which traded within 1 percent of a record last week, will rise on mounting concern that equity markets may decline, said William Rhind, ETF Securities Ltd.’s head of U.S. sales and marketing.
“Clients are getting nervous about the stock market and see the potential for a correction there,” Rhind, 30, said today by telephone from London. “That’s leading people to precious metals, and gold particularly, in a quality flight.”
Bullion has gained for eight straight years and jumped to a record in 2008 as financial turmoil boosted the metal’s appeal as an alternative asset. Speculative net-long holdings of gold futures rose last week to the highest level since at least 1993, the government has said. Before today, gold climbed 13 percent in the past year as the Standard & Poor’s 500 Index fell 11 percent.
“People see that the dollar is weakening and that the threat of inflation is here,” Rhind said. “These things are at the front of investors thinking right now and that translates into more interest for gold.” “Investors don’t want to hold the dollar, so that means they’re holding gold,” Rhind said. “We’d expect that to increase through the end of the year.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=a2A6.76IUexQ
-What If Everyone in the World Wanted a 1-ounce Gold Coin? If we’re right about where the price of gold is headed, the general public will someday clamour to buy all things gold. While gold stocks will be where the real leverage is, the rush will start with gold itself. As a gold editor, I have a very natural question: is there enough to go around?
According to the U.S. Census Bureau, there are 6.783 billion earthlings. Meanwhile, CPM Group, a highly respected industry organization, estimates there are 4.8 billion ounces of above-ground gold in the world. And this includes jewellery, electronics, and dental.
So, even if everyone around the world volunteered to have their chain, cross, or tooth melted into a coin, we’re already short. Those towards the end of the line are out of luck. However, it’s worse than that. Of all the physical metal ever mined.
2.1 billion ounces, or 43%, is found in jewellery, decorative, and religious items.
Private stock gold already held by various private parties accounts for 1.1 billion ounces.
Official reserves (central banks, IMF, etc.) stand at 1 billion ounces.
Industrial use accounts for 530 million ounces.
Very little of this is likely to come available for purchase in coin form. After all, you’re not selling any of your gold, and neither are many banks or institutions. Most everyone is buying.
So for those who don’t yet have a gold coin (or you greedy investors who want more than one), this pretty much leaves us with mine production and scrap sources.
CPM forecasts that total new supply in 2009 will be around 122 million ounces. Only a small percentage of this is made into gold coins and bars, but if all of it were, it would amount to less than two one-hundredths of an ounce, or about half a gram, for every man, woman, and child on earth this year. A product of this dimension is about half the size of that small button on your shirt collar.
Since this supply is only available annually, it means 0.018% of the global population one in every 55 people could buy a one-ounce gold coin this year. Or, said differently, it would take 55 years before everybody had one, assuming the population never increased (it is) and supply never decreased (it is).
But it’s worse than that. Actual 2009 coin production will be around 5 million ounces (excluding medallions or “rounds”), leaving two one-hundredths of a gram of gold (or 0.3 of a grain) available this year for each of the planet’s inhabitants.
This is about half the size of the sesame seed that fell off your hamburger bun at dinner last night. It means that only 0.0007% of earth’s citizens or one in 1,356 can buy a one-ounce gold coin this year, and it would take 1,356 years for everyone to get one.
How’s that for a supply squeeze? But it’s worse than that. Demand continues rising. Gold is more frequently in the news, attracting more customers every day. Hedge funds, which never before considered gold, are now buying physical metal (Greenlight Capital actually sold $500 million of GLD and bought physical gold). Central banks are net buyers of gold for the first time in 22 years.
China is running TV ads encouraging its citizens to buy gold and silver. Last month Russia bought more gold than they actually produced. In a recent survey, 20 out of 22 fund managers bought physical gold for their personal investments. In other words, some investors are already scrambling to get it and in big quantities.
But it’s worse than that. Most of the ramifications of the money printing and dollar debasement haven’t even surfaced yet. How will the general public react when the dollar is crashing and standards of living are threatened? What will they do when milk and gas prices surge to twice what they are now?
How will the greater collective respond when they lose faith in government interventions? Where will they invest when they see gold and silver prices screaming upward and don’t want to be left behind? The panic into gold by the general public hasn’t begun yet. Available supply is scarce and will get smaller. There won’t be enough. Jeff Clark, Senior Editor, Casey’s Gold & Resource Report
-Gold & Silver: the Shining Stars. Gold, silver and gold shares are jumping up. Gold hit a record high this month and all three are in ‘break out’ mode. The time of truth is at hand and it won’t take much more strength to confirm that a stronger phase of the eight year old bull market has begun.
We have often talked about gold’s role in the monetary system. For many years it was tossed aside as a barbaric relic and the thinking was that it was old fashioned. Nixon reinforced this in the 1970s when he closed the gold window by taking the U. S. dollar off the gold standard. An energetic economy then became most important.
But in spite of the generally strong U.S. economy and the growing global economies since the 1970s, the dollar has been weakening. Gold has been moving up quietly this decade and your average person or investor is still essentially unaware of its strength, but that will likely soon change. Aden Sisters-Read more here-http://www.kitco.com/ind/Aden/aden_sep222009.html
or http://www.321gold.com/editorials/aden/aden092409.html
-One-thousand Federal Reserve Notes per troy ounce! This past week gold edged over $1000 to close at its highest levels ever witnessed. This much-maligned investment has nearly quadrupled since its secular bull’s humble beginnings in April 2001, a fantastic 297% gain compared to the S&P; 500’s pathetic 7% loss over this 8+ year span.
The bottom line is $1000 gold is certainly not the extreme the financial media is portraying. In the real inflation-adjusted terms that matter, gold is nowhere close to hitting new records. Using the watered-down CPI, gold’s all-time high is closer to $2350. And during and after the 1970s gold bull this metal spent the better part of 2 years continuously over $1000 in today’s dollars. This week’s $1000 is not excessive at all.
The bullish fundamental forces driving this gold bull remain very much alive and well. Until global gold supply growth exceeds demand growth, probably years away yet, the gold price has no choice but to continue climbing on balance. While $1000 is a sexy number exuding big psychological gravity, it is nothing special in a pure technical sense. It is just another temporary step on a long bullish journey. Adam Hamilton-Read more here-http://www.zealllc.com/2009/cpigold3.htm
-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 14 months before the writing of this report).
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). Read more here-http://www.kitco.com/ind/Summers/sep232009.html
-Once we broke above and held the $850/ounce level in Gold we set the stage for much higher prices. There are NO long-term overhead price resistance points that currently exist. The “sky is the limit” in a sense. I believe we are closer to the beginning than the end of the current Gold bull market, at least in price.
A 7-fold rise in the Gold price would lift us to $1785/oz., which I think is the absolute minimum long-term secular high in the Gold price. I personally don’t think it is reasonable for Gold to top out before we reach the $2000/oz. level. And these are the worst case scenarios for the Gold price! Read more here-http://news.goldseek.com/GoldSeek/1253513280.php
-Clive Maund gold commentary. Read more here-http://news.goldseek.com/CliveMaund/1253513700.php
-IMF will sell up to 403.3 tonnes of gold could begin next week. The International Monetary Fund said it will sell one-eighth of the agency’s gold reserves-without disrupting the gold market beginning at the end of this month. Read more here-http://mineweb.co.za/mineweb/view/mineweb/en/page34?oid=89504&sn;=Detail
-China may purchase some of the 403.3 metric tons of gold being offered by the International Monetary Fund, Market News International reported, citing two unidentified government sources.
China will consider the purchase to diversify its reserves if the price is right and the potential return relatively high, the report said, citing one of the sources. There is no indication China is seeking to buy all of the gold on offer, the report said, citing no one.
The IMF board approved the sales, valued at about $13 billion, pledging to avoid disrupting the market with the transactions and saying it would “stand ready to sell gold directly to central banks,” according to a statement Sept. 18. An official at the People’s Bank of China declined to comment.
“It’s very possible that China buys from the IMF and it’s also possible the country buys all of it given its vast forex reserves and relatively low gold holdings,” Qu Mingyi, a gold dealer at the Bank of China Ltd., said from Shanghai. Buying by central banks would reduce the impact of the IMF sale on the market, Qu added. Read more here-
http://bloomberg.com/apps/news?pid=20602013&sid;=aklIw7I0Di8k or http://www.gata.org/node/7811
-Rumor: China Could Ban Gold Exports. The Chinese government has been promoting the accumulation of gold by its citizens, presumably to help the nation diversify away from a devaluing dollar. In a bid to hoard the metal, might they go as far as to ban the metal’s export? For whatever a rumour from China is worth, some speculate that this could happen. Read more here-http://www.businessinsider.com/might-china-ban-gold-exports-2009-9
-Finally the Gold price in US$ terms leads the globe, with a breakout above the $1000 mark, enough to capture world attention. Only the Gold price in the US$ is breaking out to new highs. The painful breakdown decline in the USDollar is the reason why. All currencies are damaged, but only the USDollar is in steep decline. The first phase is complete, a perverse rise from insolvent liquidations and contract satisfaction.
The second phase has begun. Foreigners have had a full year to remove the control levers, to tear down the required pillars, and to force the USDollar exchange rate to seek its true value. A shock will surely be felt, financially and politically and socially when the 30% to 50% decline comes. The 50% decline might come from a formal introduction of a new USDollar, worth half as much, but with a shiny pretty new bill to carry around. Unfortunately, the debt burden associated with the USDollar will also be carried around.
The point is that the gold price is now rising and breaking out ONLY in US$ terms. The sick hangover from the first phase has ended, as the nation enters a dangerous new phase. The Gold-Euro price and the Gold-Swiss price and the Gold-Pound price and the Gold-Canadian$ price are all struggling to rise above their February highs.
The four gold prices are shown in the same order. They might actually remain in a leveling pattern until the USDollar is finished with its powerful upcoming decline. That decline has only begun, as another 20% to 25% is assured. Jim Willie CB-Read more here-http://www.321gold.com/editorials/willie/willie091809.html
-Inflation fears and fiat currencies what they mean for gold. The recent move in gold suggests higher prices over the next few months as inflation fears linger. Read more here-
http://mineweb.co.za/mineweb/view/mineweb/en/page33?oid=89505&sn;=Detail
-Gold Rally has Legs: Mining Industry Leaders Agree. Some believe $1,000 will be the new base for the next major upside movement. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89627&sn;=Detail
-The simple commodity case for gold. Read and watch more here-http://www.gata.org/node/7814
-Gold’s big picture bullish; good upside silver potential. After some gold ETF redemptions, ETF holdings have started to climb again, which ScotiaMocatta considers a “potentially bullish development.” Read more here-http://mineweb.co.za/mineweb/view/mineweb/en/page33?oid=89507&sn;=Detail
-Indian gold purchases pick up as festive season gathers momentum. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=89629&sn;=Detail
-King World News interviews Ed Steer of GATA on the gold market. Listen here- http://www.gata.org/node/7805
-Fed admits hiding gold swap arrangements. Read more here-http://www.gata.org/node/7819
-GATA issues worldwide press release on Fed gold swaps. Read more here-http://www.gata.org/node/7820
-Sorry, gold bugs, but the facts just don’t add up. Read more here-http://www.theglobeandmail.com/report-on-business/commentary/sorry-gold-bugs-but-the-facts-just-dont-add-up/article1296703/
SILVER
Gold to silver ratio at 80 to 1 with gold at $1,400 the silver price would be $17.50
Gold to silver ratio at 70 to 1 with gold at $1,400 the silver price would be $20.00
Gold to silver ratio at 60 to 1 with gold at $1,400 the silver price would be $23.33
Gold to silver ratio at 50 to 1 with gold at $1,400 the silver price would be $28.00
Gold to silver ratio at 40 to 1 with gold at $1,400 the silver price would be $35.00
Gold to silver ratio at 30 to 1 with gold at $1,400 the silver price would be $46.67
Gold to silver ratio at 20 to 1 with gold at $1,400 the silver price would be $70.00
Gold to silver ratio at 15 to 1 with gold at $1,400 the silver price would be $93.33
-The performance of the gold/silver ratio over the past month has been stunning. From a high of 68.0 on August 19, the ratio closed last week in New York at 59.2, a remarkable 12.9% gain. In other words, the silver you own has outperformed, or appreciated, 12.9% more than your gold. This tremendous move in the ratio is clear from the following chart.
It is interesting to note that the ratio has had big declines before. Note how it fell from the end of 2003 into 2004 and then had another big decline two years later, although not to the same degree. In any case, we cannot say that this current decline is just an aberration or that it could not possibly drop any further.
The reality is that it just might. Maybe it will even drop on this current decline (and before any meaningful correction) to the green uptrend line on the above chart, currently about 54. James Turk-Read more here-http://www.fgmr.com/ratio-september-18-2009.html
-James Turk: There goes the Financial Times again. Read more here-http://www.gata.org/node/7807
-A short-term pull back in the price of silver in the next 4 to 8 weeks could well be on the cards after the sharp run-up seen since mid-July but, renewed demand late in the year and in the early parts of 2010, could see the metal challenging the $20/oz level.
This is the view of RBC Capital Markets, which says in its “review of all things silver” it retains its positive view on silver in the short to medium term because of: “Continued fundamental outlook for a weaker U.S. dollar, which we believe in turn will likely result in stronger precious metal prices (both gold and silver).” Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=89740&sn;=Detail
-Silver, PGMs to outperform gold as it hits well over $1,300/oz Melek. Commodities are riding high, gold is in it for the long term, and silver and PGMs should outperform gold in the latest scenario forecast by BMO Capital Markets. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page31?oid=89666&sn;=Detail
-Silver Remains a Contrarian’s Dream with Negative or No Media Coverage and No Public Involvement. The silver market smells different and a short squeeze and spike to over $20/oz before year end remains possible especially as the big picture supply/demand fundamentals remain compelling.
The record high of $50/oz remains a viable price target in the coming years. As ever the analysts remain overwhelmingly bearish on silver and silver remains a true contrarian’s dream with little or no public involvement and negative or no media coverage. Goldcore
-Silver has become embroiled in the current hullabaloo around the gold price and commentators on both sides of the fence have predicted either that the price is going to rise rapidly or fall precipitously. The main reason for this divergence of view points is that silver is both an industrial and an investible metal. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=89432&sn;=Detail
-Gold and Silver into the Next Decade. The strong implication of this chart is that gold and silver have a few years left to run higher. In this remaining time frame I expect gold to challenge the 1980s highs on an inflation adjusted basis.
Gold made new nominal highs at $1032 in March 2008 but that is well short of the inflation adjusted 1980 high of about $2500. Silver is unlikely to challenge its inflation adjusted high of $135 unless a mega-buyer like the Hunt brothers steps in again but the nominal high of $52 is certainly an objective. Read more here-http://www.321gold.com/editorials/watson/watson092309.html
-Gene Arensberg: Gold, silver stage at new heights. Read more here-http://www.gata.org/node/7817
-Gold and silver prices could come down in the short term VM Group. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89748&sn;=Detail
-King World News interviews Ted Butler on the silver market. Listen here-http://www.gata.org/node/7806
-Ted Butler: Is CFTC warning the big silver shorts? Read more here-http://www.gata.org/node/7815 or http://news.silverseek.com/SilverSeek/1253546222.php or
http://news.silverseek.com/SilverSeek/1253632847.php
-Sprott pushes gold and silver as dollar’s reserve currency status under pressure. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89649&sn;=Detail
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: The Option ARM Armageddon. The Option Arm Armageddon was supposed to strike in the spring of 2009. Across the country, option adjustable-rate mortgages
(ARMs) were set to detonate and start a new wave of foreclosures. But it never happened. We made it well past when this chart from Credit Suisse showed the option ARMs were supposed to begin to hit. And the crisis didn’t come.
Why not? Well, when interest rates dropped to historically low levels as the Fed fought the financial crisis, the wave of resets was held off. Unfortunately, low interest rates won’t last forever they’ll now likely strike next year and continue well into 2011. Many borrowers who now have the option of making payments so low that they don’t even cover the interest are seeing their original loan balance grow, even as their home values continue to fall or remain flat.
The chart below shows that the option ARM reset problem is comparable to the subprime problem, and will likely last for quite some time. Armageddon may have been forestalled but it hasn’t been overcome. Read more here-http://www.businessinsider.com/john-carney-chart-of-the-day-monthly-mortgage-rate-resets-2009-9
-”Option” mortgages to explode, officials warn. The federal government and states are girding themselves for the next foreclosure crisis in the country’s housing downturn: payment option adjustable rate mortgages that are beginning to reset.
“Payment option ARMs are about to explode,” Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama’s administration to discuss ways to combat mortgage scams. “That’s the next round of potential foreclosures in our country,” he said.
Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These “underwater” mortgages have been a driving force behind rising defaults and mounting foreclosures.
In Arizona, 128,000 of those mortgages will reset over the next year and many have started to adjust this month, the state’s attorney general, Terry Goddard, told Reuters after the meeting. “It’s the other shoe,” he said. “I can’t say it’s waiting to drop. It’s dropping now.” Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE58G5U320090917
-Chart of the week: Investor Sentiment Rebound Could Be A Bearish Sign. 42% of individual investors are bullish right now, according to most recent sentiment data from the American Association of Individual Investors (AAII). While investor sentiment has changed dramatically since March, we’re still only moderately above the long-term average of 39%.
The problem is that professional investors are likely to be more optimistic than AAII’s investor sentiment, since they became optimistic earlier in the game this year. Overall bullish sentiment could thus be higher once you combine individual investors with these pros.
The market could be approaching a tricky stage whereby one has to gauge the potential for new bulls to be disappointed versus that for further bears or fence-sitters to capitulate. Given the uncertain times, even moderately above-average bullishness, shown below, could signal a short-term sentiment peak. Read more here-
http://www.businessinsider.com/chart-of-the-day-aall-measure-of-bullish-sentiment-2009-9
-The idea that political freedom can be preserved in the absence of economic freedom, and vice versa, is an illusion. Political freedom is the corollary of economic freedom. Ludwig von Mises-Bio here-http://en.wikipedia.org/wiki/Ludwig_von_Mises
-US May Face ‘Armageddon’ If China, Japan Don’t Buy Debt. The US is too dependent on Japan and China buying up the country’s debt and could face severe economic problems if that stops, Tiger Management founder and chairman Julian Robertson told CNBC.
“It’s almost Armageddon if the Japanese and Chinese don’t buy our debt,” Robertson said in an interview. “I don’t know where we could get the money. I think we’ve let ourselves get in a terrible situation and I think we ought to try and get out of it.”
Robertson said inflation is a big risk if foreign countries were to stop buying bonds. “If the Chinese and Japanese stop buying our bonds, we could easily see [inflation] go to 15 to 20 percent,” he said. “It’s not a question of the economy. It’s a question of who will lend us the money if they don’t. Imagine us getting ourselves in a situation where we’re totally dependent on those two countries. It’s crazy.” Read and watch more here-http://www.cnbc.com/id/33004753
-U.S. issues $7 trillion debt, supply to stabilize. The U.S. government will have issued $7 trillion in bonds by the time the current fiscal year ends next week, but it expects the debt deluge to stabilize by mid 2010, a Treasury official said on Wednesday.
Though markets and the economy are improving, efforts to provide a firm foundation for recovery will require increases to the U.S. Treasury’s conventional bonds going forward, as well as debt securities that are indexed to inflation.
However, this expansion may take place in an environment where investors consider leaving the safe-haven Treasury market for riskier assets, and debt issuance is likely to level off mid next year, said Treasury Acting Assistant Secretary for Financial Markets Karthik Ramanathan.
“In fiscal year 2009, which ends next week, Treasury will have issued $7 trillion in gross issuance that’s in a 12-month period,” Ramanathan told a financial markets conference in New York. “This issuance was necessary to meet nearly $1.7 trillion in net marketable borrowing needs, nearly $1 trillion more than what we raised last year,” he added. Read more here-
http://abcnews.go.com/Business/wireStory?id=8649840 or http://finance.yahoo.com/news/US-issues-7-trillion-debt-rb-118622363.html?x=0&.v=4
-Harry Browne’s famous “permanent portfolio,” described in a 1981 book authored with Terry Coxon titled Inflation-Proofing Your Investments. They hedged against the big four: inflation, deflation, recession and prosperity. In four equal portions, they suggested an S&P; 500 stock index fund for prosperity; 25% long-term bonds for deflation; 25% cash for a recession; and 25% gold bullion for hyperinflation or currency devaluation. Read more here-http://www.financialpost.com/opinion/story.html?id=30124c14-3ea0-49aa-a415-a4faed2fc360
-After recoveries of 45% or more in major stock markets since the Crash of 2008, investors may well wonder how it is they’re still not back to even. There are two reasons. One, broad markets are still below the highs reached before the crash. Two, the arithmetic of loss means a 50% loss followed by a 50% rise does not mean you’re back to even. You need a 100% gain to erase a 50% loss.
The math is more understandable in absolute dollars. If you invest $100 at a top and lose 57.7%, you have just $42.30 at the bottom. But any gains you enjoy subsequently are coming off a lower base. Thus, even a 100% gain of $42.30 brings you only up to $84.60 still $15.40 less than the $100 you started with. To get back to $100, you’d need a 136.4% gain.
Even the TSX composite still must rise 39.4% to get back to its former highs: something most people realize intuitively since the TSX passed 15,000 before the crash and is now just above 11,000. Read more here-http://www.financialpost.com/opinion/story.html?id=ad81cfd5-1aa8-4865-8050-4f84ccde5318
-Never before has the S&P; 500 rallied 60% from a low in such a short time frame as six months. And never before have we seen the S&P; 500 rally 60% over an interval in which there were 2.5 million job losses. What is normal is that we see more than two million jobs being created during a rally as large as this.
In fact, what is normal is for the market to rally 20% from the trough to the time the recession ends. By the time we are up 60%, the economy is typically well into the third year of recovery; we are not usually engaged in a debate as to what month the recession ended. In other words, we are witnessing a market event that is outside the distribution curve.
While some pundits will boil it down to abundant liquidity, a term they can seldom adequately defined. If it’s a case of an endless stream of cheap money, we are reminded of Japan where rates were microscopic for years and the Nikkei certainly did enjoy no fewer than four 50% rallies and over 420,000 rally points in a market that is still more than 70% lower today than it was two decades ago.
Liquidity and technicals can certainly touch off whippy tradable rallies, but they don’t take you all the way to a sustainable bull market. Only positive economic and balance sheet fundamentals can do that.
Another way to look at the situation is that when you hear and read about “liquidity” driving the market, it is usually a catch-all phrase for “we have no clue” but it sounds good. When we don’t have a reasonable explanation for what is driving prices our strategy is to watch from the sidelines. David Rosenberg
-David Rosenberg Says Stocks Overvalued After Six-Month Rise. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a08smWhiqyWg
-Stocks Rally Will End Within Six Months, Tice Says. The biggest U.S. stocks rally since the Great Depression will end within six months because the economy isn’t improving fast enough, said David Tice, Federated Investors Inc.’s chief portfolio strategist for bear markets.
Tice said the Standard & Poor’s 500 Index will fall below 400 within 18 months, a level it hasn’t reached since 1992 and a 62 percent plunge from yesterday’s close. The investor said he has been “bloodied, but unbowed,” as the index climbed as much as 58 percent from a 12-year low in March, an advance that he called a “sucker’s rally” one month after it began.
“The economy is in really, really bad shape,” Tice said today in an interview with Bloomberg Television. The Federated Prudent Bear Fund that he founded returned 27 percent last year as the S&P; 500 plunged 38 percent, the most since 1937. “So many people are trying to be optimistic. We’ve gone from oversold to overbought.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=axKNYpAzP5yY
-Moody’s Economy service FreeLunch.com, using Standard & Poor’s Central Inquiry Office as the source, reports the average monthly P/E ratio of the S&P; 500 over the past four months at a whopping 133.66. When it comes to valuing stocks, the price/earnings (P/E) ratio is one of the oldest and most frequently used metrics.
To put things in perspective, the average monthly P/E ratio of the S&P; 500 from 1960 through 2008 was only 17.79. So, according to this data, the index is priced more than 650% above where it normally is based on as-reported earnings.
The conclusion: the stock market, despite the stubbornly persistent bear market rally we’ve seen over the past seven or so months, is significantly overvalued. In times like this, it’s okay for us to sit on the sidelines remaining patient and capitalize on the few opportunities we’re given. Chris Wood-Casey Research
-With second-quarter earnings largely in the books (over 99% of S&P; 500 companies have reported for Q2 2009), today’s chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P; 500 earnings.
Today’s chart illustrates how earnings declined over 92% since peaking in Q3 2007, which makes it easily the largest decline on record (the data goes back to 1936). On the positive side, S&P; 500 earnings have moved off their lows slightly. Read more here-http://www.chartoftheday.com/20090918.htm?T
-With inflation in tow, Dow 10,000 isn’t what you think. Read more here-http://www.marketwatch.com/story/story/print?guid=1AF9B2CB-D5D3-4D9A-B09C-4EF982FD6D4B
-Corporate insiders continue to increase the pace of their selling. Consider the latest data from the Vickers Weekly Insider Report, published by Argus Research. For the week ended last Friday, according to Vickers, insiders sold 6.31 shares for every one than they bought. The comparable ratio two months ago was 4.16-to-1, and at the March lows the ratio was 0.34-to-1. Read more here-http://www.marketwatch.com/story/story/print?guid=82C13AAD-FCEB-4564-9550-64F0FE5184CB
-The global economic downturn has probably hit bottom though the recovery will be “slow and painful,” said Paul Krugman, the Nobel Prize winning economist. “The end of the world appears to have been postponed,” Krugman, a professor at Princeton University, said at a seminar in Helsinki today.
The world economy “does not appear to be falling into an abyss but is still” in trouble. The outlook is “very fuzzy’ and a W-shaped recovery may become U-shaped, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ap6aPBj59zLc
-Edmunds.com just reported that U.S. motor vehicle sales so far in September are running at an 8.8 million annual rate a 28-year low and a 38% plunge from the incentive-induced 14.1 million tally in August.
If this is what autos do, imagine what housing does once the $8,000 first-time homebuyer tax credit expires (if it does) at the end of November (not to mention what the Fed does in terms of extending its mortgage purchase program beyond the December expiry too it has had a hand in financing 80% of all new mortgage issuance. But look at the good news at least we will be able to see what the economy can do without the walker. David Rosenberg
-U.S. consumers are cutting back, and where they are not cutting back, they are scaling down. This new cycle is all about “getting small” and it is deflationary. For yet another in the litany of signs pointing in the direction of social change towards thrift, have a look at what is transpiring at the upper echelons of the income strata Now Even Millionaires See the Benefits of Budgeting on page B5 of the Saturday NYT is a must read. Read here-http://www.nytimes.com/2009/09/19/your-money/19wealth.html
Not only are the rich trading down, but the article quotes a high net worth financial advisor who said “many of our clients are very happy to be sitting on bond portfolios and cash reserves.” And see the article on page 2 of the Sunday NYT Beauty Products Lose Some Appeal During Recession.
According to the NPD Research Group, total sales of department store beauty products are down 7% from year-ago levels. Women are apparently opting for the “natural look” “some people are selectively replacing higher-priced items with cheaper products from drug stores and discount stores.” David Rosenberg
-Card Defaults Surge to Record 11.49% in August, Moody’s Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aOUFvgV93LaI
-More “Fake Bonds” Turn Up In Italy. Seized U.S. Bonds for $116 Billion Are Fake, Prosecutor Says. U.S. Treasury bonds with a face value of $116 billion seized in Italy in August are fake and were destined for U.S. investors, according to the prosecutor running the probe. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a07gaA0LT_ME
or http://www.businessinsider.com/another-fake-bonds-turns-up-in-italy-2009-9
-Americans won’t be rushing to put out the blaze the next time Wall Street burns. One year on from the near collapse of the financial system, Tom Leonard in New York finds it’s ordinary Americans who are picking up the bill. Read more here-http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6201993/Americans-wont-be-rushing-to-put-out-the-blaze-the-next-time-Wall-Street-burns.html
-Gerald Celente Predicts Economic Armageddon by 2012. Watch here-http://www.youtube.com/watch?v=JhaEc_4zuFI&feature;=SeriesPlayList&p;=93188243F6D0495F
-Census: Recession had sweeping impact on US life. A broad survey of Americans has provided striking measures of the recession’s effect on life at home and at work: People are now stuck in traffic longer, less apt to move away and more inclined to put off marriage and buying a house. Read more here-
http://www.google.com/hostednews/ap/article/ALeqM5iCuYeWPyl7zqXPWi1Ck9mmYyAr7wD9AS7H900
-Years of saving would be needed to return household wealth to pre-recession levels, a report by the Bank of England suggests. If households saved 10% of their income, it would take nine years to bring wealth back up to the average of the last 20 years. Read more here-http://news.bbc.co.uk/2/hi/business/8266511.stm
-Study shows U.S. bank CEO pay dwarfs rest of world. You wouldn’t know it by his pay stubs, but Jiang Jianqing heads the world’s largest bank. Jiang, chairman of Industrial and Commercial Bank of China, made just $234,700 in 2008. That’s less than 2 percent of the $19.6 million awarded to Jamie Dimon, chief executive of the world’s fourth-largest bank, JPMorgan Chase & Co. Read more here-http://www.reuters.com/article/newsOne/idUSTRE58M2QU20090923
-Financial markets have grown too dependent on mathematicians who use models to anticipate price moves and need to start injecting “common sense” into the equation, said Paul Wilmott, a London-based author and quantitative finance instructor. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aD4y2TBuy4gQ
-R. Allen Stanford, the Texas financier accused of leading a $7 billion fraud, will be defended by some of Houston’s most talented lawyers at taxpayer expense. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=a6r5hRvzg1Hs
-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
-People invest diamonds and diamond jewellery mainly for the emotional value that it represents. That is the first point. But at the same time, we have seen that over the recent crisis and severe recent crisis that, in fact, diamond has a lasting value and that as a wealth protection, it is an interesting alternative. Freddy Hanard, CEO of the Antwerp World Diamond Centre
-Diamonds aren’t forever, the pipes are running dry. According to Rio and BHP Billiton analysis, most existing mine resources for rough stones will be gone within 15 years. This is because new diamond discoveries are becoming increasingly rare. According to Rio, annual discoveries of kimberlite ”pipes” kimberlite is a host rock for diamonds have fallen (on a five-year moving average basis) to little more than 100.
And history shows that only one in 10 kimberlite pipes contain diamonds and only one in 100 of those are economic to mine. The lack of new discoveries since the mid-1980s means the world’s mine reserves of rough diamonds have fallen from 80 years’ supply to the 15 years that Rio now forecasts. Read more here-
http://www.smh.com.au/business/diamonds-arent-forever-the-pipes-are-running-dry-20090923-g2sp.html
-Annenberg Flawless Headlining Diamond and Jewellery Auction. Read more here-http://www.idexonline.com/portal_FullNews.asp?id=32972
-Christie’s plans for two auctions next month. Highlights of the New York Sale & The Annenberg Diamond auction. The spotlight of the Jewels: The New York Sale & The Annenberg Diamond auction is the perfect D colour 32.01 carats Flawless Annenberg Diamond, sourced from the collection of American philanthropist late Leonore “Lee” Annenberg.
The auction will also present an assortment of coloured and colourless diamonds. From the collection of Broadway actress Lillian Booth, a pair of ear pendants featuring an 8.04 carat fancy light pink diamond with pave-set diamond trim for one ear, and a 7.18 carat fancy blue diamond with pink pave-set diamond trim for the other (estimate: $1,000,000-1,500,000). Read more here-http://diamondworld.net/contentview.aspx?item=4218
-Smithsonian Offers Public Rare View of Hope Diamond. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2009/09/23/AR2009092302062_pf.html
U.S. DOLLAR
-Global rebalancing to weaken dollar, quietly. Twenty-four years ago today, major nations called for depreciation of the dollar to rebalance the global economy. Now, as another effort at rebalancing looms, the dollar will again bear the brunt though officials will try to ensure its fall is less dramatic this time. Read more here-
http://www.reuters.com/article/usDollarRpt/idUSLL68602920090922
-Russian Prime Minister Vladimir Putin on Friday said other currencies besides the dollar should be used as global reserves to reduce the risks posed by swelling U.S. debt. Putin, who spoke at an international investment forum in the Black Sea resort of Sochi, chided the United States for “an uncontrolled issue of dollars” and said the American currency’s dominance had been “one of the triggers” of the global crisis. Read more here-http://www.gata.org/node/7801
-HSBC bids farewell to dollar supremacy. The sun is setting on the US dollar as the ultra-loose monetary policy of the US Federal Reserve forces China and the vibrant economies of the emerging world to forge a new global currency order, according to a new report by HSBC. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6211858/HSBC-bids-farewell-to-dollar-supremacy.html
FDIC IS BROKE
-U.S. Debt Limit May Hamper Any FDIC Request for Treasury Rescue. A legal limit on U.S. debt may put pressure on the Federal Deposit Insurance Corp. to replenish its coffers by assessing fees on banks rather than borrowing.
The FDIC board is set to meet next week to decide how to refill funds depleted by 94 bank failures this year. The options include new assessments on banks, tapping a $100 billion line of credit with the Treasury Department, or borrowing money from banks or debt markets. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aonZB7NPmp1A
or http://www.nytimes.com/2009/09/22/business/22bailout.html?_r=2
-FDIC Is Broke, Taxpayers at Risk, Bair Muses. The FDIC’s insurance fund is going broke, and Sheila Bair is wondering aloud about how to replenish it. This means one thing for U.S. taxpayers: Watch your wallets. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&sid;=aEKc7Yh8ogXw
-The hole in the FDIC. Read more here-http://news.goldseek.com/MillenniumWaveAdvisors/1253513460.php
TWO MORE U.S. BANKS FAIL-94 IN 2009
-Two Irwin Union bank subsidiaries in Kentucky and Indiana were closed by regulators Friday, bringing the total number of U.S. bank failures this year to 94 and punching an $850 million hole in the federal deposit insurance fund.
The Federal Deposit Insurance Corp. said that Irwin Union Bank and Trust Co. in Columbus, Ind., and Irwin Union Bank F.S.B. in Louisville, Ky., were each closed. Irwin Union Bank and Trust Co. had $2.7 billion in assets and $2.1 billion in deposits as of Aug. 31, the FDIC said. Irwin Union Bank F.S.B. had $493 million in assets and $441 million in deposits as of Aug. 31.
Hamilton, Ohio-based First Financial Bank has agreed to assume the failed banks’ deposits. First Financial Bank said in a statement that assumption of the Irwin Union Bank subsidiaries brings with it 27 banking centers in nine states. Read more here-http://www.marketwatch.com/story/story/print?guid=2FE88A00-8039-4DB4-97DE-92E397FE9680 or
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aPtgVuIMrCnU or http://www.reuters.com/article/rbssBanks/idUSN18460420090918
7.4 MILLION HAVE LOST JOBS IN U.S. DURING RECESSION
-Over 7.4 million people have lost their job during the recession, sending the unemployment rate to a 26-year high of 9.7% in August. Foreboding? Yes. But the acceleration of job loss isn’t the only cause for concern.
The average duration of unemployment at 25 weeks is now the longest since the Department of Labor started tracking the data in 1948. By the end of August, nearly five million people had been unemployed for longer than six months.
Whether the economy is on the cusp of a V-shaped turnaround or not, any recovery in employment will likely be weak well into 2010. As shown in the chart, extended unemployment has peaked, on average, eight months after the previous ten recessions ended.
Washington has already bailed out several bankrupted state unemployment insurance funds, and in June of 2008 implemented the Emergency Unemployment Compensation program, extending coverage to individuals that exhausted their initial benefits. New weekly claims for UI benefits have slowed in recent weeks, but it’s clear that benefit payments will continue to burden the bloated federal budget.
When workers lose their income, they turn to the state for cash. When the state’s well is tapped dry, they rely on the federal government. But where does the federal government find its lender of last resort? Read more here-http://caseyresearch.com/displayCcs.php?e=true
-California, Nevada Reach Record Unemployment Levels. Unemployment rose in 27 U.S. states in August, with California and Nevada reaching record levels of joblessness. Rhode Island rounded out the list of states with the highest level of unemployment since data began in 1976, the Labor Department reported today in Washington. California’s unemployment rate reached 12.2 percent and Nevada’s climbed to 13.2 percent. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aNfVuMdRsGgA
-Chart of the week: Layoff Massacres Persist. We’re still looking for a glimmer of hope on the employment front. There are green shoots of various size and scope everywhere, but seemingly not here.
Anyway, we didn’t find any in the BLS’s latest survey of mass layoffs defined as distinct events of 50 or more employees getting whacked at a single company. After some glints of hope in July, it just spiked right back up in August. Read more here-http://www.businessinsider.com/chart-of-the-day-mass-layoffs-total-events-2009-9
BRITAIN FACES ANOTHER FINANCIAL CRISIS
-Britain ‘facing immediate risk of full-blown financial crisis.’ Analysts at investment bank Nomura cautioned that the public finances are ‘plunging deeply into the red in a spectacular and frightening way’, leaving the UK far more vulnerable than the United States. They said international markets could refuse to buy Government debt, warning the ‘possibility of failed auctions is not trivial’.
Shadow Chancellor George Osborne described the report as a ‘wake-up call’ and warned Britain’s ‘international reputation’ was at stake. The alert came as Chancellor Alistair Darling was accused of planning to sweep £32billion of debt out of public view.
Former Treasury adviser David Heald claimed there was a £32billion gap between published government figures on debt and internal assessments. He told the magazine Accountancy Age that 87 per cent of public-private partnerships and private finance initiatives would be left off the Government’s books. Read more here-
-Britain’s economy less stable than Peru. Britain has a less stable economy than Montenegro or Peru, as a result of the mountain of government debt raised to bail out the banks, according to the World Economic Forum.
The global think-tank ranked the UK 71st in the world for macro-economic stability in a report addressing the relative competitiveness of different countries. The slide in stability pushed the UK down one place to be ranked the 13th most competitive market in the world, after China, based on its institutions, infrastructure, health and primary education, among many other factors.
The report’s authors said: “A significant and growing weakness remains the UK’s macro-economic instability, with low national savings, an exploding public-sector deficit (related in large part to recent efforts to bail out the financial sector), and consequential public indebtedness.”
The soundness of British banks was ranked 126th in the world, after war-torn Burundi and only four places above Iceland. Read more here-
http://www.telegraph.co.uk/finance/economics/6157759/Britains-economy-less-stable-than-Peru.html
-U.K. Had Record Deficit in August as Tax Revenue Fell. Britain posted the biggest budget deficit for any August since modern records began in 1993 as the recession destroyed tax revenue and welfare costs soared. The 16.1 billion-pound ($26.3 billion) shortfall compared with a deficit of 9.9 billion pounds a year earlier, the Office for National Statistics said in London today. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=a19rKWZ8GxFM
-King Says British Banks Got Within Hours of Collapse in 2008. Bank of England Governor Mervyn King said two British banks got within hours of a liquidity shortfall on Oct. 6, 2008, and the day after as the U.K. financial system came to the brink of collapse.
“Two of our major banks which had had difficulty in obtaining funding could raise money only for one week then only for one day, and then on that Monday and Tuesday it was not possible even for those two banks really to be confident they could get to the end of the day,” the BBC cited King as saying in an interview to be broadcast later today.
King was referring to Royal Bank of Scotland Group Plc and HBOS Plc, the BBC said. Prime Minister Gordon Brown’s government pledged to invest about 50 billion ($82 billion) pounds in the banking system on Oct. 8, 2008, to save it from meltdown in the aftermath of Lehman Brothers Holdings Inc.’s bankruptcy declared that September.
“It was, it is, probably the worst situation, as I say, we faced in peacetime,” Chancellor of the Exchequer Alistair Darling said, according to a press release from the BBC. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=afWmri7ru8QM
REAL ESTATE-MORTGAGES-FORECLOSURES-RENTS
-Moody’s bearish on housing recovery. Analysts say it will take more than 10 years to recapture peak home prices. Read more here-
http://www.marketwatch.com/story/story/print?guid=00A06319-CD78-447A-89AC-AB84C4086B25
-Sales of existing U.S. homes unexpectedly fell in August for the first time in four months, signalling the housing recovery will be slow to gain speed. Purchases dropped 2.7 percent to a 5.1 million annual rate, the second-highest level in the last 23 months, the National Association of Realtors said today in Washington. The median price dropped 12.5 percent from August 2008. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aXe9QqyAM40s
-Chart of the week: Shock Drop In Existing Home Sales. What housing comeback? After several months of an upward-sloping curve, the volume of existing home sales dropped more than expected in August. Even the normally sunny NAR warned of a fragile recovery if the government doesn’t subsidize home purchases by extending and expanding the first-time homebuyer tax credit. Read more here-http://www.businessinsider.com/chart-of-the-day-existing-home-sales-2009-9
-U.S. home prices rose 0.3 percent in July from the previous month, less than analysts’ estimates, in a sign that the housing recovery is tenuous. The house price index fell 4.2 percent for the 12 months ended in July, the smallest decline this year, the Federal Housing Finance Agency in Washington said today. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=acX5HcBP50mw
-Housing Crash to Resume on 7 Million Foreclosures, Amherst Says. The crash in U.S. home prices will probably resume because about 7 million properties that are likely to be seized by lenders have yet to hit the market, Amherst Securities Group LP analysts said.
The “huge shadow inventory,” reflecting mortgages already being foreclosed upon or now delinquent and likely to be, compares with 1.27 million in 2005, the analysts led by Laurie Goodman wrote today in a report. Assuming no other homes are on the market, it would take 1.35 years to sell the properties based on the current pace of existing-home sales, they said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aw6_gqc0EKKg
-High U.S. unemployment keeps pushing up the rate of mortgage delinquencies, which could in turn drive personal bankruptcies and home foreclosures, monthly data from the Equifax Inc credit bureau showed on Monday.
Among U.S. homeowners with mortgages, a record 7.58 percent were at least 30 days late on payments in August, up from 7.32 percent in July, according to the data obtained exclusively by Reuters.
August marked the fourth consecutive monthly increase in delinquencies, and the report showed an accelerating pace. By comparison, 4.89 percent of mortgages were 30 days past due in August 2008, while in August 2007, the rate was 3.44 percent, Equifax data showed.
The rate of subprime mortgage delinquencies now tops 41 percent, up from about 39 percent in each of the prior five months. The results, which correlate with consumer bankruptcy filings, suggest U.S. homeowners remain under financial stress despite signs of improving sentiment and fundamentals in the U.S. housing market. Read more here-
http://www.reuters.com/article/ousivMolt/idUSTRE58K29E20090921
-More than half of U.S. residential mortgages are being made by just three large banks. It is a stunning change, but is it good for the housing market, and to what extent will it boost profits over the long term for this elite trio: Wells Fargo, Bank of America and J.P. Morgan Chase? Read more here-http://online.wsj.com/article/SB125322329116020929.html
-Moody’s commercial real estate prices resume descent. Commercial real estate prices renewed steep declines and low transaction volume in July. The [Moody's/REAL Commercial Property Price Index] was down 5.1% from June after having declined by only 1% the prior month. It is now 30.8% below what it was a year earlier and 38.7% below the peak measured in October of 2007.
Overall market transaction volume continued the pattern of calendar 2009. “The market has averaged about 375 sales per month for the seven months in 2009,” said Moody”s Managing Director Nick Levidy. “Over the same time period in 2008, sales were averaging nearly 1,100 a month.” Read more here-http://blogs.reuters.com/rolfe-winkler/2009/09/21/moodys-cre-prices-resume-descent/
-Wells Fargo’s Ticking Time Bomb: Credit Default Swaps On Commercial Mortgages. Read more here-http://www.businessinsider.com/john-carney-wells-fargos-ticking-time-bomb-credit-default-swaps-on-commercial-mortgages-2009-9
-Rents on Priciest Retail Streets Fall Most Since 1985. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ae2ohbS0zRos
-Luxury hotel owners risk defaulting on their debt as the recession cuts occupancies and the credit crunch constrains refinancing. Loans secured by more than 1,500 hotels with a total outstanding balance of $24.5 billion may be in danger of default, according to Realpoint LLC, a credit rating company that tracks commercial mortgage-backed securities.
Some of the biggest loans, put on the company’s watch list because of late payments, decreasing occupancies or cash flow, were made to luxury properties where rooms can cost more than $850 a night. Read more here-http://www.bloomberg.com/apps/news?pid=email_en&sid;=a63JiZ2hVDwA
GEOPOLITICAL NEWS
-Al-Qaida predicts Obama’s fall by Muslim nation. Al-Qaida on Tuesday released a new 106-minute long video predicting President Barack Obama’s downfall at the hands of the Muslim world.
The Arabic-language video, entitled “The West and the Dark Tunnel,” is part of series of messages by the organization marking the eighth anniversary of the Sept. 11 attacks. Bin Laden released a short message of his own on Sept. 14. Read more here-http://news.yahoo.com/s/ap/20090922/ap_on_re_mi_ea/ml_al_qaida_video
-Ahmadinejad Criticizes U.S., Israel; UN Warns Iran. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=abnG6dbC06.Y
-Ahmadinejad Says That No Enemy Dares to Attack Iran. Read more here-http://www.bloomberg.com/apps/news?pid=20601104&sid;=a1cI1acsVsRw or http://apnews.myway.com/article/20090922/D9ASA8GG0.html
-Amid Protests, Iran Leader Calls Holocaust a Lie. Read more here-http://www.nytimes.com/2009/09/19/world/middleeast/19iran.html?_r=1 or http://in.reuters.com/article/worldNews/idINIndia-42553620090918
-Iran regime ‘weaker than people think’: Netanyahu. Read more here-http://www.breitbart.com/article.php?id=CNG.a107751183efc761a95b7687cb8acd74.931&show;_article=1
-Iran says makes new model of nuclear centrifuges. Read more here-http://in.reuters.com/article/oilRpt/idINLM24002120090922
-National security adviser says Iran advancing in making medium-range missiles. Read more here-http://www.washingtontimes.com/news/2009/sep/20/exclusive-national-security-adviser-says-w-europe-/?feat=home_cube_position1
-Kremlin says Israel promised not to strike Iran. Read more here-http://www.reuters.com/article/topNews/idUSTRE58J0NQ20090920?feedType=RSS&feedName;=topNews
-McChrystal: More Forces or ‘Mission Failure’. Top U.S. Commander For Afghan War Calls Next 12 Months Decisive. Read more here-
http://www.washingtonpost.com/wp-dyn/content/article/2009/09/20/AR2009092002920_pf.html
-U.S. bomb plot probe shows greatest security fears. A suspected bomb plot under investigation in New York and Denver has the ingredients of a worst case scenario for U.S. security, experts say: an al Qaeda link, overseas training and free movement within U.S. borders.
Colorado airport shuttle driver Najibullah Zazi, who U.S. authorities say admitted to taking a bomb-making course at an al Qaeda training camp in Pakistan, is at the center of what they say could be a plot to blow up subways or other targets. Read more here-http://www.reuters.com/article/newsOne/idUSTRE58M4OA20090923 or
http://apnews.myway.com/article/20090922/D9ASABU00.html
-U.S. terror suspect indicted on bomb conspiracy charge. Read more here-http://www.cnn.com/2009/CRIME/09/24/terror.indictment/index.html or
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aWkPMG4BoDLo
© 2011, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – September 29, 2009
Posted by Worldwide Precious Metals on Tuesday, September 29, 2009
The Goldbugg Report – September 22, 2009
September 22, 2009
-$5,000/oz gold? Rob McEwen says it’s coming in 2014 or 2015.
-A golden age for silver coming? Silver has been hitting 12-month highs but where does it go from here?
-If you own the silver ETF sell now and get into physical silver. Find out why.
The Week in Review
Another fantastic week for precious metals! This week’s memo will be arriving early as the authors will be on vacation until next Wednesday.
September, traditionally a weak month for stocks is proving to be the opposite so far this year. The stock market continues rising even as the media continues to play images of experts saying they essentially have no idea why. Consensus seems to be building that the stock market is setting up for a correction in the near future. BEWARE OCTOBER!
On Tuesday, September 15th, Ben Bernanke declared the recession was “technically, very likely, over” proving that he knows nothing of macro economics. With unemployment soaring, companies and consumers both hoarding cash (consumers aren’t spending, and companies are not hiring and are continuing to cut spending in other ways), and the dollar at its weakest levels in years “the recession is very likely over”. We can’t help but doubt that statement.
The White House has done a couple of things of note this week. They have seriously ramped up the rhetoric on health care reform while, at the same time, imposing a tariff on Chinese made tires. Some view the tariff move as possibly the opening skirmish of what could become a trade war between the US and China. Any student of the Great Depression can tell you that it was made worse by a serious decline in international trade. It appears that Obama doesn’t care if he angers China, which could be the most dangerous thing he could do for the US and the US Dollar. What a bimbo! This guy would rather get on his soapbox in Elementary schools than pay attention to what would get us out of this huge economic debacle.
Gold spent the week above the $1,000 dollar mark, and rumors surfaced that China, once the lowest per-capita consumer of gold, may soon become the largest. In the beginning of 2009, the central government in China removed restrictions prohibiting the private ownership of gold and is actually pushing people to buy it. China, in addition to its outright purchases of bullion has apparently also been looking to acquire mining assets in South America.
The Fed is involved in a “broad review” of commercial real estate at large regional banks. This lends credence to the rumors that commercial real estate is on the brink of a collapse to rival the current housing market crisis.
The good news of fewer than expected jobless claims was offset by fewer than expected housing starts and weak numbers on new orders and new hires at companies.
The US Dollar continues its decline, down again for the week.
Oil maintained its price above the 70 dollar mark.
Former Fed Chairman Alan Greenspan noted last week that “Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies.” This sounds suspiciously like a veiled way of stating that people are beginning to buy metals as a hedge against inflation.
Here are your Short Term Support and Resistance Levels for the upcoming week.
Volatility should be expected to continue. Rumors are becoming more abundant regarding China’s entrance into the precious metals market as a major consumer. If the government of China is truly pushing the citizens to purchase precious metals, the increase in demand would push prices even higher. Keeping yourself aware of breaking news is becoming more and more important every day. If you have not yet started your precious metals portfolio it is now time to do so. If you already have started your precious metals portfolio, adding more product to that portfolio should prove out to be one of the best investment decisions you will have made in not only insuring your net worth but providing yourself with extreme profitability in the years ahead. As always the key is not to overextend one’s ability to stay and hold and own for the long term.
Trading Department – Precious Metals International, Ltd.
GOLD
-$5,000/oz gold? Rob McEwen says it’s coming in 2014 or 2015. When über mining investor Rob McEwen makes predictions on gold prices or appears to have developed an interest in silver mines, retail investors heed his clarion call and place their bets that the gold price is about to soar.
In a presentation to the Denver Gold Group on U.S. Gold Monday, McEwen was somewhat subdued as he only briefly mentioned he thought gold could hit $5,000 an ounce before the end of the gold cycle As this reporter scrambled for a clarification of his remarks in a brief interview, McEwen stuck by his prognostication, forecasting the end of the gold cycle would occur either in 2014 or 2015. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=89220&sn;=Detail
-Central banks are expected to buy 6 million to 10 million ounces of gold annually due to currency uncertainties after being net sellers in past decades, Jeffrey Christian, managing director of CPM Group, told the Denver Gold Forum on Monday.
“What we are seeing is that central banks are making the transition from large net sellers to large net buyers,” Christian said. “You will see a net buying of 6 (million) to 10 million ounces per year by central banks, and that is an extremely conservative projection,” he said.
Christian said that European central banks appeared to be done with their gold selling, and that central banks in emerging countries which have been building up foreign reserves were now diversifying into gold due to volatility in the dollar and other major currencies.
Recently, China and other emerging economies have signalled growing interest in gold rather than stockpiling their currency reserves in U.S. dollar-denominated assets. Read more here-
http://www.reuters.com/article/usDollarRpt/idUSN1440639620090914
-Central bank gold purchases could help gold to reach fresh highs GFMS. The research house believes the potential for a sustained period of record prices is very real- but we may have to be a little patient. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89186&sn;=Detail
-Gold “guru” Martin Murenbeeld has revised his gold price forecasts upwards for 2009 and 2010 citing changing central bank attitudes and rising investment demand for the metal. Addressing the Denver Gold Forum being held in Denver, Colorado Murenbeeld described his prior forecasts made at the September 2008 conference as “too bearish.”
He added, “while volatile, gold did the job for investors” in the wake of the global financial crisis which started with the bankruptcy of investment bank Lehman Brothers almost immediately after last year’s Denver Gold Forum.
He said that, since his most recent forecast made on July 3, gold market conditions had swung towards the more bullish of the three econometric models he used to predict future price movements. Murenbeeld, who is chief economist for Canadian consultancy Dundee Wealth Economics, forecast gold could hit $1,075/oz by the end of the year and average $1,116/oz during 2010. Read more here-http://www.miningmx.com/news/gold_and_silver/murenbeeld-ups-his-call-gold.htm or http://www.gata.org/node/7796
-The price of gold could hit $1,600 an ounce if crude oil goes to $100 a barrel in the next six to 18 months, the chief executive of South Africa’s Gold Fields, the world’s No. 4 gold producer, said on Wednesday.
“Some people say oil is going up to $100 a barrel in the next six to 18 months. If that’s true, and if you look at the long-term relationship between gold and oil, you should find that gold would go to $1,500 to $1,600,” Gold Fields CEO Nick Holland told Reuters in an interview during the Denver Gold Forum.
Holland also attributed his outlook to dwindling industry supply as a result of declining quantity and quality of exploration discoveries. “The bias is more to the upside than the downside at this stage,” he said. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=89369&sn;=Detail
-China’s immense, and growing, impact on the global gold market. There seems little doubt that China’s economic strength can lead to it dominating gold price movement for the foreseeable future. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=89018&sn;=Detail
-Like a battering ram in a medieval siege, gold keeps hammering away at the gate. For the third time in less than twelve months, the yellow metal is once again crashing into the $1,000 per ounce level. As of press time, it looks like gold will close above that level today and will set a new record in the process. Even if the breach is fleeting, who can doubt that it will mount another assault soon?
In the meantime, there is no shortage of market analysts who are not buying gold while questioning the motives of those who are. Although they offer a variety of strained reasons, they nearly all agree that it has nothing to do with inflation, which is nearly universally considered dead and buried. As a self-confessed gold bug, I can assure all that inflation is the only reason I buy gold. And recently, I’m buying a lot.
The bottom line is that gold is continuing its long-term bull run, and those who dismiss the message behind its rise do so at their own financial peril. When it comes to inflation, gold is the canary in the economic coal mine. Just as unseen toxins kill the canary before the miners succumb to the fumes, a spike in gold is a harbinger of reckless monetary devaluation.
Our leading commentators think that since they can’t see or smell the gas, all those canaries (gold prices, commodity prices) must be dying of natural causes. Good luck to them when the toxins flood the mine. Peter Schiff-Read more here-http://www.321gold.com/editorials/schiff/schiff091309.html Watch video here-http://www.youtube.com/watch?v=LhPpzWZDyx0&feature;=email
-Four major developments all gold investors should watch. Read more here-http://www.resourceinvestor.com/News/2009/9/Pages/Four-major-developments-all-gold-investors-should-watch.aspx
-This gold rally no flash in the pan. Investors betting U.S. stimulus will trigger inflation. Read more here-http://www.financialpost.com/personal-finance/story.html?id=1993986
-Clive Maund gold market update. Read more here-http://news.goldseek.com/CliveMaund/1252876734.php
-Ned Schmidt’s Gold Thoughts. Read more here-http://www.kitco.com/ind/Schmidt/sep152009.html
-Why I’m sticking with gold. There is a large and growing school of thought that would have you believe the global economy is recovering, that neither inflation nor deflation is a particular threat and that you no longer need safe haven investments of any kind.
This view might be the right one, but just in case it isn’t there may be more bank failures and another leg of recession, perhaps even inflationary recession ahead I’m going to stick with my gold for a while yet.
I might even buy some more. According to Frank Holmes, the US fund manager, the beginning of September has historically been a pretty good time to start building or to top up a gold holding the price has risen in 16 of the 21 Septembers since 1989. Merryn Somerset Webb-Read more here-http://www.moneyweek.com/investments/precious-metals-and-gems/merryn-somerset-webb-why-im-sticking-with-gold-93804.aspx or http://www.ft.com/cms/s/2/7ae3517c-9efa-11de-8013-00144feabdc0.html
-A golden opportunity for investors? The busy money-printing machines are more predictable than the still-sputtering economy, making gold a smart choice even after a spike to $1,000 an ounce. Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/a-golden-opportunity-for-investors.aspx?page=all
-What Price Suits Gold? Leading Gold Bugs See Prices Tripling Someday, But Others Say its Current Level Is About Right. Read more here-
http://online.wsj.com/article/SB10001424052970203917304574415193376917198.html
-Al Korelin interviews Ed Steer on the gold market. Listen here-http://www.gata.org/node/7788
-Interviewed by GoldSeek, Turk sees gold’s breakout imminent. Listen here-http://www.gata.org/node/7798
-GoldMoney’s James Turk interviewed by King World News. Listen here-http://www.gata.org/node/7787
-September 15, 2009 Gold closed today in New York at $1005.00, a new record high. Any new record is always a noteworthy event, but particularly so when the technical position and chart are so bullish. James Turk-Read more here-http://www.fgmr.com/gold-september-15-2009.html
-GATA board member Adrian Douglas interviewed by King World News. Listen here-http://www.gata.org/node/7784
-King World News interviews David Tice on the U.S. stock market, U.S. Dollar, gold, silver, the Fed, bailouts, sentiment, the consumer, a coming funding crisis, threats to our freedoms, capital controls and much more. Listen here-http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2009/9/11_David_Tice.html
-Gold has nowhere to go but up! This is the view of a number of market commentators who see a few pivotal economic events coming together to support the price of the yellow metal. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89246&sn;=Detail
-Gold mine production costs break through $600/ounce level once more as output jumps higher GFMS. Increases in production stemmed both from new mining ventures and increases at existing operations with Africa the only region to record declining output. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=89188&sn;=Detail
-Gold investors warned to liquidate after ‘buying frenzy’. London’s leading gold forecaster has advised clients to liquidate holdings of gold and silver until the latest speculative fever abates, warning that futures contracts on New York’s Comex exchange are flashing warning signals. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6184136/Gold-investors-warned-to-liquidate-after-buying-frenzy.html
SILVER
Gold to silver ratio at 80 to 1 with gold at $1,300 the silver price would be $16.25
Gold to silver ratio at 70 to 1 with gold at $1,300 the silver price would be $18.57
Gold to silver ratio at 60 to 1 with gold at $1,300 the silver price would be $21.67
Gold to silver ratio at 50 to 1 with gold at $1,300 the silver price would be $26.00
Gold to silver ratio at 40 to 1 with gold at $1,300 the silver price would be $32.50
Gold to silver ratio at 30 to 1 with gold at $1,300 the silver price would be $43.33
Gold to silver ratio at 20 to 1 with gold at $1,300 the silver price would be $65.00
Gold to silver ratio at 15 to 1 with gold at $1,300 the silver price would be $86.67
-GoldMoney founder James Turk’s subscription newsletter, the Freemarket Gold & Money Report, has turned into an occasional public Internet posting, the Free Gold Money Report, and it discloses that silver again has fallen into backwardation even though it has risen 20 percent in two weeks. This is “simply staggering,” Turk writes, adding, “The possibility of a short squeeze in silver cannot be ruled out, particularly given its very bullish chart picture.”
There are two noteworthy points on the above chart. First, and most importantly, silver has broken through the downtrend line going back to its 2008 high, which was $20.68. That price now becomes silver’s next target, and it has been my view that this $20-something price will be reached before the end of this year.
Second, note how silver slipped below its long-term uptrend channel after the Lehman Brothers collapse, and then climbed back into this channel. It is becoming increasingly clear that this break in silver’s price was an aberration that occurred only because of the de-leveraging accompanying the Lehman collapse.
In other words, overleveraged hedge funds and other players threw out the baby with the bath water. They sold what they could sell, not necessarily what they wanted to sell. As is clear from the following charts, silver is also doing well in terms of the other currencies. Read more here-http://www.fgmr.com/silver-september-10-2009.html
-Silver Trending Towards Backwardation Again. The silver backwardation has been on-again off-again throughout 2009 and this portends gigantic problems for the worldwide monetary system. Backwardation is a situation where the fiat currency price of a commodity is pregnant with a premium the buyer is willing to pay for immediate delivery.
The price of a commodity for future deliver is lower than the spot price. This is contrasted with contango where the spot price is lower than the futures price. Backwardation seldom arises in the monetary commodity gold or the quasi-monetary commodity silver.
At all times and in all circumstances gold, silver and platinum remain money. The silver market is miniscule compared to the amount of total tangible and financial assets in the world. Yet silver can never become worthless because it is a tangible asset. As capital continues seeking a safe and liquid home silver is among the beneficiaries.
With the Chinese and Indian acquisition of physical silver there will be even more strain on the paper markets for delivery. While silver is currently not as cheap as it was earlier when I recommended buying; the ‘tears of the moon’ is still a decent value. Trace Mayer-Read more here-http://news.silverseek.com/SilverSeek/1252878023.php
-Silver is in the spotlight at U.S. gold gathering. Silver has outperformed gold this year as investors flocked to precious metals in the economic downturn and silver producers can look forward to good times ahead, the head of Coeur d’Alene Mines said on Tuesday.
“In the wake of this (financial) hurricane, this is a new golden age for us,” Dennis Wheeler, the silver producers’ chairman, president and chief executive officer told the Denver Gold Forum industry gathering.
Not only were investors buying silver as a safe haven against the recession, but new demand from electronic appliance makers for the metal was likely to strain global supplies, he said.
“We continue to see a deficit of about 100 million ounces for silver this year and it is continuing.”
Wheeler noted that the gold price had risen some 15 percent this year to around $1,000 an ounce, but silver was up 50 percent. “The number one performer this year has been silver. Silver has outperformed gold three-to-one,” said Wheeler.
“We are seeing the beginnings of a new sustainable global silver market. Clearly investors were driving the market this year.” He said that as the economy got back on its feet, silver demand was seen increasing, especially after “upbeat” outlooks from computer and appliance makers who use the metal for batteries.
Apart from traditional uses for jewellery, silver is increasingly in demand for solar energy and water purification components, medical uses and photography. Read more here-
http://www.reuters.com/article/marketsNews/idAFN158637020090915?rpc=44
-A golden age for silver coming? Silver has been hitting 12-month highs but where does it go from here? Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=89330&sn;=Detail
-The production of silver in the world 2009. Read more here-http://news.silverseek.com/Dani/1253109688.php
-All the silver ever mined fits in a 55 metre cube! Read more here-http://www.commodityonline.com/news/All-the-silver-ever-mined-fits-in-a-55-metre-cube!-21132-3-1.html
-Ross Clark, silver from a technical perspective. Read more here-http://www.321gold.com/editorials/hoye/hoye091209.html
-Ted Butler silver commentary. Read more here-http://news.silverseek.com/SilverSeek/1252940702.php
-Ted Butler speaks with King World News on week’s silver, gold action. Read more here-http://www.gata.org/node/7785
-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1252876303.php
-Roland Watson silver update. Read more here-http://news.silverseek.com/SilverSeek/1253196256.php
-If you own the silver ETF sell now and get into physical silver. Read more here-http://seekingalpha.com/instablog/407380-jeff-nielson/27731-your-etf-silver-is-for-sale
-If you own silver certificates sell now and get into physical silver. Read more here-http://seekingalpha.com/instablog/217411-bron-suchecki/27397-scotiabank-certificates
PLATINUM-PALLADIUM
-Fundamentalist view: consider platinum as an alternative inflation hedge to gold. Inflation concerns have led to a sharp rise in investor interest in gold this year, with demand in the first quarter of 2009 increasing by more than a third, despite price volatility. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/6191017/Fundamentalist-view-consider-platinum-as-an-alternative-inflation-hedge-to-gold.html
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Stocks Rally, But You’re Paying More at The Pump. Back in May we looked at how many gallons of gas you could buy for the cost of the S&P; 500. We noted that since the peak in the late 90s, when you could get over 1300 gallons of gas for the price of the S&P; 500, the trend has been on a fairly steady downhill.
In May you could buy 366 gallons. Since then the S&P; 500 has rallied about 11%, but you are only getting 390 gallons just 6% more. So the trend looks likely to hold. Gas continues to get more expensive, as a percentage of your stock holdings. Read more here-http://www.businessinsider.com/chart-of-the-day-gallons-per-sp-500-2009-9
-Chart of the week-Term Investors Start To Sell. The markets continue to make new highs, but watch out. Long-term mutual fund investors have reversed this month, selling shares, rather than dumping money in. Based on the first two weeks of the month, September’s outflows will be bigger than the inflows seen in the last three months combined. Read more here-
-Interesting financial note, DOW JONES 9605 Sept 10 2009, DOW JONES 9605 Sept 10 2001. Drudgereport.com
-Clunker math. I guess I must be on the wrong page on this “clunker” stuff. A vehicle at 15 mpg and 12,000 miles per year uses 800 gallons a year of gasoline. A vehicle at 25 mpg and 12,000 miles per year uses 480 gallons a year. So, the average clunker transaction will reduce US gasoline consumption by 320 gallons per year. They claim 700,000 vehicles so that’s 224 million gallons per year.
That equates to a bit over 5 million barrels of oil. 5 million barrels of oil is about ¼ of one day’s US consumption. And 5 million barrels of oil costs about $350 million dollars at $75 per bbl.
So, we all just spent $3 billion to save $350 million. The government spent $8.57 for every dollar saved. Hmmm, how good a deal was that? But, I’m thinking that they’ll probably do a great job with health care, though! Now how was it that Pres. Obama said we would pay for it? Anonymous
-”In 1909, the US federal government had an annual budget of $US 0.8 Billion. With this it governed a population of just over 90 million people. The cost of government was about $9 per capita. In 2009, the US federal government has an annual budget of $US 3,550 Billion. With this it governs a population of just over 300 million people. That’s a cost of about $11,675 per capita.” Are we 1200 times better off? The-privateer.com
-You say you’d like to sleep at night and not have to worry about your wealth; well there is a way to accomplish that. Buy gold and silver related assets. After ten years gold has finally broken out over $1,000 an ounce, a signal that phase 2 of 3 or 4 phases has begun. Gold could reach anywhere from $1,200 to $1,700 an ounce before the year is over. If you buy gold and silver coins or bullion, take delivery and store them in your safe at home.
At this stage of the gold and silver bull market anchor your portfolio with 3 or 4 of the strongest producing mining companies and exploration shares. In the 1977 to 1981 period some of the leveraged speculative shares went from $0.35 to $55.00 and that could well happen again. In today’s markets this is how you preserve your wealth. Bob Chapman-Read more here-
http://news.goldseek.com/InternationalForecaster/1252861200.php or http://news.goldseek.com/InternationalForecaster/1253124926.php
-It seems more and more people are waking up to the fact that gold and silver are not only moving up but are also much safer investments currently than any other alternative. At the present time, I treat the commodity differently than I treat the underlining mining equities.
As far as buying bullion or coins, basically I think investors should buy them at any time. Certainly you’re better off buying silver at $15.00 than you are if you’re buying it at $20.00, but the metals themselves, from a long-term perspective, will preserve your wealth and possibly multiply it. Many agree that the real metal is your core position. That is the investment that really counts the most. David Morgan-Read more here-http://news.silverseek.com/SilverInvestor/1252674849.php
-Recently, my friend Ambrose Evans-Pritchard reported in the London Telegraph on his interview with Mr. Cheng Siwei, Vice Chairman of China’s Communist Party’s Standing Committee. According to Evans-Pritchard, Mr. Siwei said, “Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not [to] stimulate the market.”
This single statement should send shivers down the necks of all who believe in the paper currencies of debtor countries. Similarly, it should warm the heart of all those who already own gold. China has indeed resisted upsetting the international gold market with massive purchases. Quietly, she has merely ‘diverted’ part of her own production into her treasury vaults!
Also, China has sought to protect its citizens from the debasement of paper currencies by lifting restrictions on its citizens’ ownership of precious metals. They can be expected to be large buyers of gold and silver (‘poor man’s gold,’ at only $17 an ounce).
In order to protect themselves from the ravages of governments who believe in massive deficit-financed entitlements, Western citizens should think carefully about whether to trust paper currency over real money. Its an easy decision to reach. John Browne-Read more here-http://www.321gold.com/editorials/browne/browne091109.html or
http://www.321gold.com/editorials/browne/browne091709.html
-Kinross Gold Corp., Canada’s third- largest producer of the precious metal, said the gold industry is facing a crisis of declining reserves as investor demand outpaces supply. “We may be in the midst of a perfect storm in terms of price and industry dynamics,” Tye Burt, chief executive officer of the Toronto-based company, said at a conference in Denver today.
“Globally production has been in decline since the peak of 81 million ounces in 2001 to 77 million ounces last year, and we see that decline continuing long term.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601082&sid;=atxJ5yqO73DY
-US credit shrinks at Great Depression rate prompting fears of double-dip recession. Both bank credit and the M3 money supply in the United States have been contracting at rates comparable to the onset of the Great Depression since early summer, raising fears of a double-dip recession in 2010 and a slide into debt-deflation. Read more here-
-The world has not tackled the problems at the heart of the economic downturn and is likely to slip back into recession, according to one of the few mainstream economists who predicted the financial crisis.
Speaking at the Sibos conference in Hong Kong on Monday, William White, the highly-respected former chief economist at the Bank for International Settlements, also warned that government actions to help the economy in the short run may be sowing the seeds for future crises.
“Are we going into a W shaped recession? Almost certainly. Are we going into an L? I would not be in the slightest bit surprised,” he said, referring to the risks of a so-called double-dip recession or a protracted stagnation like Japan suffered in the 1990s. “The only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.” Read more here-http://www.ft.com/cms/s/0/e6dd31f0-a133-11de-a88d-00144feabdc0.html
-Volcker Predicts ‘Long Slog,’ Risk of ‘Relapses’ for Economy. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aEJ2RERn3xFM
-US Economy Facing ‘Death by a Thousand Cuts’: Roubini. Read more here-http://www.cnbc.com/id/32837255
-Roach Says U.S. ‘Stall Speed’ Economy Is Vulnerable to Relapse. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aY8U5p9XSeNw
-U.S. Economy May See Its Slowest Recovery Since 1945. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aBj5AeyQqun8
-The Stimulus Didn’t Work. The data show government transfers and rebates have not increased consumption at all. Read more here-
http://online.wsj.com/article/SB10001424052970204731804574385233867030644.html
-Warren Buffett, the billionaire investor who last year called the financial crisis an “economic Pearl Harbor,” said the U.S. economy has “hit a plateau at bottom.” “We have not bounced but we’ve quit going down,” Buffett, the 79-year-old chief executive officer of Berkshire Hathaway Inc., said today in an interview on CNBC. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aYraS__55h34 or http://www.cnbc.com/id/32870258
-Americans plan to refrain from boosting their spending even after the biggest drop in consumption since 1980, signalling concern about the direction of the economy over the next six months.
Only 8 percent of U.S. adults plan to increase household spending, almost one-third will spend less, and 58 percent expect to “stay the course,” a Bloomberg News poll showed. More than 3 in 4 said they reduced spending in the past year.
Respondents were divided over whether the economy will get better or stay the same in the next six months; only 1 in 6 said things will get worse. More than 40 percent of those surveyed said they feel less financially secure than they did when President Barack Obama took office in January, outnumbering 35 percent who said they feel more secure.
“People I never thought would lose their jobs have lost their jobs,” said Angela Payton, 42, a university publications editor in Florence, South Carolina. She kept her children out of summer camp, stopped buying organic milk and plans to curtail the party for her daughter’s 6th birthday in November.
In the poll, conducted Sept. 10-14, 40 percent of those questioned said they have experienced one or more problems from the banking crisis. In the most-often cited repercussions, 27 percent said their credit-card interest rates have risen dramatically and 15 percent report that they couldn’t get a home-equity, car, or other kind of consumer loan. Read more here-
http://www.bloomberg.com/apps/news?pid=20601070&sid;=aDhCOltOR1RY
-Derivatives still pose huge risk, says BIS. The global market for derivatives rebounded to $426 trillion in the second quarter as risk appetite returned, but the system remains unstable and prone to crises, according to the Bank for International Settlements (BIS). Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6184496/Derivatives-still-pose-huge-risk-says-BIS.html
-Insiders sell like there’s no tomorrow. Corporate officers and directors were buying stock when the market hit bottom. What does it say that they’re selling now? Read more here-
http://money.cnn.com/2009/09/10/news/economy/insider.sales/index.htm?postversion=2009091107
-For the latest two week period ending yesterday, insiders purchased just $4.6MM in stock while selling an astounding $471MM in stock. That is a $217MM jump over last week’s reading of $254MM. The trend in insider selling has been negative for quite some time, but even more alarming is the total lack of insider buying.
Insiders sell for a number of varying reasons, but it remains confounding that the equity markets can be so convinced of an economic rebound while insiders give a resounding vote of no confidence in their own companies via purchases of their own shares. Perhaps the lack of organic growth via revenue growth has insiders less than convinced of the economic rebound. Read more here-http://pragcap.com/the-negative-trend-in-insider-selling-worsens
-U.S. companies spent the least on share buybacks in the second quarter since at least 1998, S&P; said, as the recession crimped earnings. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=a18LYtrK09Ek
-Not much to report in terms of data flow. Equities around the planet are bid yet again as Asia reaches fresh 12-month highs. Bonds are flat in the U.S.A. but selling off overseas. The U.S. dollar is weak and that is helping maintain a positive tone to the gold price. Imagine that, bullion is north of $1,000/oz at a time when the U.S. CPI is -1.5% YoY imagine what gold will do if (when?) that inflation rate turns positive.
As we discuss in today’s Breakfast, the incoming economic data in both the U.S. and Canada have improved and for the most part bettering expectations. The dilemma is that market pricing has moved far beyond the fundamentals. Despite the temptation to jump into a “liquidity-induced” rally, and these rallies can often take you to heights that you can never imagine we would get to, they cannot be sustained without a durable organic economic expansion.
The problem is that the global economy in general, and the U.S. economy in particular, is operating on so much medication that it is difficult to conduct an appropriate examination of the patient at the current time. All we know is that the markets seem to have very rapidly now priced in three years worth of recovery.
Not much more to say. The S&P; 500 is now up more than 60% from the lows, which is truly amazing and kudos to those who called it. But the question is whether the fundamentals will ever catch up to this level of valuation usually after a 60% rally, we are fully entrenched in the next business cycle.
Never before have we seen the stock market rise so much off a low over such a short time period, and usually at this state, the economy has already created over one million new jobs during this extremely flashy move, the U.S. has shed 2.5 million jobs (as may as were lost in the entire 2001 recession). David Rosenberg
-U.S. junk bond default rate rises to 10.2 pct S&P.; Read more here-http://www.reuters.com/article/marketsNews/idUSN039597920090903
-International demand for long-term U.S. financial assets weakened in July as investors cut purchases of Treasuries by more than a third from the prior month, government statistics showed.
Emerging powers such as China and Russia have questioned the dollar’s dominance in the global economy because of a federal budget deficit projected to exceed $1.5 trillion in the fiscal year that ends Sept. 30. Investors abroad were also net sellers of U.S. corporate and agency debt in July.
“The U.S. budget deficits are off the charts, and global investors are starting to get a little wary,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, before today’s report. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a58PmCDST2Ls
-The FDIC quietly shuttered three more banks on Friday, including Chicago-based Corus Bank, which was riddled with commercial real estate exposure and brings to 92 the total number of banks that have been forced to close so far in 2009, and the year still has more than three months to go. So far this year, there have been more bank failures than in the last 15 years combined. David A. Rosenberg
-Obama adviser Larry Summers, high U.S. unemployment for years. Read more here-http://www.politico.com/news/stories/0909/27052.html
-U.S. unemployment not to peak until 2011: Krugman. Read more here-http://www.reuters.com/article/ousiv/idUSTRE58F61F20090916
-Credit card losses climb with jobless rate in August. Read more here-http://www.reuters.com/article/ousiv/idUSTRE58F42320090916
-Bank of America Corp and Citigroup Inc customers defaulted on their credit card debts in August at the highest rates since the onset of the recession, a sign that the banks’ consumer lending woes are far from over. Read more here-http://www.reuters.com/article/ousiv/idUSTRE58E6LH20090915
-As an economic power, the U.S. may go the way of the British Empire because of the government’s increasing debt burden, according to Richard A. Posner, an economist and federal judge.
The CHART OF THE DAY shows how the public debt, or the national debt aside from liabilities for entitlement programs, has climbed in the past year. The chart goes back to March 2005, when the U.S. Treasury started giving daily updates on the debt.
Public debt will keep growing rapidly, Posner wrote earlier this week on a blog he shares with Gary Becker, an economics and sociology professor at the University of Chicago.
Declining tax revenue, rising Medicare costs, congressional reluctance to cut spending or raise levies, and the likely cost of efforts to overhaul health care and promote climate control will push the debt higher, in Posner’s view.
“At some point the wheels may start coming off the chassis,” he wrote. “The United States may find itself in the kind of downward economic spiral in which ‘developing’ countries often find themselves.” He drew the comparison with the British Empire, whose economic position in the early 20th century was similar to the U.S. role today.
The threat may emerge as the Treasury borrows more and more money, fear of inflation worsens as the Federal Reserve avoids raising interest rates, and government social programs cause unfunded spending to increase, the posting said. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aj6qdHrVNXhk
-European Commission sees galloping UK debt crisis. Britain’s public debt will explode to 180pc of GDP within a decade unless future governments take drastic measures to restore fiscal probity, according to a confidential study by the European Commission. Read more here-http://www.telegraph.co.uk/finance/financetopics/recession/6169544/European-Commission-sees-galloping-UK-debt-crisis.html
-U.K. Banks to Post $215 Billion Losses, Moody’s Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=afu5IWbkX1ZY
-Ireland plans to spend 54 billion euros ($79 billion) buying real-estate loans to purge the country’s financial system of the toxic assets that are crippling what was once Europe’s fastest-growing economy. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ah73GDbwTXfg
-Cheap dollars are sowing the seeds of the next world crisis. After years of selling cheap goods to debt-fuelled Western consumers, China now has $2 trillion dollars of foreign exchange reserves. That’s 2,000 billion a reserve haul no less 25 times bigger than that of the UK. Read more here-http://www.telegraph.co.uk/finance/comment/liamhalligan/6179482/Cheap-dollars-are-sowing-the-seeds-of-the-next-world-crisis.html
-Congressman Ron Paul discusses the failures of Keynesian economics, the true cause of the financial crisis, and the need to end the Fed. Watch more here-
http://www.youtube.com/watch?v=WjVpr3zIr8E&feature;=player_embedded
-Peter Schiff: Americans must prepare for deepening unemployment, inflation and possible breadlines. Watch more here-
http://www.youtube.com/watch?v=LhPpzWZDyx0&feature;=email
-The biggest and most secretive gathering of ships in maritime history lies at anchor east of Singapore. Never before photographed, it is bigger than the U.S. and British navies combined but has no crew, no cargo and no destination and is why your Christmas stocking may be on the light side this year. Read more here-http://www.dailymail.co.uk/home/moslive/article-1212013/Revealed-The-ghost-fleet-recession-anchored-just-east-Singapore.html#ixzz0RCbk13Uy
-Peak oil expected in 2009: Macquarie. Read more here-http://www.globeinvestor.com/servlet/story/RTGAM.20090916.wpeakoilmacquarie0916/GIStory/
-The 2008 global recession caused the first worldwide contraction in assets under management in nearly a decade, according to a study that found wealth dropped 11.7 percent to $92.4 trillion. Read more here-http://www.reuters.com/article/ousiv/idUSTRE58E13320090915
-Bin Laden reportedly calls Obama ‘powerless.’ In a tape released Sunday by al-Qaida’s media wing, terrorist leader Osama bin Laden said President Barack Obama is “powerless” to stop the war in Afghanistan. Read more here-http://www.breitbart.com/article.php?id=D9AMS78O0&show;_article=1
-Has Osama Bin Laden been dead for seven years and are the U.S. and Britain covering it up to continue war on terror? Read more here-http://www.dailymail.co.uk/news/article-1212851/Has-Osama-Bin-Laden-dead-seven-years–U-S-Britain-covering-continue-war-terror.html#ixzz0RCXwL6JG
-Experts at the world’s top atomic watchdog are in agreement that Tehran has the ability to make a nuclear bomb and is on the way to developing a missile system able to carry an atomic warhead, according to a secret report seen by The Associated Press. Read more here-http://www.breitbart.com/article.php?id=D9AP714G0&show;_article=1
-U.S. to Confront Iran on Nuclear Program at Oct. 1 Meeting. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ax5xpsKSA3tY
-Iran Gains U.S. Military Technology Through Malaysia Middlemen. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aK4daf8MD.Bw
-Mullen Says Afghan War Will Require More U.S. Troops. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aR1xqD3sNE4A
-U.S. President Barack Obama will abandon plans championed by his predecessor George W. Bush to build a missile-defense system in Poland and the Czech Republic, Czech Prime Minister Jan Fischer said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a9gL2ja4_w54
-Homeland Security to More Than Double Staff for Cyber Threats. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ayDCHq5H0CH8
-U.K. think tank says US power is fading. Read more here-http://news.yahoo.com/s/ap/20090915/ap_on_re_eu/eu_britain_us_power or http://www.cbsnews.com/stories/2009/09/15/ap/europe/main5311827.shtml
-China could undermine US military power in Pacific: Gates. Read more here-http://www.breitbart.com/article.php?id=CNG.a2e736d334e760c3afc9d72bbc9a211c.bb1&show;_article=1
-Surgical masks worn by doctors since the 1918 flu pandemic to prevent the spread of infection don’t protect against respiratory viruses, according to a study that found thicker, more expensive respirators should be used. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aidFWI_.8j30
-Twenty-two years after appearing on the big screen, and one year after the collapse of investment bank Lehman Brothers, the film character Gordon Gekko continues to resonate on Wall Street.
The “strip and flip” corporate raider played by Michael Douglas will make his comeback in Oliver Stone’s “Wall Street 2,” which began filming in New York this week. The sequel is set in 2008 during the run-up to the financial meltdown with Gekko emerging from two decades behind bars. Read more here-
-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
-Rio to Resume Argyle Diamond Mine Expansion Next Year. Rio Tinto Group, the world’s third- largest mining company, will resume work on a A$1.8 billion ($1.5 billion) expansion of its Argyle diamond mine next year as global jewellery demand recovers.
Underground production at the world’s largest diamond mine should start in 2013, Argyle Chief Operating Officer Kevin McLeish said today in an interview from Perth. Work on the expansion had slowed down in January, he said.
Output from the Argyle mine slumped 86 percent in the June quarter from a year earlier to 408,000 carats because of the shutdown in processing facilities from January to June. The mine is now operating at full capacity of 8 million metric tons a year, McLeish said today. Argyle, in Western Australia’s east Kimberley region, normally accounts for about 20 percent of annual global diamond output, according to Rio.
Rio’s Argyle mine supplies 90 percent of the world’s pink diamonds, used exclusively for jewellery. Those gems account for just 1 percent of total production at the mine. Much of the remainder is sold as rough, or uncut, diamonds.
Rio is selling 43 of the best diamonds produced from the mine in the last year in its annual tender. The current tender includes a 2.61 carat pink, heart-shaped diamond named Argyle Amour, the most valuable diamond ever produced from the mine.
Demand for pink diamonds, generally bought by wealthy customers, has not been affected by the global crisis, McLeish said. Pink diamonds are more valuable than colorless diamonds because of their rarity. For every one colored diamond there are 10,000 colorless diamonds in existence, according to Rio.
De Beers, 45 percent owned by Anglo American Plc, is the largest producer of diamonds, followed by Alrosa and Rio, according to Rio Tinto. Read more here-
http://www.bloomberg.com/apps/news?pid=20601081&sid;=a4xAPW0NHhxo
JIM ROGERS-I EXPECT A CURRENCY CRISIS
-The worst of the economic crisis is not over and a currency crisis can happen this year or the next year, because the problem of too much debt in the system has not been solved, legendary investor Jim Rogers told CNBC Monday.
The current recovery is just a consequence of the fact that consumption fell so dramatically in 2008 and people have to buy things they need in 2009, Rogers told “Worldwide Exchange.”
“How can the solution for debt and consumption be more debt and more consumption? How can that be the solution to our problems?” he said.
“I would expect there to be a currency crisis or a semi-crisis this fall or next year. It’s crony capitalism, Bernanke and Greenspan have brought crony capitalism to America but that’s not going to solve the world’s problems,” Rogers added.
There are still “gigantic amounts of horrible, horrible debt that hasn’t been dealt with” in Central Europe, while hopes that China will pull the world out of recession are overblown, according to Rogers. Read and watch more here-http://www.cnbc.com/id/32837500
STIGLITZ-BANKING PROBLEMS ARE NOW BIGGER THAN PRE-LEHMAN
-Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc. “In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”
A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.’s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.
While Obama wants to name some banks as “systemically important” and subject them to stricter oversight, his plan wouldn’t force them to shrink or simplify their structure. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aYdgQkXu9eBg
TALEB-WANTS HIS OBAMA VOTE BACK
-U.S. President Barack Obama has failed to appoint advisers and regulators who understand the complexity of financial systems, Nassim Taleb, author of “The Black Swan,” told a group of business people in Toronto. “I want my vote back,” Taleb, who said he voted for Obama, told the group.
The U.S. has three times the debt, relative to the country’s economic output, as it had in the 1980s, Taleb said. He blamed rising overconfidence around the world. U.S. Federal Reserve Chairman Ben Bernanke, who was appointed to a second term last month by Obama, contributed to that misperception, Taleb said.
“Bernanke thought the system was getting stable,” Taleb said, when it was on the verge of collapse last year. Debt is a direct measure of overconfidence, he said. The national debt is $11.8 trillion, according to U.S. Treasury Department figures.
The nation must reduce its debt level and avoid “the moral sin” of converting private debt to public debt, he said. “This is what I’m worried about,” Taleb said in a speech last night at Grano’s restaurant. “But no one has the guts to say let’s bite the bullet.”
Taleb wrote the 2007 best-seller “The Black Swan: The Impact of the Highly Improbable,” which argues that history is littered with rare, high-impact events. The black swan theory stems from the ancient misconception that all swans were white. In addition to overconfidence, Taleb blamed the availability of instant information for contributing to the collapse of banks in the U.S. and the economy in Iceland.
“Ontario messed up the world with this,” Taleb said, holding up a BlackBerry, the mobile e-mail phone made by Waterloo, Ontario-based Research In Motion Ltd. “You guys bankrupted Iceland.” In the past, runs on banks took time as people left their homes, drove or walked to a branch and stood in line to withdraw money, Taleb said.
Now, a run can be accomplished in seconds via the Internet and phones with Web-browsing capabilities like the BlackBerry, he said. “In no time, Iceland is history,” Taleb said. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aaxO2K8O3IaY or http://www.theglobeandmail.com/report-on-business/crash-and-recovery/we-still-have-the-same-disease/article1286246/
ERIC SPROTT U.S. DOLLAR COMMENTARY
-So how will this US debt crisis ultimately resolve itself? Let’s consider the options. It would appear from our analysis that the spending ‘promises’ are the crux of the problem now facing the US Government. If there isn’t enough new capital in the current environment to fund new Treasury bill issues (as we argued in “The Solution is the Problem”), then there certainly isn’t enough capital to pay for the US’s unfunded future obligations. The choices, therefore, are bleak:
1. Default on Medicare promises. (Unlikely given the current debate in Washington to expand medical coverage.)
2. Default on Social Security promises. (Unlikely given the increasing average age of the voting public.)
3. Put forward a credible plan to balance the budget. (Unlikely given the most recent budget projections.)
4. Default on outstanding debt. (Unthinkable)
None of these options are feasible for the US Government. So they realistically only have one option left to print their way out of their debt crisis. We keep coming back to the numbers for the US debt, and they don’t add up. Even Alan Greenspan, former Chairman of the Federal Reserve, believes that the rising budget deficits in the United States are “unsustainable”.
Because the US Government is printing dollars to fund their liabilities, it is highly unlikely that we will ever see a failed bond auction similar to that of Poland. The far more likely outcome, therefore, will be a US dollar crisis. It is for this reason that we have positioned our hedge funds and mutual funds so heavily in precious metals.
At the end of the day, when the world finally realizes what the US has done to the world reserve currency, international investors will shift into an asset that no government can print. In our opinion the US dollar’s status as a ‘port’ in the financial storm has officially come to an end. Read more here-http://www.sprott.com/Docs/MarketsataGlance/09_09_MAAG.pdf
REAL ESTATE
-U.K. Housing Slump to Resume in 2010, Item Club Says. The U.K. housing market slump will resume next year as the squeeze on mortgage lending persists, Ernst & Young LLC’s Item Club said.
After “dipping” in the first half of 2010, prices will then stagnate for two years, the research group, which uses the same economic model as the U.K. Treasury, said in a report today in London. Mortgage finance may “remain scarce and expensive” as banks rebuild balance sheets while the economy emerges from the recession, the Item Club said.
U.K. house prices rose the most since 2006 in August amid a shortage of supply, Nationwide Building Society said last month. The slump, which erased 15 percent from home values since the decade-long housing boom peaked in 2007, has left many mortgage holders owing more than their properties are worth. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aG45IIQ6VCjw
-Commercial-property sales in the U.S. this year are forecast to fall to the lowest in almost two decades as the industry endures its worst slump since the savings and loan crisis of the early 1990s. About $16 billion of office transactions will be completed by year-end, according to data compiled by Real Capital Analytics Inc., a New York research firm that has tracked deals for almost a decade.
Real Capital Managing Director Dan Fasulo and Sam Chandan, chief economist of Real Estate Econometrics LLC, said that may be the lowest volume since at least 1991. “There’s no real way to sugarcoat it,” Fasulo said in an interview. “A slowdown of this magnitude certainly hasn’t occurred since I’ve been in the business.” Read more here-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aigNcv3uUpag
-Real Estate Rebound Will Reap ‘04 Prices, Simon Says. Prices of U.S. shopping malls may return to 2003 or 2004 levels as consumer spending and the commercial real estate market recover, Simon Property Group Inc. Chief Executive Officer David E. Simon said. That would represent a decline of as much as 23 percent. Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid;=ae2FrrmwuUF8
-The Housing Tsunami’s Second Wave. Read more here-http://www.financialsense.com/editorials/benson/2009/0916.html
© 2011, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – September 22, 2009
Posted by Worldwide Precious Metals on Tuesday, September 22, 2009
The Goldbugg Report – September 15, 2009
September 15, 2009
-China can no longer afford to let gold or silver price slump
-After 21 years, Barrick will finally wean itself off gold hedging
-Buy silver, the china factor. Watch video here
GOLD
-Hedge fund eyes gold at $1,600, sells equities. The price of gold could rise as high as $1,600 an ounce as investors opt for assets with lasting value rather than volatile currencies, says one hedge fund manager who has increased his exposure to the precious metal.
“All the fundamentals are in place. If it breaks last year’s high it can go to $1,200 to $1,400 quite quickly,” Pedro de Noronha, managing partner of Noster Capital told Reuters in an interview on Tuesday. Spot gold rose through the psychologically significant barrier of $1,000 an ounce on Tuesday its highest since March 2008 when it hit a record $1,030.80.
The precious metal was helped by a weaker dollar and expectations that government measures to revive economic growth will boost demand for basic resources. “If you adjust the gold price for inflation, to retest the early 80s highs gold would need to be at $1,600. I don’t think this figure is inconceivable, especially given the fundamentals that are behind this move in gold,” de Noronha said.
Nearly 50 percent of the $45 million Noster Capital fund is now exposed to gold after it raised its exposure last week. Quantitative easing by governments has increased the attraction of gold, de Noronha said, while leading global currencies are under pressure due to high levels of borrowing. “People say they hate the U.S. dollar, but is the euro or (British) pound any better?” he said.
“Do you want to own the stock certificates of a country burning cash year in, year out, or own something that, no matter what, you can’t produce more of? “I think it’s a third-quarter or fourth-quarter story it’s just getting into the time of year when gold performs best. All the stars are aligned for gold to work.” Read more here-
http://www.reuters.com/article/newsOne/idUSTRE5874DS20090908
-China has issued what amounts to the “Beijing put” on gold. You can make a lot of money but you really can’t lose. Read more here-http://www.gata.org/node/7761
-China can no longer afford to let gold or silver price slump. Chinese state endorsement of gold and silver as good investments means the country can no longer afford to let precious metals prices drop by any significant amount.
With Chinese state institutions hawking gold and silver to the general populace as a good investment the latest news on this front being that the biggest Chinese bank, the Industrial and Commercial Bank of China (ICBC), is setting up a special precious metals department to handle growing investor demand for gold and silver within the country, the corollary is that therefore the country cannot afford to let precious metals prices fall substantially and thus alienate millions of its citizens who have been taking state advice to buy them.
In a Reuters report the ICBC is quoted as saying “”China is the world’s largest gold producer and the second-biggest gold consumer, and Chinese always have a custom to keep gold as personal wealth. China’s gold market is growing rapidly and has a huge potential with the growth of individual incomes.” Surely yet another endorsement of gold as an investment by a Chinese state concern?
And China certainly has the power to manipulate the gold price in ways maybe not undreamt of by GATA which has long believed that there has been gold price suppression by western governments, central banks and financial institutions. This time the boot could be veritably on the other foot. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=88887&sn;=Detail
-China’s hidden gold purchase policy. Evidence suggests that China is continuing to buy gold for its reserves, but is doing so in a manner designed not to over-disrupt the global gold market. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=88700&sn;=Detail or http://www.gata.org/node/7760
-After 21 years, Barrick will finally wean itself off gold hedging. More than two decades ago, Barrick transformed the international mining industry with its new-fangled policy of hedging gold production. Now Barrick admits it’s finally time to let its hedgebook go. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=88850&sn;=Detail
-Barrick Sees $5.6 Billion Charge to End Gold Hedges. Barrick Gold Corp., the world’s largest gold producer, plans to record $5.6 billion in third- quarter costs to eliminate fixed-price contracts as the company bets that prices for the precious metal will climb.
As of yesterday, the company had gold sales contracts for 9.5 million ounces of gold, which had a mark-to-market position of negative $5.6 billion, Toronto-based Barrick said today in a statement. To fund some of the costs, Barrick agreed to sell 81.2 million shares at a price of $36.95 per share for proceeds of $3 billion, the company said.
Barrick has “an increasingly positive outlook on the gold price,” the company said in the statement. Gold today rose to the highest price since March 2008, topping $1,000 an ounce, as the slumping dollar and inflation concerns boosted the metal’s appeal to investors. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a9BSZgMw3HB8
-DJ Sumitomo Metal Mining Makes Hedge Deals For Gold Output. The Japanese nonferrous metal supplier said it has contracted to sell 48% of the 7.5 tons a year output from its mine in Kagoshima Prefecture, southern Japan at $700-$1,700 per troy ounce through June 2012.
At its Pogo mine in Alaska, Sumitomo contracted to sell 28% of a set amount of its take at $750-$1,850 per troy ounce and the remaining 72% at $750-$1,700 through December 2014. Read more here-http://www.tradingmarkets.com/.site/news/Stock%20News/2515056/
-Coxe advocates overweight gold in commodity-oriented portfolios. BMO’s Don Coxe advocates gold as attractive havens that can outperform under the extreme scenarios of financial collapse and runaway inflation. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=88562&sn;=Detail
-If history’s any judge, fall is a great time to be a gold bug. Over the past 16 of 20 Septembers, the gold price has gone up, says Frank Holmes, CEO and chief investment officer of U.S. Global Investors, an investment adviser managing 13 natural resources and emerging market mutual funds. On average, he says, gold rises about 2.5% over its August price not too shabby. But will it be enough to break $1,000 for good? Read more here-http://www.hardassetsinvestor.com/features-and-interviews/1/1750-frank-holmes-a-september-for-gold.html
-GATA Chairman Bill Murphy has written a summary of GATA’s work, keyed to recent developments in the gold market, including China’s steady but until recently surreptitious acquisition of gold, about which he has written for years but which only now is catching the attention of the establishment financial press.
Murphy’s commentary is headlined “GATA Media Special: The Reason for Gold’s Imminent Price Moon Shot? It’s a Simple Supply-Demand Story.” Read more here-http://www.golddrivers.com/gata2.aspx or http://www.gata.org/node/7769
-GATA’s secretary-treasurer Chris Powell is interviewed by King World News on gold. Listen here-http://www.gata.org/node/7753
-Gene Arensberg: Gold, silver breakout in action. Read more here-http://www.gata.org/node/7771
-Gold Is Still the Opportunity of a Lifetime. The opportunity offered by precious metals is the opportunity to rid oneself of counterparty risk. The Dollar is the ultimate example of counterparty risk as it relies on the responsible performance of government and monetary authorities to maintain its value.
Since the two aforementioned entities have been absentee custodians of the Dollar for so long, its value has deteriorated dramatically. Precious metals have allowed individuals to compensate for that loss in purchasing power. Pundits will say that Gold is a lousy investment and they’re right. The problem with their thinking is that Gold is not an investment; it is sound money and should be regarded as such, not with contempt as is routinely the case in the mainstream press corps.
So as we begin another September, a time of year that seems to bring out the worst in our financial and banking system, I will say it again Gold continues to be the opportunity of a lifetime. Andy Sutton-Read more here-http://seekingalpha.com/article/160262-gold-is-still-the-opportunity-of-a-lifetime?source=article_sb_popular
-Gold looking for a new support level. The sharp break above $960 could suggest a further jump to around $1,110. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88688&sn;=Detail
-Gold price could hit $1,300/oz in 2011-BMO Capital Markets. BMO Capital Markets asserts the market has become quite divided on the outlook for gold and gold stocks with no clear consensus on the gold outlook. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page31?oid=88686&sn;=Detail
-Gold Prices May Hit $1,650 by 2010. Spot gold prices could jump to $1,650 an ounce in the medium term, predicts Jurg Kiener, CEO of Swiss Asia Capital. Watch video here-
http://www.cnbc.com/id/15840232?video=1244824610&play;=1
-Gold Rush by Many Investors Could Push Price Up to $1,200. Read more here-http://www.cnbc.com/id/32674100
-Gold market update from Clive Maund. Read more here-http://news.goldseek.com/CliveMaund/1252390500.php
-Gold Party Barely Started. Read more here-http://news.goldseek.com/GoldSeek/1252505222.php
-The Beginning of the Gold Era. Read more here-http://news.goldseek.com/GoldSeek/1252427988.php
-Gold Rally Signals Move Away From Currencies, Greenspan Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601083&sid;=acrGvxBXPDfk
-James Turk: Coming inevitably $1,000 gold and L10 silver. Read more here-http://goldmoney.com/commentary-coming-inevitably-1000-dollar-gold.html
-James Turk: Gold is always the safest haven. Read more here-http://www.gata.org/node/7767
-Ross Clark technical analysis, gold could not be better. Read more here-http://www.321gold.com/editorials/hoye/hoye091009.pdf
-13 Reasons for Major Gold BreakOut. Read more here-http://news.goldseek.com/GoldenJackass/1252612800.php
-The keys to gold’s near term performance and beyond. Even though gold may not have been able to maintain its initial surge through the $1000 barrier there are four key drivers towards regaining this figure and moving it further forward in the months ahead. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88950&sn;=Detail
-A run on the Bank of the Gold Cartel. Read more here-http://news.goldseek.com/GATA/1252392300.php or http://www.gata.org/node/7764
-$1,000 gold could be bad for business. Demand during India’s busy festival season could be dented by the high prices currently being made by the yellow metal. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88797&sn;=Detail
-Swiss gold shares beginning trading on NYSE this week. The product, launched by ETF Securities is backed by physical gold in Swiss vaults. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=88907&sn;=Detail or http://www.gata.org/node/7772
-Hong Kong recalls gold reserves, touts high-security vault. In a challenge to London, Asian states invited to store bullion closer to home. Read more here-
http://www.marketwatch.com/story/story/print?guid=FB75EAFA-EAE5-4032-BFA4-61CBB884280E
-Gold sensor can detect lung cancer. Read more here-http://www.thestandard.com.hk/news_detail.asp?we_cat=16&art;_id=87464&sid;=25284089&con;_type=1&d;_str=20090908&fc;=3
SILVER
Gold to silver ratio at 80 to 1 with gold at $1,200 the silver price would be $15.00
Gold to silver ratio at 70 to 1 with gold at $1,200 the silver price would be $17.14
Gold to silver ratio at 60 to 1 with gold at $1,200 the silver price would be $20.00
Gold to silver ratio at 50 to 1 with gold at $1,200 the silver price would be $24.00
Gold to silver ratio at 40 to 1 with gold at $1,200 the silver price would be $30.00
Gold to silver ratio at 30 to 1 with gold at $1,200 the silver price would be $40.00
Gold to silver ratio at 20 to 1 with gold at $1,200 the silver price would be $60.00
Gold to silver ratio at 15 to 1 with gold at $1,200 the silver price would be $80.00
-Buy silver, the china factor. Watch video here-http://news.silverseek.com/SilverSeek/1252520450.php
-Forget gold. Silver is shining bright. Silver has outperformed the yellow metal in recent months and the silver spike might have more to do with a global economic recovery than inflation fears. Read more here-http://money.cnn.com/2009/09/08/markets/thebuzz/index.htm?section=money_latest
-Silver market analyst Ted Butler interviewed by King World News. Listen here-http://www.gata.org/node/7755
-Ted Butler silver market commentary, warnings ignored. Read more here-http://www.gata.org/node/7752 or http://thefundamentalview.blogspot.com/2009/09/china-and-buzz-of-pending-bank-default_03.html
-Silver market update from Clive Maund. Read more here-http://news.silverseek.com/CliveMaund/1252378732.php
-Sprott’s John Embry interviewed on gold, silver, and a lot more. Read more here-http://www.q1publishing.com/dispatch/502/Gold-Outlook:-Expolosion-in-the-Price-of-Gold-Imminent
-Rising silver demand and how far prices can go. David Morgan expects that once gold breaches the $1,000 level and remains there for several trading days, it will be time to look for the next level in silver.
“I’m expecting to see around the $1,250, $1,300 level in gold,” he said. “Silver may be lagging at that point somewhere in the $15-$17 range but once gold goes through it, it will have a magnet effect for silver. You’ll see silver reach the $21 high it experienced last year and move upward.”
For Mr. Morgan, silver’s key price level is $25/oz. “That is the point where I think you’re going to see an acceleration in the price of silver, because for all practical purposes, everyone that’s held silver and owns it at $25/oz is going to have it at profit.
“When markets go into a profitable scenario especially in a thin market like silver – everyone asks the question, ‘How high is high?’ So you have very few sellers, and they are all holding or buying more. That puts more upward pressure on the metal. I think we’re going to get to that scenario sometime in 2010,” he said. Read more here-
http://www.commodityonline.com/news/Rising-silver-demand-and-how-far-prices-can-go-20803-3-1.html
-NIA Officially Declares Gold and Silver Mania is Here. Read more here-http://www.reuters.com/article/pressRelease/idUS228786+08-Sep-2009+PRN20090908
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Consumer Credit Collapse. Hoping for a consumer-led recovery? Don’t hold your breath. The latest data from the Federal Reserve shows that the year-over-year decline in total consumer credit is collapsing at an accelerating rate. God forbid consumers go back to living within their means. Read more here-
http://www.businessinsider.com/chart-of-the-day-consumer-credit-change-at-annual-rate-2009-9
-Record Plunge in U.S. Consumer Borrowing Signals a Slow Recovery in Demand. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aAYZpSNGocVM
-Government employees move up the ladder through educational credentials rather than merit. People are given jobs and promotions based on seniority, race and gender rather than ability or talent. Such a system often overlooks the deserving and rewards the incompetent. There is no payoff for achievement. James Cook
-Short-sighted and impatient efforts to wipe out poverty by severing the connection between effort and reward can only lead to the growth of a totalitarian state, and destroy the economic progress that this country has so dearly bought. Henry Hazlitt
-What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment. Alan Greenspan, Bloomberg, 09 September 2009
-As gold skyrockets, governments will be forced to print more money to buy their own bonds to halt rates from skyrocketing. If the bond market collapses, a real estate holocaust will take place. Yet, ironically, the collapsing US dollar itself could cause banks to hike mortgage rates, regardless of the Fed’s T-bond buy programs. My sense is the whole situation is on the verge of blowing out of control.
Even the perception that this could possibly occur could cause a massive institutional buying panic of gold. Most investors have forgotten about oil. Given the absolutely hair-trigger situation in Iran, with Pakistan also pushing the limits of stability, the energy markets could be next to see a powderkeg price explosion upside! Stewart Thomson-Read more here-http://www.321gold.com/editorials/thomson_s/thomson_s_090909.html
-One year after the near collapse of the global financial system, this much is clear: The financial world as we knew it is over, and something new is rising from its ashes. Historians will look to September 2008 as a watershed for the U.S. economy.
On Sept. 7, the government seized mortgage titans Fannie Mae and Freddie Mac. Eight days later, investment bank Lehman Brothers filed for bankruptcy, sparking a global financial panic that threatened to topple blue-chip financial institutions around the world. In the several months that followed, governments from Washington to Beijing responded with unprecedented intervention into financial markets and across their economies, seeking to stop the wreckage and stem the damage.
One year later, the easy-money system that financed the boom era from the 1980s until a year ago is smashed. Once-ravenous U.S. consumers are saving money and paying down debt. Banks are building reserves and hoarding cash. And governments are fashioning a new global financial order. Read more here-http://www.mcclatchydc.com/226/story/75016.html
-Another financial crisis inevitable: Greenspan. Another global financial crisis is inevitable because human nature always reverts to “speculative excesses” during a period of sustained prosperity, former U.S. Federal Reserve Chairman Alan Greenspan said.
“The crisis will happen again but it will be different,” he told BBC Two’s “The Love of Money” television series. “That is the unquenchable capability of human beings when confronted with long periods of prosperity to presume that that will continue,” he said.
Greenspan, speaking to the BBC to mark the first anniversary of the fall of U.S. investment bank Lehman Brothers, said Britain will be hit worse than the U.S. by the subsequent worldwide financial crisis and global recession because it has a globally-focused economy.
Countries, smarting from the near collapse of the banking system, will struggle to match their stated desire for increased regulation with their other stated need for free global trade. Read more here-http://www.reuters.com/article/ousiv/idUSTRE5881R720090909
-UK was hours from bank shutdown. FSA ready to close cash machines during crisis. Britain was within hours of a banking shutdown last autumn as the government battled to piece together a rescue plan for the stricken Halifax and Royal Bank of Scotland, it has emerged.
Treasury mandarins and Bank of England officials battled the clock to come up with a support package on the weekend of 12 October. If they had failed, the Financial Services Authority could have ordered the closure of cash machines and prevented deposits at either of the two main casualties of the global financial chaos.
Hector Sants, chief executive of the FSA, said: “The FSA knew we could not have allowed them [RBS and HBOS] to open their doors on the Monday morning without a solution.”
In the absence of a deal, the FSA would have issued notices to the two banks forbidding them from taking deposits or allowing withdrawals. Such a drastic move, a year after the hugely damaging run on Northern Rock, was unthinkable and the authorities had to come up with a fully worked-out rescue.
“HBOS and RBS would not have survived without government intervention,” said Sants, who was involved in the frantic negotiations that weekend to ensure the banking system did not collapse. Read more here-http://www.guardian.co.uk/business/2009/sep/06/banks-fsa-rbs-financial-crisis
-Greed, Arrogance Fuel Subprime Disaster in ‘American Casino’. In January 2008, when Andrew Cockburn and his wife Leslie started making a documentary about the subprime mortgage crisis, the Dow Jones Industrial Average was above 13,000, the U.S. unemployment rate was under 5 percent and Lehman Brothers and Bear Stearns were still big names on Wall Street.
During the next 11 months, the Dow plunged 43 percent, Lehman Brothers and Bear Stearns collapsed and the U.S. economy fell into its worst slump since the Great Depression. “It was a big story when we started, but it got even bigger as we were making the film,” Andrew Cockburn said. “We certainly didn’t know that all these huge banks would fail and that the market would crash.”
The Cockburns examine the roots and ramifications of the subprime debacle in “American Casino,” which shows how the resulting financial crisis has affected Main Street as well as Wall Street. The film is playing in New York and will open in other U.S. cities throughout September and October. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=asU.JlUM4Sdk
-Delta Air Lines Inc. and the other big U.S. carriers are poised to make more cuts in available seats as the summer travel season ends this weekend, capping the industry’s deepest retrenchment since World War II.
Capacity at the six largest airlines, led by Delta, will shrink 6.8 percent by year’s end from 2008 levels, according to data compiled by flight information firm OAG Aviation Solutions for Bloomberg News. That’s equal to erasing the domestic network of US Airways Group Inc., the No. 6 U.S. carrier by traffic. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aUBm5SGb6II8
-Iran rejected any compromise with the West over its nuclear program Wednesday, as blunt comments from the Obama administration over Tehran’s bomb-making capability suggested that the two sides were headed toward a renewed diplomatic crisis.
Iran offered Western officials a long-awaited package of proposals to restart negotiations over its nuclear program. But diplomats who viewed the offer Wednesday said the document of fewer than 10 pages essentially ignored questions over Iran’s production of nuclear fuel and instead focused broadly on other international issues. Read more here-
http://sec.online.wsj.com/article/SB125249646237795391.html?mod=rss_Page_One or http://www.bloomberg.com/apps/news?pid=20601087&sid;=alaYRZjHPgSc
-Iranian Atomic Work Nears Bomb Capability, U.S. Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=a7V8D6BH4McM
-Ex-CIA Boss Urges Curbs on Oil Firms Supplying Iran. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aX9.xRqSNQ2w
-OPEC Maintains Oil Quotas as IEA Raises Global Demand Forecast. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aRiBc7COFFaI
-Supertankers May Halt Oil Trading, Frontline Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aXQU8JUfltCw
-H1N1 outbreak might hurt businesses, Harvard study says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=avwZUXu9nrqg
-U.S. Poverty Rises, Median Household Income Falls. Household incomes decreased in 2008, the first full year of the recession, and the poverty rate rose to the highest since 1997, government data showed.
The median household income fell 3.6 percent to $50,303, snapping three years of increases, the Census Bureau said today in its annual report on incomes, poverty and health insurance. The poverty rate climbed to 13.2 percent from 12.5 percent. The number of people living in poverty rose to 39.8 million last year, an increase of 2.6 million from 2007.
Today’s report highlights concerns that consumer spending will play a limited role in leading any recovery from the worst recession since the 1930s. Plunging home values and stock prices have fueled a record $13.9 trillion loss in household wealth in the U.S. since the middle of 2007.
“The decline in incomes we’re seeing certainly has implications for consumer spending, particularly post-housing bubble when families can’t tap into home equity through loans,” said Heather Boushey, a senior economist at the Center for American Progress, a research organization headed by John Podesta, a leader of the Obama administration transition team. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aDIvtqxX.pxY
-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
-Some miracles have a way of going unnoticed. Gems and jewels have been doing brilliantly at auction for months, as if bidders had never been told that there is a recession. And yet this has not aroused much commentary. No one can reasonably argue that the market is faring poorly when earth-shattering world records are set.
On Dec. 10, when the mood in London was at an all-time low, Christie’s sold the most expensive jewel ever. The 35.56-carat blue diamond rose to $24.31 million, or to be strictly accurate, £16.39 million. (In the jewelry market prices are always quoted in dollars, and even the presale estimate for the blue diamond, stated only on request, was given as a flat $15 million.).
The faceting of the diamond was dazzling and the delicate ultramarine blue exceedingly rare, but this was more than just a beautiful gem. Its history went back to the 17th century, when Philip IV of Spain gave it to his daughter Margaret Theresa on her betrothal to Leopold I, the ruler of the “Roman Germanic Empire.” Later, it belonged to the Princes of Wittelsbach in Bavaria.
To round it off nicely, the stone can be shown today to have been cut by Sa’ida-ye Gilani, the Iranian poet, calligrapher and jeweler employed at the Moghul court by the emperor Jahangir (who reigned from 1605-1627), thus multiplying its potential value manyfold. However, the catalog did not mention this, since it was not known at the time of the sale. The world leader in diamonds, Laurence Graff of London, finding the blue diamond irresistible, paid a world record price, the highest for any stone ever auctioned.
Five months later, another extraordinary price within its range was realized at Sotheby’s in Geneva. This confirmed that the market was indeed exploding at the top end. Once again, the subject of the excitement was a fancy blue diamond.
With its “fancy vivid blue” color, the 7.03-carat gem dazzled connoisseurs out of their wits. It brought a staggering $9.48 million, just over $1.34 million a carat, making the diamond the most expensive stone per carat ever sold in any category. Unlike Christie’s fabulous historic diamond, it had no distant past. The bauble was cut from a 26.58-carat rough diamond recovered the year before at the Cullinan mine in South Africa. It was solely the lure of the stone that determined the prodigious price.
Sotheby’s press release announced that the buyer, Joseph Lau Luen-hung of Hong Kong, had acquired the diamond, and given it a name, “The Star of Josephine.” Josephine being his wife’s name, dealers were ecstatic. This really was a private acquisition, fully demonstrating the vibrancy of the market.
Other extraordinary prices were fetched at Sotheby’s Geneva auction, which netted a cool $35.76 million. A rare “fancy pink” diamond cut in the shape of a pear soared to $2.04 million, a huge figure for a 5.29-carat stone. When the glitter of a jewel makes it hard to resist temptation, money suddenly becomes available. There might be a lesson here for those who are in charge of the broader economy. Read full story here-http://www.nytimes.com/2009/09/05/arts/05iht-melik5.html or
http://www.idexonline.com/portal_FullNews.asp?id=32880
-Diamonds, Colored Stone Jewellery on Auction Block This Month. Three separate estates of rare fancy color diamonds, colorless diamonds, diamond jewelry, and colored stone jewelry will be auctioned Sept. 16, 2009, in New York.
The auction will be conducted by Gemological Appraisal Association Inc., part of the Palmieri Group, in the penthouse (34th Floor) of 580 Fifth Ave. at 10:00 a.m. The three estates are the Treasure Trove (rare collection of fancy color diamond rings), the Howard W. Klein estate (certified diamonds and jewelry), and Alison Gem Corp. (loose diamonds and commercial diamond jewelry). The lots will be auctioned in three sessions.
A kickoff presentation by Bruno Scarselli, principal of Scarselli Diamonds, and by the Natural Color Diamond Association, discussing fancy color diamonds, will begin at 9:00 a.m. Read more here-http://www.jckonline.com/article/339973-Diamonds_Colored_Stone_Jewelry_on_Auction_Block_This_Month.php
INFLATION-DEFLATION
-Investor Marc Faber said government spending and low interest rates will keep the U.S. deficit “very high” and will spur inflation. Interest rates will be kept “artificially low” and remain “near zero for a long time” in the U.S., Faber, the publisher of the Gloom, Boom & Doom report, said today in a presentation broadcast on the Internet. “The deficit will stay very high and that will create some kind of more inflation down the road.”
The Federal Reserve is likely to continue to “print money” in an effort to boost the U.S. economy, and that, combined with low interest rates, will spur weakness in the dollar, Faber said. U.S. President Barack Obama has pumped up the nation’s marketable debt to an unprecedented $6.94 trillion as he borrows to spur the world’s largest economy.
“Money printing will be unprecedented because the deficit will need to be financed,” Faber said. “The weaker the economy, the more the stock market will go up because the money that is being printed will go into” speculative assets. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=az3plDWXOx2c
-Does the world have the courage to deal with its debts? Deflation is spreading from the core of the global system to the most unexpected regions of the world. It has even reached Latin America. Prices are sliding in Peru, Chile, Colombia, Paraguay, Bolivia, Ecuador, Guatemala, and El Salvador, to the consternation of everybody. Read more here-
INTEREST RATES
-Goldman Says Deleveraging May Keep Fed Rate Low for ‘Years’. The Federal Reserve may keep interest rates low for “many years” to help U.S. consumers and companies as they pare back debt, according to economists at Goldman Sachs Group Inc.
Sluggish spending as households reduce debt could lop as much as 2 percentage points from U.S. economic growth over the next three years, New York-based economists Peter Berezin and Alex Kelston wrote in a report released late yesterday. While not enough to threaten a long-term recovery, it may require the Fed to offset the weakness by keeping its benchmark rate unchanged through 2010, they said.
“It is hard to escape the conclusion that the Fed may need to maintain fairly low interest rates over a period of many years,” wrote Berezin and Kelston. “If you want to bring down leverage, you should keep monetary policy sufficiently accommodative to forestall a collapse in spending and a deflationary spiral.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=axL0qC8rIx_M
-The Bank of Canada kept its key interest rate at a record low and said persistent strength in the country’s dollar is threatening signs of faster-than expected growth in the second half of the year.
The target rate for overnight loans between commercial banks remained at 0.25 percent. Governor Mark Carney repeated a commitment made in April to keep that rate unchanged through June 2010 unless the inflation outlook shifts.
“Growth in the second half of 2009 could be stronger than the bank projected in July,” the central bank said today in a statement from Ottawa. “Persistent strength in the Canadian dollar remains a risk to growth and to the return of inflation to target.” Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aI4QKHgcJg74 or
http://www.bloomberg.com/apps/news?pid=20601082&sid;=ahOXUPRVeiP0
U.S. BANK FAILURES HIT 89
-Five More U.S. Banks Are Seized, Pushing Total for Year to 89. Lenders in Illinois, Iowa, Missouri and Arizona collapsed, pushing the number of bank failures to 89 this year amid continuing fallout from the worst economic slump since the Great Depression.
Illinois lenders InBank of Oak Forest and Platinum Community Bank of Rolling Meadows; Vantus Bank of Sioux City, Iowa; First Bank of Kansas City, Missouri; and First State Bank of Flagstaff, Arizona were shut by regulators, and the Federal Deposit Insurance Corp. was named receiver, the agency said in statements yesterday. Closing the lenders, with combined assets of $1.1 billion and deposits of $982 million, will cost the deposit insurance fund about $401 million.
Regulators have closed banks at the fastest pace in 17 years and more are likely as losses mount from soured real- estate debt. A total of 416 banks with combined assets of $299.8 billion failed the FDIC’s grading system for asset quality, liquidity and earnings in the second quarter, the most since June 1994, the regulator said in a report last month. Read more here-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=atIgNJeY9A6g or http://money.cnn.com/2009/09/04/news/companies/bank_failures/?postversion=2009090421
-Regulators closed banks in California, Maryland and Minnesota yesterday, pushing U.S. bank failures to 84 this year amid continuing fallout from the worst economic crisis since the Great Depression. The Federal Deposit Insurance Corp. was named receiver for Affinity Bank of Ventura, California, Bradford Bank of Baltimore and Mainstreet Bank of Forest Lake, Minnesota, after yesterday’s closings, the FDIC said.
Assets of $1.9 billion and deposits of $1.7 billion from the three banks were turned over to new lenders at a total cost of about $446 million to the FDIC’s deposit insurance fund, according to agency statements. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aSdMMGzkt1do or http://money.cnn.com/2009/08/28/news/economy/bank_failure/index.htm
OBAMA MAKING DEPRESSION MISTAKES
-Barack Obama is committing the same mistakes made by policymakers during the Great Depression, according to a new study endorsed by Nobel laureate James Buchanan. His policies even have the potential to consign the US to a similar fate as Argentina, which suffered a painful and humiliating slide from first to Third World status last century, the paper says.
There are “troubling similarities” between the US President’s actions since taking office and those which in the 1930s sent the US and much of the world spiralling into the worst economic collapse in recorded history, says the new pamphlet, published by the Institute of Economic Affairs.
In particular, the authors, economists Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute, claim that the White House’s plans to pour hundreds of billions of dollars of cash into the economy will undermine it in the long run. They say that by employing deficit spending and increased state intervention President Obama will ultimately hamper the long-term growth potential of the US economy and may risk delaying full economic recovery by several years.
The study represents a challenge to the widely held view that Keynesian fiscal policies helped the US recover from the Depression which started in the early 1930s. The authors say: “[Franklin D Roosevelt's] interventionist policies and draconian tax increases delayed full economic recovery by several years by exacerbating a climate of pessimistic expectations that drove down private capital formation and household consumption to unprecedented lows.” Read more here-http://www.telegraph.co.uk/finance/economics/6147211/Barack-Obama-accused-of-making-Depression-mistakes.html
U.S. DOLLAR-STIMULUS
-UN wants new global currency to replace dollar. The dollar should be replaced with a global currency, the United Nations has said, proposing the biggest overhaul of the world’s monetary system since the Second World War. Read more here-http://www.telegraph.co.uk/finance/currency/6152204/UN-wants-new-global-currency-to-replace-dollar.html or
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aSp9VoPeHquI
-U.S. Dollar Will Weaken, Currency Crash Possible, Roubini Says. The dollar will weaken and the U.S. risks seeing a crash of the currency unless it does more to control the deficit and reduce debt, said New York University Professor Nouriel Roubini, who predicted the financial crisis.
“If markets were to believe, and I’m not saying it’s likely, that inflation is going to be the route that the U.S. is going to take to resolve this problem, then you could have a crash of the value of the dollar,” Roubini said in an interview today in Cernobbio, Italy. “The value of the dollar over time has to fall on a trade-weighted basis, but not necessarily relative to euro and yen.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a.SW_71xPhjA
-Dollar Index on Defensive, May Fall to 76: Technical Analysis. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aLH858tMUd50
-Two years ago Max Keiser warned of ‘Death of the Dollar’. Read more here-http://www.gata.org/node/7770
-China alarmed by US money printing. The US Federal Reserve’s policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to a top member of the Communist hierarchy. Read more here-http://www.telegraph.co.uk/finance/economics/6146957/China-alarmed-by-US-money-printing.html or http://www.gata.org/node/7759
-China’s Premier Wen Jiabao signaled he will maintain unprecedented government spending to drive a recovery from the slowest expansion in almost a decade. “China’s economic rebound is unstable, unbalanced and not yet solid,” Wen said yesterday in a speech at the World Economic Forum in Dalian, a city in northeastern China. “We cannot and will not change the direction of our policies when the conditions aren’t appropriate.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aF3.IaUQ.JEo
-European Central Bank policy makers signaled they intend to leave emergency lending measures in place into next year to support an economic recovery. “When the economy is walking solely with the aid of fiscal and monetary crutches, it’s not advisable to whip them away,” Bundesbank President and ECB council member Axel Weber said today in Ploen, Germany. Luxembourg’s ECB council member, Yves Mersch, said the bank will monitor the impact of its stimulus measures “until the end of the year.”
The Frankfurt-based ECB is flooding banks with cheap cash in the hope they will lend it on to companies and households and get them spending again. While Europe is showing signs of emerging from its worst recession since World War II, policy makers are concerned the recovery will falter if the extra liquidity is removed too soon. Read more here-
http://www.bloomberg.com/apps/news?pid=20601068&sid;=aALof_hn_AuM
U.S. UNEMPLOYMENT
-Fed officials see slow recovery for labor market. U.S. labor markets could take years to recover from the setbacks of the current recession, which have pushed the unemployment rate to a 26-year high, top Federal Reserve policy-makers said on Wednesday.
But the officials said the Fed may need to end its ultra-accommodative policy stance long before the jobless rate starts to plummet if inflation starts to rise. For now, though, that seems some way off given the tentative nature of the economic recovery. Read more here-http://www.reuters.com/article/ousiv/idUSN0961189820090909
-Employers’ hiring plans for the upcoming fourth quarter dropped to their lowest level in the history of Manpower’s Employment Outlook Survey, which started in 1962. Read more here-
http://www.marketwatch.com/story/story/print?guid=F014B933-B25C-44B9-9973-CE0426E80E25
-Temporary Hiring Shows Job Rebound Isn’t Imminent: Chart of Day. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=avYl515PP_pM
-U.S. Initial Jobless Claims Fell to 550,000 Last Week. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=ag9R1aoTYI_o
-The Labor Department reported that nonfarm payrolls (jobs) decreased by 216,000 in August. Today’s chart puts that decline into perspective by comparing job losses during the current economic recession (solid red line) to that of the last recession (dashed gold line) and the average recession from 1950-2006 (dashed blue line).
As today’s chart illustrates, the current job market has suffered losses that are more than six times as much as average (20 months after the beginning of a recession). In fact, if this were an average recession-job loss cycle, the number of jobs would have begun to increase five months ago. Read more here-http://www.chartoftheday.com/20090904.htm?T
DAVID ROSENBERG MARKET COMMENTARY
-Canada Dollar Parity ‘Achievable’ by Year-End, Rosenberg Says. Canada’s dollar may reach parity with its U.S. counterpart by year-end as economic growth in Asia boosts commodity prices, said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.
The Canadian currency may strengthen as rising unemployment in the U.S. forces the government to adopt additional stimulus measures, further weakening the American currency, Rosenberg said in a telephone interview. Gluskin Sheff, a wealth manager, oversees $4 billion.
“If you’re going to give me a three- to six-month window, I would say it’s definitely achievable,” said Rosenberg, former North American chief economist at Merrill Lynch & Co., referring to Canada’s currency appreciating to C$1 per U.S. dollar. “It seems to me that the Asian economy is on a discernable upward track. That will be the tide that lifts the boat for the commodity complex.”
Canada’s dollar reached parity with the greenback in September 2007 for the first time in three decades, and hovered near there until July 2008, following a 60 percent climb over five years fuelled by rising commodity prices. Shipments of crude oil, natural gas, lumber, gold, copper and other raw materials account for more than half of Canada’s export revenue. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=a1FGLHvlZzx8
-Five points worth making on the markets, earnings and the economy.
1. This remains a hope-based rally in the equity markets (with strong technicals). What we are seeing transpire is without precedent – the magnitude of the employment slide versus the magnitude of the market advance.
2. Companies have not really been beating their earnings estimates – only the very final estimates heading into the reporting quarter.
3. Valuation is a poor timing device but even on “normalized” trailing 10-year earnings, the S&P; 500 is trading near 18x, which is now above the historical average of 16x.
4. All the growth we are seeing globally this year is due to fiscal stimulus.
5. While Mr. Market may be pricing in a fine future for the U.S., but when the 3-month Treasury-bill yield is 13bps north of zero, you know that there are still substantial fundamental imbalances that need to be worked through. David A. Rosenberg Chief Economist & Strategist Gluskin Sheff
-Okay, let’s get this straight. We are now being told by the pundits that the reason why Mr. Market is managing to so readily shrug off adverse data is because Mr. Market is discounting “normalized” 2011 earnings of $80. That is behind the latest round of S&P; 500 estimates of 1,200. After a momentous 50%+ surge from the lows, anything is certainly possible.
But let’s see if it makes sense. First, with household net worth down $14 trillion, employment down 7 million since the start of the recession and consumer credit down $110 billion from last year’s peak, it would seem to us as though there are too many gaping holes to believe we are going to be seeing anything remotely close to “normalized” earnings any time soon.
But even if that were the case, it would suggest that the market is trading near a 12x two-year forward multiple. Go back 80 years worth of data, and the mean two-year forward multiple is 7x. Too rich for our liking. David A. Rosenberg Chief Economist & Strategist Gluskin Sheff
-We did some digging and found that all of the world economic rebound in 2009 that is, 100% and them some is being accounted for by fiscal stimulus. There is still nary a sign that the global recovery is being sustained by organic private sector activity.
Oh yes, for 2010, we calculate that 80% of the growth that the consensus is penning in is derived from the public sector. Even FDR would blush over this unprecedented government incursion into the economy. Since the impact from government spending is a second-round effect on corporate profits, it will be interesting to see the extent to which earnings growth come into line with today’s lofty expectations. David A. Rosenberg Chief Economist & Strategist Gluskin Sheff
-The U.S. economy is actually 9.4 million jobs short of being anywhere remotely close to being fully employed, which is why any inflation that can somehow be created by the Fed is simply going to be unsustainable noise along a fundamental downtrend in pricing power.
After last Friday’s report, we have now lost 6.9 million positions that have been cut during this recession and we have to count in the additional 2.5 million jobs that need to be created but never were just to absorb the new entrants into the labour market. The ‘real’ unemployment rate is now 16.8%, so to suggest that this down-cycle was anything but a depression is basically a misrepresentation of the facts. David A. Rosenberg Chief Economist & Strategist Gluskin Sheff
U.S. STOCKS AT RISK OF 20 PERCENT DECLINE-INSIDERS STILL SELLING
-The U.S. stocks rally is “maturing” and the risk of a 20 percent retreat in the Standard & Poor’s 500 Index increased after sellers became more aggressive than buyers, Bank of America said.
Mary Ann Bartels, an analyst at Bank of America, said her volume intensity model, used to capture the market’s money flows, showed investor buying peaked last week and selling gained strength. That’s signalling the 50 percent rally in the S&P; 500 from a 12-year low on March 9 may be near an end, she said. Technical analysts study chart patterns to predict prices.
Selling pressure was the third of five indicators watched by Bartels to signal increased probability of a 15 percent to 20 percent “correction” in the benchmark for American equity, she said. Two others were triggered last month when China’s Shanghai Composite Index began a 16 percent slump and Investors Intelligence said bearish sentiment among newsletter writers shrank to less than 20 percent.
“These are all signs of a maturing rally,” Bartels, who ranked second among analysts who study price charts in Institutional Investor magazine’s most recent survey, wrote in a note published today. “The risk of a deeper correction is increasing.” Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=ak.1o0dVxWHo
-Insiders sell like there’s no tomorrow. Corporate officers and directors were buying stock when the market hit bottom. What does it say that they’re selling now? Read more here-
http://money.cnn.com/2009/09/10/news/economy/insider.sales/index.htm?postversion=2009091016
REAL ESTATE-MORTGAGES-FORECLOSURES
-Home Price Increases Depends on Foreclosure Sales. Read more here-http://blogs.wsj.com/developments/2009/09/08/home-price-increases-depends-on-foreclosure-sales/
-As an Exotic Mortgage Resets, Payments Skyrocket. Edward and Maria Moller are worried about losing their house not now, but in 2013. That is when the suburban San Diego schoolteachers will see their mortgage payments jump, most likely beyond their ability to pay.
Like millions of buyers during the boom, the Mollers leveraged their way into a house they could not otherwise afford by taking out a loan that required them to make only interest payments at first, putting off payments on the principal for several years.
It was a “buy now, pay later” strategy on a grand scale, meant for a market where home prices went only up, and now the bill is starting to come due. With many of these homes under water worth less than the loans against them many interest-only mortgages will soon become unaffordable, as the homeowners have to actually start paying principal. Monthly payments can jump by as much as 75 percent.
The Mollers owe so much more than their house is worth, and have so few options, that they are already anticipating doom. “I’m praying for another boom,” said Mr. Moller, 34. “Otherwise, we’ll have to walk.”
Keith Gumbinger, an analyst with HSH Associates, said: “This is going to be the source of tomorrow’s troubles. The borrowers might have thought these were safe loans, but it turns out they bet the house.” Read more here-http://www.nytimes.com/2009/09/09/business/09loans.html
-Commercial property defaults may set record according to study. Commercial mortgage defaults of loans made by banks are projected to peak in 2011, and could set a new record next year, according to a report released on Tuesday by Real Estate Econometrics.
The real estate research firm revised its early projections for the rest of the year, viewing the default rate of mortgage loans on office buildings, hotels, shopping centers hotels and other non-residential income earnings property to be 4.2 percent, up the most recent forecast of 4.1 percent. Falling rental rates, higher vacancies and the absence of a functioning credit market have combined to undermine borrowers’ abilities to keep current with their monthly payments.
Real Estate Econometrics also raised its default projections for next year and 2011 to reflect a larger number of loans moving from delinquency to nonaccrual — loans lending institutions do not expect to be repaid in full. In the second quarter, delinquent commercial mortgage balances across all banks fell by about $2 billion, while those in nonaccrual balances jumped $6.5 billion. Read more here-http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN0829660420090909
-U.S. Foreclosure Filings Top 300,000 for Sixth Straight Month. Foreclosure filings in the U.S. exceeded 300,000 for the sixth straight month as job losses that boosted the unemployment rate to a 26-year high left many homeowners unable to keep up with their mortgage payments.
A total of 358,471 properties received a default or auction notice or were seized last month, according to data provider RealtyTrac Inc. That’s up 18 percent from a year earlier, and down 0.5 percent from July, the Irvine, California-based company said in a statement. One in 357 households received a filing. Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid;=a3dnPxhcGAxs or http://www.reuters.com/article/newsOne/idUSTRE5890VR20090910
-Option ARM Disaster Arrival: Mortgages More Problematic than Originally Thought. $134 Billion Recasting in Next Two Years. 94 Percent Made only Minimum Payment. Only 35,000 of the 1 million Option ARM loans Modified. Read more here-http://www.mybudget360.com/option-arm-disaster-arrival-mortgages-more-problematic-than-originally-thought-134-billion-recasting-in-next-two-years-94-percent-made-only-minimum-payment-only-35000-of-the-1-million-option/
-Treasury sees millions more foreclosures. Only 12 percent of U.S. homeowners eligible for loan modifications under the Obama administration’s housing rescue plan have had their mortgages reworked, and millions more foreclosures are coming, the Treasury Department said on Wednesday. Read more here-
http://www.reuters.com/article/ousiv/idUSTRE5883S620090909
-70% of July home sales in Las Vegas were foreclosures. Read more here-http://latimesblogs.latimes.com/laland/2009/09/70-of-july-home-sales-in-las-vegas-were-foreclosures.html
-On the corner of Flamingo Road and Pink Flamingo Lane, beyond the putting green, the crystalline lagoon and the Sawgrass Mills mall, a soaring monument to the great condominium bust bakes under the Florida sun.
The Tao Sawgrass, as the twin-towered complex is known, was built on the western fringes of Fort Lauderdale with easy money from the now tottering condo king of American finance: Corus Bancshares of Chicago. Only about 50 of the 396 units have been sold, The New York Times’s Eric Dash writes. Read more here-
http://dealbook.blogs.nytimes.com/2009/09/10/in-florida-empty-vestiges-of-the-boom/
© 2011, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – September 15, 2009
Posted by Worldwide Precious Metals on Tuesday, September 15, 2009
The Goldbugg Report – September 08, 2009
September 8, 2009
WORLD FINANCIAL REPORT ON RADIO SEPT 4 2009 SHOW
-Will gold reach $5000 plus?
-Gold price could still hit $1,200 this year.
-Industrial demand for silver sharpens bullish view.
GOLD
-Martin Armstrong, will gold reach $5000 plus? I have provided the technical analysis on Gold based on a monthly chart. The first real resistance is formed by the Primary Channel that shows $1,350 – $1,750 between 2010 and 2012. This represents still a plain old normal technical move with nothing that would reflect a meltdown. It is breaking this overhead resistance where it becomes support that we enter the “danger zone” of a true meltdown in Public Confidence.
Most of the projected resistance from the major low back in 1999, shows various targets from $1,700 to $2,750. However, if gold exceeds this level and it too forms the subsequent support, now we are looking at the $3,500 to $5,000 target zone. This is where we see the potential for Gold is a true economic meltdown of Confidence. Read more here-
http://news.goldseek.com/GoldSeek/1251747405.php and http://moneytalks.net/index.php?option=com_content&view;=article&id;=2111:will-gold-reach-5000&catid;=48:daily-updates&Itemid;=88
-S&P; 500 up 40% by December 2010 and then collapse? Gold and silver to jump. Merrill Lynch Asia (Bank of America) strategists Sadiq Currimbhoy, Arik Reiss, and Jacky Tang suggest that the S&P; 500 could soar another 40% by December 2010 before it collapses completely based on a unique comparison with the Nikkei 225.
Relationship suggests gold could go to $1175 and silver to $27.67: Were we to apply the same approach to the analysis of the short-term price for gold and silver a record price would result for gold and a dramatic increase would be realized in the price of silver. Gold has gone up only 8% YTD vis-à-vis the S&P; 500’s 13.9% or 57.5% as much.
Therefore, should the S&P; 500 go up 40% one could expect, under this scenario, that gold would go up a further 23% (57.5% of 40%) which would put gold well above that ‘precious barrier’ of $1000 to a record $1175 by the year’s end. Again, the results of the comparative analysis seem achievable.
Silver is up 30.3% YTD or 2.2 times that of the S&P; 500. That would translate into an 87% price increase in the current price of silver from $14.72 as of last Friday to $27.50 by the end of 2010. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=88283&sn;=Detail or http://www.bloomberg.com/apps/news?pid=20601109&sid;=aKzgH4hvhh.g
-Gold price could still hit $1,200 this year. Bullish on gold since it carried a $400-per-ounce price tag, Blue Phoenix Chief Investment Strategist John Licata expects the king of metals to ring in the New Year with a $1,200-per-ouncecrown. Interview with The Gold Report. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88360&sn;=Detail
-Gold may advance to a record $1,325 an ounce if it first breaks out of a symmetrical, triangular pattern, a move that may occur in the next one or two weeks, Standard Bank Group Ltd. said, citing trading patterns.
A so-called topside breakout would be indicated by a close at more than $980.85 an ounce, Darran Grabham, the bank’s technical analyst, wrote in a note. That would signal a short-term bull trend to at least $1,100 an ounce, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aqg7fd0Bs6lU
-New gold investors are often surprised to learn that gold prices have a heavy seasonal component. Seasonality makes intuitive sense for commodities inexorably tied to orbital mechanics, like wheat. Their annual late-summer harvest really increases supply. But why should gold, which is mined evenly and continuously throughout the year, have big price swings governed by the solar calendar?
Unlike the supply-driven seasonality in soft commodities, gold’s seasonality is demand-driven. Across the globe, surges in gold demand tend to clump around end-of-financial-year cash surpluses and festival seasons. This is not just an Asian phenomenon, it is even true in the modern West. Gold’s well-established seasonality creates tailwinds that make certain times of the year exceptionally bullish.
And today we are entering gold’s strongest seasonal period. Autumn is a very exciting time for investors and speculators long anything in the precious-metals complex. Gold strength doesn’t only benefit the Ancient Metal of Kings, but the whole PM ecosystem which mirrors (and amplifies) gold’s every move. This includes gold stocks, silver, and silver stocks. Autumn is the best time of the year to be long PMs. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton082809.html
-Historically September is best month for gold and gold stocks. September has been the best month on average for the gold price to show an increase with appreciation over the month in 16 of the past 20 years. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88271&sn;=Detail or http://news.goldseek.com/GoldSeek/1251730009.php
-Gold shines in September, analysis of 20 year’s data shows. Record contrasts with that of stocks; prior to 1988, gold didn’t do as well. Read more here-
http://www.marketwatch.com/story/story/print?guid=10720221-EFF9-4B67-9C23-CFBED969C5E1
-Last Chance to Buy Gold below $1000? Read more here-http://news.goldseek.com/EricHommelberg/1251910800.php
-Chinese sovereign wealth fund dumping dollars for strategic investments like gold. Reports suggest that China’s main sovereign wealth fund and other state entities are under pressure to invest in strategic Western assets as the country tries to offload its dollars for firmer-based wealth including gold and oil. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=88400&sn;=Detail
-Hong Kong bringing gold reserves home from London. Read more here-http://www.gata.org/node/7749
-Turning point for gold as Central Banks become buyers. With the possibility of Central Banks becoming net gold buyers and the speculation that the IMF gold may be sold “off market” gold analyst Jeff Nichols remains bullish on the precious metal’s prospects. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88296&sn;=Detail
-Long term trends the key for gold and silver investors. Day to day movements in the prices of both gold and silver have little relevance to overall price trends. Read more here-
http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88215&sn;=Detail
-Ned W. Schmidt gold thoughts. Read more here-http://news.goldseek.com/NedSchmidt/1251784980.php
-Roger Wiegand on Precious Metals: “We Haven’t Seen Anything Yet”. Read more here-http://news.goldseek.com/GoldSeek/1251489392.php
-Gold price to remain range bound over short term Fitch. The ratings agency believes the price of gold is heavily influenced by investor demand on one side and scrap and official gold sales on the other. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88434&sn;=Detail
-Smart Money Analysis-Paulson’s AngloGold bet points to inflation. Read more here-http://www.reuters.com/article/marketsNews/idAFN0150657920090902?rpc=44&pageNumber;=1&virtualBrandChannel;=0
-The myth of declining gold demand. Read and watch video here-http://www.usagold.com/video/20090828.html
-Where have all US Mint gold & silver coins gone? Read more here-http://www.commodityonline.com/news/Where-have-all-US-Mint-gold–silver-coins-gone-20753-3-1.html
-”There’s no reason to invest in gold,” said ‘Betsy’. Read more here-http://www.321gold.com/editorials/casey/casey081409.html
-Germany’s MMNews interviews GATA Chairman Bill Murphy. Read more here-http://www.mmnews.de/index.php/200908313669/Gold-Silber/Gold-Manipulation.html
-GATA Chairman Bill Murphy interviewed by King World News. Listen here-http://www.gata.org/node/7735
SILVER
Gold to silver ratio at 80 to 1 with gold at $1,100 the silver price would be $13.75
Gold to silver ratio at 70 to 1 with gold at $1,100 the silver price would be $15.71
Gold to silver ratio at 60 to 1 with gold at $1,100 the silver price would be $18.33
Gold to silver ratio at 50 to 1 with gold at $1,100 the silver price would be $22.00
Gold to silver ratio at 40 to 1 with gold at $1,100 the silver price would be $27.50
Gold to silver ratio at 30 to 1 with gold at $1,100 the silver price would be $36.67
Gold to silver ratio at 20 to 1 with gold at $1,100 the silver price would be $55.00
Gold to silver ratio at 15 to 1 with gold at $1,100 the silver price would be $73.33
-China pushes silver and gold investment to the masses. A report suggests that the Chinese government is pushing the general public into buying gold and silver bullion, which could have a dramatic effect on the markets. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=88452&sn;=Detail
-Industrial demand for silver sharpens bullish view. Prospects for global economic recovery may increase the call for silver from industrial users, leaving the metal ripe for fresh gains on top of already firm investment interest.
Interest from industrial consumers, which accounted for more than half of silver demand last year, could lead to the metal outperforming gold this year but only if confidence in the economy continues to grow, analysts said.
“Silver has really taken its lead from gold this year,” said Standard Bank analyst Walter de Wet. “But now, with industrial production picking up, you have to favour silver, relative to gold at least as long as industrial demand keeps growing.”
The metal’s relationship with base metals, which, like silver, are widely used in industry, has grown in recent weeks after a spate of stronger-than-expected economic data. “Investment demand is the main driver of silver, but it is also benefiting from the positive industrial outlook and the rally in the base metals,” said VM group analyst Matthew Turner.
“If you look at all the commodities, base metals have left most of them behind this year in price terms, even energy,” he said. “There has been so much industrial metal demand that silver is riding on the coat tails of that.” Read more here-http://uk.reuters.com/article/idUKLNE58003D20090901?sp=true
-H1N1, the A-type influenza virus that looms large across the top half of our planet, already has scientists and industrial researchers testing experimental disinfectants, triage diagnostic tools for airports and hospitals and silver-embedded sterilizers for doorknobs, water fountains, bandages and viral-prone surfaces. Silver is fast becoming a select ingredient for hospital surfaces, plasters, clothing and a wide array of medical devices. Thom Calandra-Read more here-http://www.stockhouse.com/Columnists/2009/Sept/1/Silver,-H1N1—rare-earth-events-are-imminent or http://www.gata.org/node/7745
-Silver market analyst Ted Butler interviewed by King World News. Listen here-http://www.gata.org/node/7738
-Martin Hennecke, associate director at Tyche says go for silver and gold. Read and watch more here-http://www.cnbc.com/id/32638139
PLATINUM-PALLADIUM
-Demand to outstrip platinum supply between 2010 and 2016 Platinum Australia. Read more here-
-‘Very strong’ resurgence in Chinese platinum jewellery Implats. Read more here-http://www.miningweekly.com/article/very-strong-resurgence-in-chinese-platinum-jewellery-implats-2009-09-03
-Russian Palladium Stockpiles Exhausted. Mining Weekly reports that the Russian palladium stockpiles have finally run out, and palladium prices are expected to soar as a result. The demand for palladium will undoubtedly grow substantially once the financial crisis in developed countries tones down and car sales start recovering.
Mining company African Rainbow Minerals CEO Andre Wilkens told Mining Weekly that Russian miner Norlisk Nickel, ARM’s partner in South Africa, is back to its normal monthly levels of palladium production. Mining company Impala Platinum Marketing Executive Derek Engelbrecht called on Russia to stop destocking its palladium reserves.
In the beginning of the decade, palladium reached a price of $1,000 per ounce. Today its price is climbing towards $300 per ounce, after dropping to a level of $150 per ounce. However, Engelbrecht states that palladium prices will not rise back to $1,000 per ounce in the near future. According to Engelbrecht, China and India both hold abundant palladium mines, and are expected to take the lead in this market in the near future. Israelidiamond.co.il
-Steady rise of palladium price expected Implats. Read more here-http://www.miningweekly.com/article/implats-bullish-on-palladium-2009-09-01
-PGM prices uncertain as German auto scrappage scheme also closes. The German version of the “Cash for clunkers” programme which gave consumers more than twice the $3 billion expended in the US to help subsidise the purchase of almost two million new cars is now at an end and some are expecting a decline in the German auto market of as much as 30%. Read more here-http://mineweb.co.za/mineweb/view/mineweb/en/page35?oid=88460&sn;=Detail
-Shortage of Rare Earths Used in Hybrids, TVs May Loom in China. Read more here-http://www.bloomberg.com/apps/news?pid=20601012&sid;=afn.hOk6pEHg
-As hybrid cars gobble rare metals, shortage looms. The Prius hybrid automobile is popular for its fuel efficiency, but its electric motor and battery guzzle rare earth metals, a little-known class of elements found in a wide range of gadgets and consumer goods.
That makes Toyota’s market-leading gasoline-electric hybrid car and other similar vehicles vulnerable to a supply crunch predicted by experts as China, the world’s dominant rare earths producer, limits exports while global demand swells.
Worldwide demand for rare earths, covering 15 entries on the periodic table of elements, is expected to exceed supply by some 40,000 tonnes annually in several years unless major new production sources are developed. Read more here-http://www.reuters.com/article/wtUSInvestingNews/idUSTRE57U02B20090831
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Bad Economy Means Less Death. Good news! The recession means fewer people are dying or, to put it another way, people are living longer. A new study from the Canadian Medical Association Journal confirms a long-held theory that mortality is pro-cyclical, meaning that the better the economy, the more people are dying. This is not the case in poor countries.
What explains the effect? The authors cite a few mechanisms, including the increased use of social safety nets, having more leisure time, less overeating, less alcohol consumption and also (logically) less worker stress. Read more here-http://www.businessinsider.com/chart-of-the-day-worse-economy-less-death-2009-9
-Chart of the week: You should have gone into the public sector. Do you want to make good pay, have awesome benefits, and amazing, iron-clad job security? Don’t go looking in the private sector. New analysis from the BEA, via Cato-at-Liberty, shows that the average Federal worker makes well more than their private sector counterpart.
And look at wage growth. Since 2000, Federal average pay is up 55%, compared to just 29% wage growth in the private sector. And this doesn’t even take into account the awesome health benefits. Read more here-http://www.businessinsider.com/chart-of-the-day-you-should-have-gone-into-the-federal-government-2009-8
-The story goes that in South India, villagers use a special tactic for capturing small monkeys. The South Indians hollow out a gourd or coconut and place some rice inside of it. They leave a small hole in the gourd big enough that the monkey can put his hand through it. But, when the monkey grabs hold of the rice, his fist is too big to pull back through the hole.
Tempted by the rice and driven by hunger, the monkey will reach into the gourd, grab the rice, but suddenly finds he is trapped. He does not know that all he has to do is let go of the rice and he can pull his hand back out. Because he’s hungry, however, he holds on to the rice and is unable to pull his fist out. He is trapped, thus making him an easy catch for villagers.
We humans are likewise easily distracted by possessions, ideas, and or actions. We grab a hold of them and are trapped. However, we want the item so badly that we won’t let go and remain trapped. We don’t realize that if we let go, we are released from the hold of the trap. Anonymous
-The Constitution of the U.S. is not an instrument for the government to restrain the people, it is an instrument for the people to restrain the government… lest it come to dominate our lives and interests. Patrick Henry-Bio here-http://en.wikipedia.org/wiki/Patrick_Henry
-Unchecked, government social programs are a security threat because they weaken the ultimate line of defence: the free-born citizen whose responsibilities are not subcontracted to the government. Mark Steyn-http://en.wikipedia.org/wiki/Mark_Steyn
-Central banks in recent years have been selling constantly, and I’m strongly suspicious that the President’s Working Group on Financial Markets the “Plunge Protection Team” participates in the gold market as well, to keep the price suppressed.
As recently as November 2008, Bernanke admitted to me in a Financial Services Committee hearing that the only time gold is discussed with other central bankers is for the purpose of selling never to consider its merit in serving as a reserve for a new currency agreement. Representative Ron Paul, R-Texas, from his new book End the Fed to be published on September 16, 2009
-Giving you gold price objectives has not proved in the past to be in your best interest as we are read by both sides of the gold market spectrum. However, one time only, here they are:
$1000 three tries and success, this is the third try. Then $1024, $1089, $1156, $1225, $1296, $1369, $1444, $1521, $1600, and $1681. Jim Sinclair
-“The dollar is going to be the main driver for gold strengthening for the rest of the year.” David Barclay a metals analyst at Standard Chartered Plc in London-Bloomberg
-“The next trending step higher is under way” for gold, SEB AB analysts in Stockholm said today in a report. The metal may rise to $1,112, according to the report. Bloomberg
-“A good deal” of gold’s move higher “is technical, with models likely to be chasing the break of a recent tight range,” Sydney-based Greg Gibbs, a Royal Bank of Scotland Group Plc strategist, said today in a note. “The ability of gold to continue to rise perhaps tells us that investors are far from calm about the longer-term global economic outlook and the policy response to it.” Bloomberg
-We get the sense that something really quite ominous is upon us and that some news and clearly not good news is waiting out there on the market’s periphery that shall tend, on balance, to weigh heavily upon stock prices, shall weigh heavily upon government intervention efforts; shall weigh heavily upon the global capital market’s collective psychology we have the sense
that we are at an historic turning point for the gold market, and that turning point was made mid-day yesterday when the dollar began to strengthen, as commodity prices began to weaken, and yet gold held steady as a rock. Dennis Gartman
-I got a little tidbit of information yesterday from Simon Black’s International Man e-mail commentary. His source in China had this to say “Gold was attainable by Chinese via Panda coins (China’s version of Eagles) or jewellery since the 1980s. Walking into a bank and buying coins/bars however is a recent phenomenon.”
“The critical point to understand is that the government has never before pushed gold and silver as an investment vehicle. It has gone from being illegal, to being the hottest asset on the market simply because of the government’s marketing efforts.” “I’m convinced that this will create significant upside, especially for silver. You should see how people stand in line at banks to buy silver bars now.” Ed Steer
-Will Rogers said, “Invest in inflation, it’s the only thing that is going up.” But how about timing? The best way to invest in a trend is to get on board before it turns serious. We don’t have inflation yet, In fact, we are in a deflationary period. Prices are actually coming down, and things are relatively cheap.
If you bet on inflation now, you are betting on the future. Right now, gold and silver are actually defying deflationary trends and have been gradually creeping up. But they are still relatively cheap compared to what they will be. All socialist states end up producing hyperinflation and destroying their own currency, without exception. The way to make money is to get in early, before inflation starts to boom.
Can you imagine how much gold and silver buying will soar when gold is over $1,000 and silver is over $25? That will happen to dumb investors. Gold is now $990 and silver a little over $16. Now is the time to buy and wait patiently. Howard Ruff
-According to TrimTabs, corporate insiders were net sellers of their stock to the tune of $6.3 billion in August the selling/buying ratio was a huge 30.7x (insiders bought only $210 million). Not only that, but share buybacks slowed to a trickle in August too $3.6 billion, which was the third lowest tally in the past two years. Read more here-
-Sobering piece in this morning’s San Jose Mercury News on the vast amount of unoccupied office space in the Valley as a result of the economic downturn.
A few tidbits from the story:
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20.5% of Silicon Valley office space is vacant, the highest level since 2003.
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18.9% of R&D; space is vacant, the highest since early 2006.
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Total empty R&D; space in the valley: 29.1 million square feet.
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Total empty office space: 12.6 million square feet.
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Completely vacant R&D; buildings: 277.
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Completely vacant office buildings: 39.
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Sunnyvale’s vacancy rate has reached 53.4%. As it happens, a project called Moffett Towers is in the process of adding 1.6 million additional square feet of office and R&D; space in Sunnyvale in 7 eight-story buildings. Six are completed. All are empty.
In July, the unemployment rate in the Valley hit 11.8%. Read more here-http://blogs.barrons.com/techtraderdaily/2009/08/31/silicon-valley-land-of-the-see-through-office-building/?mod=yahoobarrons
-The Federal Reserve will be unable to prevent the trillions of dollars in government stimulus pumped into the U.S. economy from stoking inflation over the next decade, a survey of business economists showed. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=awguLss.uevA
-America’s long-term budget outlook has worsened. Not for the last time. Read more here-http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=14324535
-Dollar Is Funny Money in Push for World Currency: Kevin Hassett. Read more here-http://www.bloomberg.com/apps/news?pid=20601039&sid;=adiwJJwwge88
-The Dollar Will Fall, The Only Question Is “When?” Read more here-http://finance.yahoo.com/tech-ticker/article/311525/The-Dollar-Will-Fall-The-Only-Question-Is-%22When%22
-The Rise and Fall of the Dollar: 1800-2009. See graphic here-http://blog.mises.org/archives/010553.asp
-For a world first, the announcement came with remarkably little fanfare. But last month the Swedish Riksbank entered uncharted territory when it became the world’s first central bank to introduce negative interest rates on bank deposits. Read more here-http://www.gata.org/node/7730
-Regulators Shutter Three U.S. Banks, Bringing 2009 Toll to 84. Regulators closed banks in California, Maryland and Minnesota pushing U.S. bank failures to 84 this year amid continuing fallout from the worst economic crisis since the Great Depression.
The Federal Deposit Insurance Corp. was named receiver for Affinity Bank of Ventura, California, Bradford Bank of Baltimore and Mainstreet Bank of Forest Lake, Minnesota, after yesterday’s closings, the FDIC said. Assets of $1.9 billion and deposits of $1.7 billion from the three banks were turned over to new lenders at a total cost of about $446 million to the FDIC’s deposit insurance fund, according to agency statements.
Regulators have closed banks at the fastest pace in 17 years and more are likely as losses mount from soured real- estate debt. A total of 416 banks with combined assets of $299.8 billion failed the FDIC’s grading system for asset quality, liquidity and earnings in the second quarter, the most since June 1994, the regulator said in a report Aug. 27. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aSdMMGzkt1do
-The Coming Deposit Insurance Bailout. Another lesson that federal guarantees aren’t free. Read more here-http://online.wsj.com/article/SB10001424052970204731804574385072164619640.html?mod=googlenews_wsj
-For FDIC, a long tunnel and little light. Read more here-http://blogs.reuters.com/rolfe-winkler/2009/08/27/for-fdic-a-long-tunnel-and-little-light/
-U.S. Consumer Bankruptcies Rose 24 Percent in August. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aqyxH6p.cd_c
-U.S. Cities’ Woes to Worsen as Taxes Trail Pace of Recovery. Read more here-http://www.bloomberg.com/apps/news?pid=20601070&sid;=ai724AYZvzsU
-Stiglitz Sees ‘Significant Chance’ U.S. Rebound Not Sustained. The U.S. economy faces a “significant chance” of contracting again after emerging from its worst recession since the 1930s, Nobel Prize-winning economist Joseph Stiglitz said.
“It’s not clear that the U.S. is recovering in a sustainable way,” Stiglitz, a Columbia University professor, told reporters today in New York. Economists and policy makers are expressing concern about the strength of a projected economic recovery, with Treasury Secretary Timothy Geithner saying yesterday that it’s too soon to remove government measures aimed at boosting growth.
Stiglitz said he sees two scenarios for the world’s largest economy in coming months. One is a period of “malaise,” in which consumption lags and private investment is slow to accelerate. The other is a rebound fueled by government stimulus that’s followed by an abrupt downturn an occurrence economists call a “W-shaped’ recovery. “There’s a significant chance of a W, but I don’t think it’s inevitable,” he said.
Stiglitz said it’s difficult to predict the economy’s trajectory because “we really are in a different world.” He said the crisis of the past year resulted from lax regulation that allowed some financial firms to grow so large that the system couldn’t handle a failure of any of them. “These institutions are not only too big to fail, they are too big to be managed,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=avoMA970qQjs
-End of Stimulus May Cause A ‘Double-Dip’ Recession: Gross. Read and watch video here-http://www.cnbc.com/id/32660536
-Graphic: If I had a trillion dollars. Recent estimates show that the U.S. debt could double to an astounding $20-trillion in the next decade. The graphic below tries to explain the astronomical sum. See graph here-http://network.nationalpost.com/np/blogs/posted/archive/2009/08/25/graphic-if-i-had-a-trillion-dollars.aspx
-HSBC Says Switzerland Luring More Rich Foreigners as Taxes Rise. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ae3NU.gekp.0
-Oldest Swiss Bank Tells Clients to Sell U.S. Assets or Leave. Wegelin & Co., Switzerland’s oldest bank, is telling wealthy clients to sell their U.S. assets, or switch banks, because of concerns new rules will saddle investors with tax obligations in the world’s biggest economy.
U.S. proposals to extend reporting requirements for banks whose clients buy American stocks and bonds coupled with estate tax liabilities that may be inherited by the heirs of people who have such holdings prompted the advice from the St. Gallen, Switzerland-based bank, said Managing Partner Konrad Hummler.
“We came to the conclusion that it’s a threat to our clients,” Hummler, who is also president of the Swiss Private Bankers Association, said in an interview yesterday during a conference in Zurich. “It’s also a threat to us as a bank because as a custodian we are an executor to the estate. We find this aspect discomforting, so we recommend selling all American securities whatsoever.” Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=ae3NU.gekp.0
-From Switzerland with No Love Wegelin Bank Says Goodbye to the U.S. Read more here-http://www.wegelin.ch/download/medien/anlagekommentar/kom_265en.pdf
-Peak water. Read more here-http://theburningplatform.com/economy/peak-water-1
-U.S. Food-Stamp Recipients Reach Record 35.1 Million. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=atCF1wakoZGk
-Iran Is Continuing Uranium Enrichment, UN Agency Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a.IhIWKIZMaA
-Iran Won’t Bow to Deadline Demand for Nuclear Talks. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5mh3RwBMJag
-Gates Says Afghan War ‘Not Slipping,’ U.S. Has ‘Right Approach’. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aKcj03QWuBEU
-North Korea Says It’s Entered Final Stage of Enriching Uranium for Weapon. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aNA_kN1LXYok
-Bernard Madoff thought regulators had caught him in 2006 and was “astonished” U.S. Securities and Exchange Commission investigators never followed up on information he gave them, the agency’s internal watchdog said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aoFFqspXtMDg
-Israel’s Wealthiest Woman Says She Can See the Future. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2009/08/30/AR2009083002473_pf.html
-Senate Bill Would Give President Emergency Control of Internet. Details of a revamped version of the Cybersecurity Act of 2009 show the Senate bill could give the president a “kill switch” on the Internet and allow him to shut out private networks from online access. Read more here-http://www.foxnews.com/politics/2009/08/28/senate-president-emergency-control-internet/
-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
-Sotheby’s to Offer Flawless, 30-Carat Diamond Ring at October Sale. Sotheby’s will offer a pear-shaped, 29.53 carat, D diamond ring reputed to be internally flawless during its upcoming Important Jewels sale in New York, to be held on October 19, 2009. The rare type IIa stone is flanked by two heart-shaped stones that are 1.35 and 1.51 carats, respectively. The lot has been attributed a presales estimate of $1.8 million to $2.2 million and is set in a decorative platinum mounting.
The ring is from a New York estate collection that also includes jewels by Van Cleef & Arpels, Tiffany & Co., David Webb and Bulgari. It will first be exhibited at Sotheby’s Hong Kong show from October 2 to 6 and then at a public exhibition in New York, beginning on October 14, culminating in its availability at the Important Jewels auction. Diamonds.net
WORST OF SLUMP YET TO COME
-Ann Pettifor predicted a painful end to the good times. Now she says that only radical action can prevent further gloom. Ann Pettifor is a member of a select club the seers who saw it all coming. Now the economist, who predicted the credit crunch as far back as 2003, believes that the worst is yet to come unless there is radical reform of the financial system.
Six years ago she parodied the International Monetary Fund’s annual economic forecast with her own The Real World Economic Outlook. Then, in 2006, her book The Coming First World Debt Crisis, warned that rich countries were heading for a debt crisis that would overshadow anything seen in the developing world. Both were ridiculed.
With the British and world economies languishing in the worst recession since the Great Depression and with once-mighty banks reliant on government life support, she could be forgiven for being a little smug. Not a bit of it: “No, being Cassandra is not something I wish for. I hate this role of being a gloomer and doomer, as I’m an optimist by nature. But I am very pessimistic now.”
She is dismayed that politicians have failed to seize the opportunity that the crisis has given them to embark on tough reform of the banking system. Stock markets have rebounded and house prices have stopped falling, but Ms. Pettifor fears that politicians and households have started to relax prematurely. Read more here-
http://business.timesonline.co.uk/tol/business/economics/article6816287.ece
BEAR MARKET RALLY
-For some perspective on the current stock market rally and how it compares the 1929-1932 bear market (which also included bank failures, bankruptcies, severe stock market declines, etc.), today’s chart illustrates the duration (calendar days) and magnitude (percent gain) of all significant Dow rallies that occurred during the 1929-1932 bear market (solid blue dots).
For example, the bear market rally that began in November 1929 lasted 155 calendar days and resulted in a gain of 48%. As today’s chart illustrates, the duration of the current Dow rally (hollow blue dot labelled you are here) is longer than any that occurred during the 1929-1932 bear market. As for magnitude, only the November 1929 bear market rally resulted in a better performance than what has occurred during the current rally to date. Read more here-http://www.chartoftheday.com/20090828.htm?T
GLOBAL DERIVATIVES STILL GROWING
-The global derivatives market has grown rapidly in the past decade. By one measure of market size the notional value, which is the value of the underlying derivatives contract the derivatives market expanded from $87 trillion in 1998 to $592 trillion as of the end of 2008.
To date, the United States has published very little information on cross-border derivatives because of the limited availability of data. The U.S. Department of the Treasury, the Federal Reserve Bank of New York, and the Federal Reserve Board began collecting data on U.S. cross-border transactions and positions in derivatives in March 2005.
They collect the data through the Treasury International Capital (TIC) reporting system, which for many years has collected similar data for securities such as stocks and bonds. Below is a chart of the growth in the size of derivatives of just cross-border transactions for U.S. banks:
Most of these positions net against each other, so the $6 trillion vastly overstates the risks involved, but such a big number certainly carries some concern for its size. It’s amazing that this grew so much from a little over $1 trillion in 2006, at the onset of the Credit Crisis. It’s impossible to know how much risk is involved in such positions, but one measure is the difference of the positives and negatives, which is calculated below for all derivatives combined. That measure has doubled since the end of 2007.
As derivatives are difficult to value, they are usually just ignored in traditional statistical measures like our international investment accounts. Now they are so big, they can affect the measures, and there is some evidence that the discrepancy in international accounts would be less if these were properly included. My interpretation is only that there is a growing risk (not decreasing, as might be expected because of the financial crisis) to financial systems buried in these huge and still growing derivatives. Bud Conrad-Read more here-
http://www.caseyresearch.com/displayCdd.php?id=208
REAL ESTATE-MORTGAGES-FORECLOSURES-RENTAL
-Housing Won’t Lead U.S. Out of Recession, Gross Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=arMoynrLZVUs
-Home Prices Rise 1.7 Percent, Gaining in All Areas. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a.aAAu51wmbU
-Pending Sales of Existing Homes in U.S. Rose in July. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aT80nhnFzzvw
-U.K. House Prices Climb for First Time in Two Years. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a6SNezjRrUPU
-London’s Luxury Homes Sell at the Fastest Pace Since July 2007. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aKkxmq34nT3E
-Commercial Mortgage Defaults Jump for U.S. Banks. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a9FRZ6ipJB8Y
-Commercial Real Estate Lurks as Next Potential Mortgage Crisis. Read more here-http://online.wsj.com/article/SB125167422962070925.html
-For Commercial Real Estate, Hard Times Have Just Begun. Read more here-http://www.nytimes.com/2009/09/02/business/economy/02office.html?_r=1&partner;=rss&emc;=rss
-Coming Soon: The Alt-A Mortgage Reset Bomb. Read more here-http://www.businessinsider.com/henry-blodget-coming-soon-the-alt-a-mortgage-reset-bomb-2009-8
-Greenwich Homeowners Push $40,000 Rentals in Worst Sales Market. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a_xD5LU.fl2M
-Chart of the day: The End of Peak Homeownership. In his analysis of the “new normal,” PIMCO chief Bill Gross discussed the declining rate of homeownership in America an obvious phenomenon, given what we’re going through in this economy.
But we still have a long way to go to get to where we were the boom started, and we might even go further down than that. Nobody believes in the homeownership myth anymore, for one thing. And we’re a changing society. We’re more mobile than ever before, and the idea of being locked down in a home with a 30-year mortgage just makes less and less sense. Read more here-http://www.businessinsider.com/the-end-of-peak-homeownership-2009-9
© 2011, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – September 08, 2009
Posted by Worldwide Precious Metals on Tuesday, September 8, 2009
The Goldbugg Report – September 01, 2009
September 1, 2009
WORLD FINANCIAL REPORT ON RADIO AUG 28 2009 SHOW
-Silver to Jump 29% on ‘Crushing’ U.S. Debt
-Why China is about to buy a lot more silver.
-Clive Maund gold market update.
GOLD
-Clive Maund gold market update. UPSIDE BREAKOUT ALERT: gold is now believed to be very close to an upside breakout to new highs, a development that should lead to a rapid advance towards the $1300 area, and it should be noted that this scenario will not be negated by a brief sharp drop that may be aimed at wrong-footing a lot of traders. The reasons for shifting from our recent stance of neutral/bullish to flat out bullish are as follows.
1. Massive inflationary pressures building as the gargantuan panic measure increases in M0 money supply by the US Fed late last year and well into this year come through the pipe, replicated in other countries around the world although probably not on such a grand scale. 2. strong breakout by US stockmarkets late last week that portends continued gains, confirming the building inflationary pressures. 3. ongoing gains in the prices of other commodities copper continues to advance, crude oil threatening to break clear above June highs.
4. window for dollar to stage a strong rally believed to be closing, increasing downside risk it appears that the dollar is to be sacrificed in favour of Treasuries a quite logical way of reducing the debt burden, even if not entirely appreciated by creditors. 5. significant improvement in gold COT last week. 4. gold’s best month of the year seasonally, September, is just around the corner. Read more here-http://news.goldseek.com/CliveMaund/1251065400.php
-Gold ‘Deja Vu’ Shows Advance Above $1,000: Technical Analysis. Gold will rise to more than $1,000 an ounce next month based on moving-average “deja vu” patterns since the start of 2005, according to Barclays Capital.
This year’s trading was similar to previous patterns that indicated gold has a tendency to “break higher” in September and the 200-week moving average showed the uptrend on the precious metal remained intact, Jordan Kotick and other analysts at Barclays wrote in a report on Aug. 21.
Bullion jumped 7.8 percent in September 2005 and 10 percent in September 2007, laying the ground for the metal to rise to new highs in the following months. “This is likely a repeat of Aug. 2005 and Aug. 2007 when the market broke significantly higher in September,” the analysts said. “We are looking for a breakout above $1,033 next month.” Gold rose to a record $1,032.70 on March 17 last year.
JPMorgan Chase & Co., Standard Chartered Bank and three other financial companies predicted bullion would top $1,000 in the fourth quarter, the survey showed. Read more here-
http://www.bloomberg.com/apps/news?pid=20601012&sid;=au9vWBOfMd9g
-Charts: Gold to Hit $1,040 ‘Very Quickly’; S&P; to Weaken. Gold’s “breaking out” to a higher level as imminent, Chris Locke, managing director at Oystertrade.com Management, told CNBC Wednesday, as other analysts have said the precious metal could shine again as inflation fears resurface.
“We’re on this point of the market making a substantial move to the upside,” Locke said. “We will see the market move through the bull market highs of $1,040 very, very quickly,” he added. Read more here-http://www.cnbc.com/id/32562897
-Can you buy gold today and then walk away? Gold has tracked its seasonal pattern very closely this year, and indications are it reached a low during July. Traditionally, August is an excellent time to buy gold. Read more here-http://www.mineweb.net/mineweb/view/mineweb/en/page31?oid=87932&sn;=Detail
-Gene Arensberg: Gold, silver consolidating, waiting for a sign. Read more here-http://www.gata.org/node/7725
-Zimbabwe considering gold-backed currency. The country is looking for an alternative to its hyperinflation-ravaged Zimbabwean dollar that was replaced by multiple currencies in January. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page504?oid=87809&sn;=Detail
-Adrian Douglas: ‘Cash cost’ hides unprofitability of gold mining. It is estimated by some in the industry that a gold price of $1,500 per ounce would be necessary for new reserves to be exploited at a profit today.
As mining costs climb, the price of gold must climb at an equal or faster rate for production to continue. But the gold cartel has been preventing that, and as a result world gold production is in rapid decline. Read more here-http://www.gata.org/node/7709
-Global gold hedge book drops just 31 tonnes in Q2 SocGen. Next year should see at least 80 tonnes of dehedging a far cry from the annual average of 290 tonnes since net dehedging became part of the annual supply-demand balance in 2000. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=88114&sn;=Detail
SILVER
Gold to silver ratio at 80 to 1 with gold at $1,000 the silver price would be $12.50
Gold to silver ratio at 70 to 1 with gold at $1,000 the silver price would be $14.29
Gold to silver ratio at 60 to 1 with gold at $1,000 the silver price would be $16.67
Gold to silver ratio at 50 to 1 with gold at $1,000 the silver price would be $20.00
Gold to silver ratio at 40 to 1 with gold at $1,000 the silver price would be $25.00
Gold to silver ratio at 30 to 1 with gold at $1,000 the silver price would be $33.33
Gold to silver ratio at 20 to 1 with gold at $1,000 the silver price would be $50.00
Gold to silver ratio at 15 to 1 with gold at $1,000 the silver price would be $66.67
-Silver to Jump 29% on ‘Crushing’ U.S. Debt, Coeur d’Alene Says. Silver prices will jump 29 percent by the end of the year as soaring U.S. debt spurs inflation, said Dennis Wheeler, the chief executive officer of Coeur d’Alene Mines Corp., the largest U.S. producer of the metal.
Demand from investors seeking a store of wealth accounts for more than half of silver’s 23 percent price jump this year before today, Wheeler said in an interview in New York. The metal will reach $18 an ounce with supplies little changed and demand buoyed by purchases from exchange-traded funds, he said.
“We have this crushing new debt and dollar weakness,” Wheeler said today. “The outlook for precious metals is very positive, and silver will be No. 1.” The U.S. government has pledged $12.8 trillion, an amount that approaches U.S. gross domestic product, in a bid to stem the longest recession since the 1930s. The spending will erode the value of the dollar and boost the appeal of silver and gold as alternative assets, Wheeler said.
The metal will outperform gold in the next few years, Wheeler said. “There’s a lot of anxiety out there over this debt,” Wheeler said. “Around the world, there are a growing number of investors who want protection. They’re going to want silver as part of their portfolio.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aAMz2EFsmKtk
-Why China is about to buy a lot more silver. Citizens urged to put 3% to 5% of their net worth in precious metals. Two years ago, on August 21, China’s government allowed its citizens to invest in an entirely new asset. It allowed them to invest in Hong Kong-listed stocks. Hong Kong is a special region of China. It’s one of the most dynamic, capitalistic places on Earth. The move from the government was a move toward “investment freedom” for the Chinese people.
On that day, Hong Kong’s benchmark stock index rose 8.74%. Over the next two and a half months, it skyrocketed from 11,000 to over 20,000. It was a chapter in a story that you should get used to over the coming years: When the Chinese decide to invest in something, it causes giant ripples across the world. This sort of situation is starting to happen again: This time it’s happening in precious metals, especially silver.
The Chinese have a centuries-old affinity with silver. It began in the 1500s with the explosion of trade with Mexico via the Spanish galleons. These sailing ships were the super-tankers of their age. They made one voyage per year, carrying tea, silks, and spices from Asia to Mexico. The ships returned to Asia with gold and silver. After the Chinese threw off imperial rule in 1912, the country used silver money. Today, the Chinese word for “bank” means, “silver movement.”
And now that China is becoming one of the richest, most dynamic capitalistic countries on Earth, this story is about to take a modern twist. The Chinese want silver again. Thanks to a decade of wealth accumulated by regular Chinese citizens, there is plenty of cash to chase good investments. As the famed global investor Jim Rogers points out, these people are the best capitalists in the world. They are great savers. Chinese people want their money to work for them so they invest.
I recently watched a China Central Television piece on gold investing. According to the program, there are some 400 million households in China, with an average ownership of about 0.1 ounces of gold. The average gold ownership in most emerging countries works out to about one ounce per household. The Chinese are beginning to make up that gap. From 2006 to 2007, domestic demand for gold rose 60% to around 700,000 ounces. Experts continue to urge citizens to put 3% to 5% of their net worth in precious metals.
Chinese government statistics show the average urban Chinese household has about $1,300 in disposable income to invest. While that doesn’t seem like much, when you add up all those households, there’s about $36 billion that could move into the next big investment opportunity precious metals.
The government is now actively encouraging its citizens to buy gold and silver. They recently unveiled silver bullion for investing (you can see the video here). The premise is that gold was 50 times more expensive than silver in 2007, but is now 70 times more expensive.
The government is promoting silver bullion as an investment for regular citizens. And remember, a bunch of Chinese students laughed at U.S. Treasury Secretary Tim Geithner this year when he claimed the dollar was safe. The Chinese know the value of real assets real money like gold and silver.
What does this mean for silver prices? It’s impossible to say. But here’s a little math that interests me. According to the Silver Institute, demand for silver in 2008 (for industry, jewelry, and investing) was 832 million ounces. At today’s price, that’s an $11.5 billion market, or about 1/3 the capital available in China alone.
The most important thing to understand about this situation is the Chinese people become freer every time the government loosens up a restriction. These people couldn’t legally buy silver bars before. Now, they can. They’re becoming richer, and they will continue to do so for decades. Add this to a world already waking up to the grand currency debasement, and you have a recipe for the continuation of the big bull market in silver and other precious metals. Read more here-http://www.stockhouse.com/Columnists/2009/Aug/21/Why-China-is-about-to-buy-a-lot-more-silver
-Silver’s fundamentals offer plenty of reasons to be bullish in the coming years. Relentlessly growing global investment demand coupled with reduced production is a recipe for much higher prices. With something like 3/4ths of all the silver mined globally being merely a byproduct, primarily of base metals, supplies will remain constrained. Investors will have to compete in a tiny market for this scarce metal.
While silver’s long-term bullish case is well-known among its investors, this volatile metal also has incredible near-term potential. In the coming months, silver is likely to witness exceptional gains. Unfortunately, the driver of this potential big autumn silver rally is not widely discussed. Thus many investors and speculators still sidelined since the panic risk missing out on this rare opportunity. Adam Hamilton-Read more here-http://www.321gold.com/editorials/hamilton/hamilton082109.html
-Silver is being used to kill germs. In a world where the norovirus travels by cruise ship and the swine flu can hop a plane, we have become a country with germ compulsions, a nation of microbephobes. Still, bacteria have learned to outsmart antibiotics, and Pure Bioscience, a company based in El Cajon, Calif., says it is counterattacking with an even smarter biocide.
The company developed a molecule called silver dihydrogen citrate, or S.D.C., that it bills as an all-purpose germ killer. Hungry germs are attracted to the citrate part of the molecule, which they recognize as a food source. Then microscopic particles of ionized silver, an antimicrobial agent, emerge and destroy the germ cells.
Tradition is found here: silver has been used since the days of the ancient Greeks to purify water containers. And silver dihydrogen citrate turns out to be a pretty effective killer of certain viruses, bacteria and fungi. Read more here-http://www.nytimes.com/2009/08/23/business/23stream.html
-Clive Maund silver market update. Read more here-http://news.silverseek.com/CliveMaund/1251053968.php
-David Morgan silver commentary, China and silver. How much silver investment demand there will be and how it will catch on, nobody knows. I expect it to catch on. I believe that, as we get nearer to the ultimate top in the precious metals markets, silver will far out-perform gold. My belief, and this certainly can’t be proven, is that people have almost a financial survival instinct, just like a basic survival instinct, and when things are really going south in a hurry, people will seek something, anything, that they perceive will preserve their wealth or protect them.
And both metals have done that throughout history. Now, if gold is going north of 1,000 or 2,000, pick a number; the idea is that you might not have that much to preserve, but whatever you’ve got you are highly motivated to preserve, and you’re going to go to either the next best thing or the only thing that you can and that of course is the silver market.
Now we saw a taste of that in 1980. Basically what was happening at the panic buying phase of the market where “everybody,” or about 1 percent of the population, was trying to ditch the U.S. dollar. They were saying, “Get me anything but dollars the dollar is history.” And they were seeking silver and gold, and a lot of silver was purchased at the top because silver was more affordable to a lot of these people.
I see that taking place this time around, except this time it’s not going to be 1 percent of the United States’ population, it’s going to be roughly 1 percent of the world’s population. And on top of that, you’ve got to remember that at the time silver hit $50.00 in 1980, and there’s roughly 1.6 billion ounces more fine silver available above ground than there is today.
So, we have a much smaller silver supply that’s available for investment or industrial use or either, and we also have a much larger base of people willing to get into the silver market than there was before. I think that the $50.00 level is going to be breached in real terms. If we take the $50.00 price that silver achieved in 1980 and adjust for inflation, that’s roughly $130.00 an ounce in today’s dollars!
I have been on record as saying I see silver going over $100.00 an ounce in U.S. terms. Now I want to be very clear here: I’m very practical. For something to get to $100.00 it means it must get past $20.00 again and then it needs to get to $30.00 and $40.00 and $50.00 and on and on, so certainly I’m not trying to give any false hope or false indicators here. But I know these markets fairly well and when the U.S. dollar goes this time, the panic of 1980 will look like a warm-up event.
That is, in this euphoric phase of the market where everybody and his brother and mother and aunt and uncle are looking to get into precious metals, that’s all you’re going to see on the mainstream news. You’re going to see silver and or gold on the cover of TIME Magazine.
What you’re going to see is a huge, huge move. But before we get there, we have to come off the base that we’re building this long consolidation, this wide trading range and then after that we will get to the phase of the market psychologically, where there’s optimism in the precious metals again.
During this phase you might see that gold goes from, let’s say a $1,000.00 barrier, breaks through that, and moves up nicely over several months to maybe $1,500.00, $2,000.00, $2,500.00, I don’t know the number exactly. But I want to give you the correct idea.
Gold (silver too) builds this back-and-forth and back-and-forth upward trend over several months, and then after that’s accomplished, you usually get some type of pullback and consolidation. But in most markets, shortly after that, the market will go into the euphoric state. This is where, as stated earlier, everyone wants out of the dollar and into precious metals. This is usually a very fast moving market with new highs being set day after day, and people simply cannot believe that the gold and silver prices are what they are! Read more here-
http://news.silverseek.com/SilverInvestor/1250862020.php
-Ted Butler interview with King World News. Listen here-http://www.gata.org/node/7705
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: The White House Caves On The Deficit. Today The White House confirmed news that leaked last Friday, about the deficit being wider than they had previously estimated. As you can see, while the deficit as a percentage of GDP has been revised down for this year due to less bailout spending it’s been bumped up every year going out to 2019. Next year the hike is big from 8.6% to 10%. Read more here-http://www.businessinsider.com/chart-of-2009-8
-Chart of the week. New Foreclosures Dwarf New Home Sales. New home sales are ticking up again, bringing some much-needed relief to the beleaguered homebuilders. But watch out. Mark Hanson produced this chart, showing foreclosure starts against new home sales. As you can see, the new foreclosure starts jumped even more in July than new home sales, meaning trouble down the road for homebuilders especially once that $8,000 first-time homebuilder tax credit runs out. Read more here-http://www.businessinsider.com/chart-of-the-day-xxxx-2009-8
-Chart of the week: When Social Security runs Out. The CBO has updated its projections for both outlays and revenue (via Market Ticker). For now, outlays are still less than revenue, though the “surplus” consists of IOUs.
But the day is coming when the government won’t have that surplus anymore, and that could happen very shortly. The “outlays” line is an estimate, but the dark green shaded space shows the range of possibilities, including the possibility that a shortfall is just around the corner. Read more here-
http://www.businessinsider.com/chart-of-the-day-social-security-2009-8
-”The people who delivered this problem to us don’t have a whole lot of sanity, except where it reflects their own personal wealth.” Jim Sinclair.
-There are really only three types of investors: 1-Bulls, 2-Bears, and 3-Pigs. The bulls and bears will each have their days but the pigs always end up going to the slaughterhouse.
Having CNBC-TV as the world’s largest slaughtering house for pigs is more than enough. Peter Grandich
-In 25 years, I’ve never seen an investment perform as it was intended to yet receive little praise (and much dismay) as gold has. Throughout 2008 and early 2009, many in the media questioned why gold was not performing well given the so-called market conditions for it. Forgive me, but I suspect any and all investors who lost money in the more “touted” plays like stocks would gladly take what gold was up versus their own losses in those great blue chip stocks.
Now gold’s supposed inability to go much higher if not fall dramatically is being bantered about and such talk is not limited to the usual anti-gold crowd. This is music to my ears as after nearly increasing 300% this decade, such a great bull run usually doesn’t end in a whimper but instead a busting of over enthusiasm something we’re not even remotely close to.
Gold’s seasonally weak period ends in a few weeks. Any and all selling bouts are quickly met with strong physical buying. Central bank sales, once the darling of all carrots dangled by the bears, has little or no impact any more on the price. A tremendously long-term bullish reverse head and shoulders pattern is setting gold up for its next leg up. A four-digit gold price is not a question of if, but when. Not too long after that, the lowest four-digit price should become the floor, not the ceiling. Peter Grandich-Read more here-
http://news.goldseek.com/Grandich/1251059404.php
-Gold is going to a minimum of US$2,000 an ounce by 2011, in my view, for all the reasons above. World money supply has doubled in the last two years. No new gold supply, plus dwindling faith in ‘fiat’ currencies all around the world. Neither the dollar, nor the yen, nor the Euro will fill the bill. The Hon Robert Lloyd-George, chairman of Lloyd George Management, Hong Kong-Read more here-http://www.321gold.com/editorials/thomson/thomson082109.html
-I maintain a long-term bullish view on gold bullion, with my long-term target price set at US$3,360 an ounce. Christopher Wood, managing director and equity strategist, CLSA Asia-Pacific Markets, Hong Kong
-Just as economists did not expect the recent collapse of global markets, they do not expect what will happen next. So much money is now in circulation, economists actually believe that rising stock markets reflect expanding economic activity instead of reflating speculative bubbles.
The trillions of dollars of credit being pumped into the global economy is only an interim solution to a long-term systemic problem; and, until those problems are fixed, the consequences will continue, consequences which now include a severe deflationary depression coupled with the possibility of hyperinflation.
These are the real possibilities which now face the global economy, no matter how optimistic the ostriches believe the future to be. Buy gold, buy silver, have faith. Darryl Robert Schoon-Read more here-http://www.kitco.com/ind/schoon/aug272009.html
-Since March we have watched a stock market rally borne by low volume and short covering. The gains are reminiscent of the rallies of 1930 and 1932. What you are witnessing is a rally engineered by our government. If you watch the tape and you can read it you can see exactly what they are doing, and how they are doing it.
Yes, it is legal under an Executive Order singed by President Ronald Reagan in the aftermath of the October 19th, 1997 collapse of the stock market. It was named the “Working Group on Financial Markets” and was to be used for such emergencies. Unfortunately, like many things in government, the mission of the “Plunge Protection Team” has been distorted.
For over the last more than ten years it has been used to manipulate markets 24/7. Thus, what you are witnessing is a sucker rally, which has little hope of lasting. What do you do with a market that has a trailing P/E of 24 times earnings? You stay as far away from it as possible. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1251306428.php or http://news.goldseek.com/InternationalForecaster/1251060355.php or
http://news.goldseek.com/InternationalForecaster/1250835300.php
-If analysts like Robert Prechter and the Elliott Wave theorists are correct, and the 2009 market recovery is similar to the 61% retracement in 1930 following the ‘29 crash, then we are on the verge of a frightening collapse. As Prechter notes in a recent interview: “What I have been saying publicly is that the Dow could go below 1,000 which is a radical enough statement.” Could it happen? If history repeats itself…
To put the above chart in perspective, consider that the Dow did not fully recover its 1929 peak until 1953! The growth was so moderate, in fact, that the Dow did not eclipse 1,000 until 1972 and this occurred when the US economy was production-based. Tarek Saab
-“The question is not whether the dollar will weaken over time, but how it will weaken,” said El-Erian, a former deputy director of the International Monetary Fund whose firm runs the world’s largest bond fund. “The real risk is that you will get a disorderly decline.”
By the end of 2010, the euro will rise to about $1.60, its highest since April 2008, while Canada’s currency will appreciate to C$1.01 per U.S. dollar, its strongest since July 2008, as the U.S. is slow to tighten credit, said Sophia Drossos, co-head for global foreign-exchange strategy at Morgan Stanley in New York. Read more here-
http://www.bloomberg.com/apps/news?pid=20601109&sid;=av_._ayG1vEU
-Back when the U.S. Dollar Index traded well north of 100, I began to make a statement that I repeated over and over again. It needs to be said constantly because whenever these little blip up opportunities come from very oversold conditions, the “Don’t Worry, Be Happy” crowd on Wall & Broad will come out like clockwork and declare the U.S. Dollar undervalued.
That statement is again worth repeating after yet another short-term interruption in the dollar’s march to oblivion: “The only party that doesn’t know the U.S. Dollar is dead is the U.S. Dollar.” The dollar has had reasons to rally despite the market turning upside down a long standing factor that was once quite dependable. In the “good old times,” a stronger economy meant rising interest rates which usually coincided with a rising U.S. Dollar.
In the “New World Order,” the U.S. Dollar is a lose-lose. Stronger economy means less need for it as a supposed “safe haven” play. Weaker economics mean low interest rates translating into less demand for the dollar.
Poor old Uncle Sam. The glory days are gone. Other than some temporary relief rallies (believe it or not, we just had one), the dollar’s long-term path is a slow march to death. Only one song should come to mind when you think of the dollar long-term. Peter Grandich
-Fed’s Lockhart Says Low Rates Needed for Recovery. The U.S. economy needs the stimulus from low interest rates for some time as it begins a “fragile” recovery from the worst recession since the 1930s, said Dennis Lockhart, president of the Federal Reserve Bank of Atlanta.
“Overall, the U.S. economy is improving but still fragile,” Lockhart said today in remarks prepared for a speech in Chattanooga, Tennessee. “The FOMC has stated its intention to keep the policy interest rate low for an extended period. I agree that this approach is needed.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=atgz839sKie4
-ECB Warns of ‘Bumpy Road’ as No Stimulus End Signalled. European Central Bank officials led by President Jean-Claude Trichet greeted mounting evidence of an economic recovery with caution, suggesting they won’t rush to reverse their emergency stimulus.
“We see some signs confirming that the real economy is starting to get out of the period of freefall,” Trichet said at the U.S. Federal Reserve’s annual symposium in Jackson Hole, Wyoming, on Aug. 22. This “does not mean at all that we do not have a very bumpy road ahead of us.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aMfDK.S6QHWk or http://www.bloomberg.com/apps/news?pid=20601087&sid;=auZs4FjGAgeU
-Britain is sleepwalking towards a decade of economic misery. Despite the hype about recovery, there is no real evidence that the recession is over, says Liam Halligan. Read more here-
-Oil May Reach $90 as Trend Remains Upward: Technical Analysis. Crude oil is likely to approach $90 a barrel if it remains above a $68 support level, according to technical analysts at WJB Capital Group. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aHAaQM3znn1g
-Peak Oil Supply Data Doesn’t Lie. Read more here-http://news.goldseek.com/GoldSeek/1251266700.php
-A one hour program in which Ron Paul provides the basics of the Federal Reserve and why it is high time transparency was introduced to this most critical of institutions. Watch video here-http://fora.tv/2009/06/24/Ron_Paul_Bringing_Transparency_to_the_Federal_Reserve
-Eric Sprott August commentary, beyond the stimulus. In the world of government stimulus, the size and speed of the injections are critical to their impact. Once the taps are turned on full bore, any reduction to the stimulus will have almost the same negative impact as removing it entirely.
We are now seeing this reduction on three fronts: the Federal Reserve threatening to close the window on its ‘quantitative easing’ program; the tax cuts and transfers already paid out to US citizens; and the Chinese banks now reining in their excessive lending. In trader terms we will soon have no “dry powder” left to burn.
In their 2008 annual report, the Bank for International Settlements (BIS) recently reviewed previous banking crises and suggested that a sustainable recovery would require the banking system to take losses, dispose of non-performing assets, eliminate excess capacity and rebuild capital bases.
The BIS concludes that “these conditions are not being met and any stimulus will therefore only lead to a temporary pick up in growth followed by protracted stagnation.”10 We agree wholeheartedly, and have seen nothing yet to suggest that the real problems plaguing the world’s banking system are being addressed.
In our view, the threat of a double dip recession remains real. When the stimulus effects wear off there will be nothing left to replace the artificial demand they have induced. Investors should be prepared for what awaits us beyond the stimulus. Read more here-http://www.sprott.com/Docs/MarketsataGlance/August_2009.pdf
-’Cash for Refrigerators’ Debuts in the fall, really! Read more here-http://www.reuters.com/article/mnEnergy/idUS225779891520090825
-Food stamp enrolment surges in Hawaii, with 9% now getting aid. Enrolment up 25% as Islanders struggle to make ends meet. Read more here-
http://www.honoluluadvertiser.com/article/20090823/NEWS01/908230390/-1/RSS02?source=rss_localnews
-Mullen Says Afghan Security Situation ‘Serious,’ Getting Worse. A top U.S. military official said Afghanistan’s security situation is getting worse, as Senator John McCain warned that there aren’t enough troops deployed in the country.
“It is serious and it is deteriorating,” Admiral Michael Mullen, chairman of the Joint Chiefs of Staff, said on CNN’s “State of the Union” program yesterday. “The Taliban insurgency has gotten better, more sophisticated. Their tactics, just in my recent visits out there and talking with our troops, certainly indicate that.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601070&sid;=aJAjcvV8kgWI
-Ahmadinejad Names Man on Interpol Wanted List as Defense Chief. An Iranian official wanted by Interpol in connection with the 1994 bombing of an Argentine Jewish center has been nominated for promotion to defense minister in President Mahmoud Ahmadinejad’s cabinet. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aTgjE4GvMogI
-Hezbollah Readies for War as UN Peacekeepers Can Only Observe. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aeol1KbCenkM
-Swine Flu May Infect Half of U.S., Kill 90,000, Report Says. Swine flu may hospitalize 1.8 million patients in the U.S. this year, filling intensive care units to capacity and causing “severe disruptions” during a fall resurgence, scientific advisers to the White House warned.
Swine flu, also known as H1N1, may infect as much as half of the population and kill 30,000 to 90,000 people, double the deaths caused by the typical seasonal flu, according to the planning scenario issued yesterday by the President’s Council of Advisers on Science and Technology. Intensive care units in hospitals, some of which use 80 percent of their space in normal operation, may need every bed for flu cases, the report said.
The virus has sickened more than 1 million people in the U.S., and infections may increase this month as pupils return to school, according to the Centers for Disease Control and Prevention in Atlanta. If swine flu patients fill too many beds, hospitals may be forced to put off elective surgeries such as heart bypass or hernia operations, said James Bentley with the American Hospital Association. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=abCN9aBVJIkg
-Swine Flu Pandemic Paradox Kills Few, Overwhelms ICUs. Read more here-http://www.bloomberg.com/apps/news?pid=20601124&sid;=a74PVQloYnFc
-WHO predicts ‘explosion’ of swine flu cases. Read more here-http://www.google.com/hostednews/ap/article/ALeqM5gGBK5q0LgRNjBQCvYaHi4SlH0RwgD9A75RKG0
-Swine Flu Infects Children 14 Times More Often Than Elderly. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=apjNe9a4e6To
-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
-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. Argylepinkdiamonds.com.au
-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 specialized 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 neighbouring 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. Argylepinkdiamonds.com.au
-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
HYPERINFLATION-INFLATION-DEFLATION
-Senator warns of hyperinflation rivalling the 1980s. The economy could spiral into hyperinflation not seen since the early 1980s if the Federal Reserve does not tighten its monetary policy soon, Sen. Chuck Grassley (R-Iowa) warned Tuesday.
Grassley, speaking about the renomination of Federal Reserve Chairman Ben Bernanke to a second term as head of the Fed, asserted that Bernanke’s ability to hold down inflation would be the metric by which the Fed’s success would be measured.
“We won’t know for a year if he’s done a good job so far, because he shovelled money out of an airplane to save banks and the financial system,” Grassley said in a conference call with Iowa reporters. “But shovelling money out of an airplane to solve problems can be inflationary in this case, hyperinflationary if he doesn’t start mopping up some of the money that’s out there.”
Grassley, the ranking member of the Senate Finance Committee, said that inflation as a result from government spending on bailouts could result in inflation rivaling rates in 1980, when it hit a peak of 13.5 percent. “The Fed has the ability to put money out, it’s got the ability to take money back in, and if they don’t do that, we will have hyperinflation worse than we had in 1980 and ‘81,” Grassley said. “And I hope he demonstrates that ability.” Read more here-http://briefingroom.thehill.com/2009/08/25/senator-warns-of-hyperinflation-rivaling-the-1980s/
-There’s no will to fight inflation. As we’re already seeing outside the US, central banks won’t stop printing money if it means choking off growth. Don’t expect anything different from the Fed. Read more here-http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/theres-no-will-to-fight-inflation.aspx?page=all
-Inflation: A threat or not? Read more here-https://news.fidelity.com/news/article.jhtml?guid=/FidelityNewsPage/pages/viewpoints-is-inflation-rising&topic;=economy
-Zimbabwe’s Hyperinflation: #2 in world history. Steve Hanke and Alex Kwok just published a paper calculating last year’s hyperinflation in Zimbabwe, when “conventional inflation measures were not available.” Their conclusion is that in mid-November, prices were doubling every day. That means Zimbabwe’s hyperinflation ranks second worst in world history. Read more here-http://blogs.reuters.com/rolfe-winkler/2009/08/18/zimbabwes-hyperinflation-2-in-world-history/
-Chart of the day: Deflation Coming In From Abroad. The deflation story to pick up steam. Today’s trading consisted of falling stocks, falling commodities, falling gold and a stronger dollar a classic deflationary combo. And new data from the Bureau of Labour Statistics shows that after several months of rising prices, imports are starting to drop again watch out. Read more here-http://www.businessinsider.com/chart-of-the-day-imports-price-index-2009-8
ROUBINI SEES INCREASING RISK OF DOUBLE DIP RECESSION
-Nouriel Roubini, the New York University professor who predicted the financial crisis, said the chance of a double-dip recession is increasing because of risks related to ending global monetary and fiscal stimulus.
The global economy will bottom out in the second half of 2009, Roubini wrote in a Financial Times commentary today. The recession in the U.S., the U.K., and some European countries will not be “formally over” before the end of the year, while the recovery has started in nations such as China, France, Germany, Australia and Japan, he said.
Governments around the world have pledged about $2 trillion in stimulus measures amid the worst worldwide recession since the Great Depression. Federal Reserve Chairman Ben S. Bernanke and other global policy makers have cautioned that the recovery is likely to be muted, indicating they would not soon remove all the stimulus injected into the financial system.
“There are risks associated with exit strategies from the massive monetary and fiscal easing,” Roubini wrote. “Policy makers are damned if they do and damned if they don’t.” Government and central bank officials may undermine the recovery and tip their economies back into “stagdeflation” if they raise taxes, cut spending and mop up excess liquidity in their systems to reduce fiscal deficits, Roubini says. He defines “stagdeflation” as recession and deflation. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aXbZZWXPR5mw or http://www.ft.com/cms/s/0/90227fdc-900d-11de-bc59-00144feabdc0.html
CBO-WH-BIGGER U.S. DEFICITS TO COME-U.S. BALANCE SHEET
-Congressional Budget Office Forecasts $1.4 Trillion ‘10 Deficit. The federal budget deficit will total $1.6 trillion this year as revenue falls and the U.S. government spends at the fastest pace in 57 years, according to the nonpartisan Congressional Budget Office.
Next year’s deficit will total $1.4 trillion, the agency said today. The CBO also said it anticipates a “relatively slow and tentative” economic recovery because of “global economic weakness, continued strains in financial markets and households’ desire to rebuild their savings.”
The economy will grow between the fourth quarter of this year and next year by 2.8 percent and by 3.8 percent in 2011, the agency said. Unemployment will increase next year to 10.2 percent before falling to 9.1 percent in 2011, the agency said.
This year’s deficit, for the fiscal year ending Sept. 30, will amount to 43 percent of the $3.68 trillion the government will spend, the CBO said. The gap will be equal to 11.2 percent of the economy, the biggest since World War II. The shortfall is largely attributable to the financial crisis, CBO said.
“That deficit figure results from a combination of weak revenues and elevated spending associated with the economic downturn and financial turmoil,” the report said. “The deficit has been boosted by various federal policies implemented in response, including the stimulus legislation and aid for the financial, housing and automotive sectors.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aDAOUtTrVndY
-Obama Increases 2010 Deficit Forecast 19% to $1.50 Trillion. U.S. unemployment will surge to 10 percent this year and the budget deficit will be $1.5 trillion next year, both higher than previous Obama administration forecasts because of a recession that was deeper and longer than expected, White House budget chief Peter Orszag said.
“While the danger of the economy immediately falling into a deep recession has receded, the American economy is still in the midst of a serious economic downturn,” the White House report said. “The long-term deficit outlook remains daunting.”
The budget shortfall for 2010 would mark the second straight year of trillion-dollar deficits. Along with the unemployment numbers, the deficit may complicate President Barack Obama’s drive for his top domestic priority, overhauling the U.S. health care system.
“It throws a wrench in health-care reforms,” Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said in an interview. “No matter the specific numbers, they’re a constant reminder that we’re in bad, bad shape.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aNaqecavD9ek
-Grassley Says Deficit Will Force Congress to Limit Health Plan. Read more here-http://www.bloomberg.com/apps/news?pid=20601070&sid;=aZtKLbVq35XA
-Why the deficit will raise taxes. The nation’s debt must be brought to heel, and doing so will require tough choices beyond spending cuts, experts say. Read more here-
http://money.cnn.com/2009/08/27/news/economy/deficit_taxes/index.htm?postversion=2009082713
-Goldman’s Hatzius Says Fed Balance Sheet Could Hit $4 Trillion. Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc., said the Federal Reserve could double the size of the central bank’s balance sheet again if needed to support economic growth.
A rise in the balance sheet to $4 trillion is a “possibility,” Hatzius said in an interview on Bloomberg Radio in New York. “It is going to depend on not just what inflation does, but also on whether the economy does move back to a slower growth pace.”
Fed Chairman Ben S. Bernanke has cut the main U.S. interest rate to almost zero and more than doubled total assets on the central bank’s balance sheet to unclog credit markets and help meet banks’ demand for cash. Fed officials have started to phase out such programs, deciding this month to let a $300 billion program to purchase long-term Treasuries expire in October.
The size of the Federal Reserve’s balance sheet has increased to $2.02 trillion as the central bank purchased assets aimed at lowering interest rates, as of the week ended Aug. 12. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=awWsNf0zRkYY
U.S. SOCIAL SECURITY WILL MAKE DEFICITS WORSE
-With the slowdown in tax receipts from fewer people earning wages, the income to the Social Security funds is declining. The surpluses that were contributing to fund other expenses of government are about to be replaced by demands for funds that exceed the revenues. The Congressional Budget Office produced an update of the situation in August 2009.
It reports on the % of GDP that will be required to make the projected retirement payments of around 6%, which is funded by 3% to 5% of revenues, leaving the balance (ongoing surplus or deficit) at around 1% to 3%. As percentages, the devil hides in the small numbers, which do not appear like a significant danger. And partly that is right, because the bigger retirement problem is the medical costs that are continually escalating.
But to see how big the expenses per year might become, I multiplied the % balance by the projected GDP to get a dollar figure. This is partly understating how the scenario will unfold by using 2009 dollars as the measure, ignoring the strong potential for inflation down the road. The result is that there will be big spending on Social Security in the baby boomer retirement years ahead. Bud Conrad-Casey Research
1,000 BANKS TO FAIL-BANKING CRISIS
-1,000 Banks to Fail In Next Two Years: Bank CEO. The US banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May. Read more and watch video here-http://www.cnbc.com/id/32581463
-‘Problem’ Banks Rise to 15-Year High on Bad Loans, FDIC Says. The U.S. added 111 lenders to its list of “problem banks” in the second quarter, a 36 percent increase that pushed the group to a 15-year high.
A total of 416 banks with combined assets of $299.8 billion failed the Federal Deposit Insurance Corp.’s grading system for asset quality, liquidity and earnings, the most since June 1994, the Washington-based FDIC said in a report today. Regulators didn’t identify companies deemed “problem” banks.
“For now, the difficult and necessary process of recognizing loan losses and cleaning up balance sheets continues to be reflected in the industry’s bottom line,” FDIC Chairman Sheila Bair said in a statement.
Regulators have taken over 81 banks this year, including Guaranty Financial Group Inc. in Texas and Colonial BancGroup Inc. in Alabama. Twenty-four banks collapsed in the second quarter as the pace of failures accelerated amid the worst financial crisis since the Great Depression.
The surge in failures prompted the agency to charge the industry an emergency fee in the second quarter to raise $5.6 billion to replenish its insurance fund, which fell to $10.4 billion as of June 30 from $13 billion in the previous quarter, the agency said. An $11.6 billion increase in loss provisions for bank failures caused the decline in the fund, the FDIC said.
FDIC-insured banks reported a net loss of $3.7 billion in the second quarter, compared with a $5.5 billion gain in the first quarter. The loss, the second quarterly one the industry has reported in 18 years, was driven by increased expenses for bad loans, the FDIC said. Read more here-
http://www.bloomberg.com/apps/news?pid=20601082&sid;=aKrqdLil0pGI
-Four more banks fail, with 2009 tally now at 81. Guaranty Bank of Texas joins list of biggest U.S. bank failures of all time. Read more here-
http://www.marketwatch.com/story/story/print?guid=8465B339-95EE-4887-8EC6-D4E0E59870A8 or http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aj833suxjw1o
Largest U.S. bank failures Amounts in $ billions
-Meredith Whitney Says Bank Failures Will Rise to More Than 300. Meredith Whitney, the analyst who predicted that Citigroup Inc. would cut its dividend last year, said the number of U.S. bank failures will quadruple as lenders struggle with bad loans.
“There will be over 300 bank closures,” Whitney said in an interview with Bloomberg Television from Jackson Hole, Wyoming. “The small-business owner on Main Street continues to see liquidity come away.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a1B7kV_7EPhI
-Analyst Bove sees 150-200 more U.S. bank failures. A prominent banking analyst said on Sunday that 150 to 200 more U.S. banks will fail in the current banking crisis, and the industry’s payments to keep the Federal Deposit Insurance Corp afloat could eat up 25 percent of pretax income in 2010.
Richard Bove of Rochdale Securities said this will likely force the FDIC, which insures deposits, to turn increasingly to non-U.S. banks and private equity funds to shore up the banking system. “The difficulty at the moment is finding enough healthy banks to buy the failing banks,” Bove wrote. Read more here-
-Big banks still hold FDIC captive. Read more here-http://blogs.reuters.com/rolfe-winkler/2009/08/21/big-banks-still-hold-fdic-captive/
-Federal Reserve Says Disclosing Loans Will Hurt Banks. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a6mdEyvr7Mpk
-U.S. regulators prep defences to survive bank crisis. U.S. regulators are set to buttress their defences this week against a slew of sick banks still facing closure and the risks to the dwindling fund that protects depositors.
The Federal Deposit Insurance Corp has been looking at expanding the pool of potential bidders for distressed banks, providing some capital relief for troubled assets that will soon be brought back onto banks’ books, and charging further industry premiums to replenish the insurance fund.
All of these moves are geared to get the banking industry, and the agency charged with ensuring the industry’s safety, through a financial crunch that is coming to a head. “We’re working through this problem. We’re not at the beginning, we’re not at the end,” said James Chessen, chief economist for the American Bankers Association. “We’re in the middle and it’s painful.” Read more here-http://www.reuters.com/article/ousiv/idUSTRE57O4KX20090825
-Banks Cut Credit for 58M Card Holders in 1 Year. Read more here-http://www.nytimes.com/aponline/2009/08/20/business/AP-Credit-Cards-Credit-Limit-Cuts.html
-Chart of the day: The Great Banking Recovery Or The Next Bubble? Should we be happy that the value of investments owned by commercial banks has begun to rapidly climb? Or should we be worried that the value is climbing at such a rapid clip that it looks a bit like an unsustainable bubble? Or is it just evidence of banks hoarding money and refusing to lend it out, holding Treasuries and securities instead? Read more here-http://www.businessinsider.com/ch-2009-8
EURO-U.S. DOLLAR
-Euro May Rise to 8-Month High Versus Dollar: Technical Analysis. The euro may extend its advance against the dollar to $1.4718, the strongest level since December 2008, Ueda Harlow Ltd. said, citing trading patterns.
The euro’s uptrend versus the greenback is evident, with the 16-nation currency staying above the top line of the ichimoku cloud on a daily and weekly basis, Toshiya Yamauchi, manager of the foreign-exchange margin trading department at Ueda Harlow, said in Tokyo.
“This currency has a tendency to extend its gains once the deviation from the 21-day moving average line tops 1 percent, which has just emerged,” Yamauchi said. “Looking at these key charts, the chance of testing the December 2008 high of $1.4718 is now looking to be reasonably high.” Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid;=amyXrqpfP1X8
-French President Nicolas Sarkozy said Wednesday that the dollar can’t remain the world’s only reserve currency, as the rise of emerging powers such as China and Russia challenge the U.S.’s prominence.
“The political and economic reality of a multipolar world will have to find sooner or later a translation on the monetary level,” Sarkozy told foreign ambassadors, gathered for a yearly reception at the Elysee Palace. “A multipolar world can’t count upon one currency only.” Sarkozy also said that he won’t allow the euro to be the only currency to bear the weight of foreign exchange market adjustments as has happened in the past. Read more here-http://www.gata.org/node/7726
-Dollar May Surpass ‘Established Lows,’ Goldman Says. The dollar may weaken through “established lows” as signs of a global economic recovery drive gains in equities and oil, Goldman Sachs Group Inc. said.
“That kind of shift could easily be prompted by continued good news from the macro front and the persistently negative dollar-equity and dollar-oil correlations,” Thomas Stolper, an economist at Goldman Sachs in London, wrote in a report yesterday. “Dollar bulls could well end up disappointed. Even a short-term move beyond our three- and six-month forecasts of $1.45 per euro is getting increasingly likely.”
The Dollar Index, which Intercontinental Exchange Inc. uses to track the U.S. currency against the euro, yen, pound, Canadian dollar, Swiss franc and the Swedish krona, has weakened as the Standard & Poor’s 500 Index of U.S. shares gained more than 85 percent of the time since June and more than 50 percent of the time since September as investors sought higher-yielding assets on signs on an economic recovery.
The index fell 11 percent from its high this year on March 4, during which time the S&P; 500 gained 44 percent. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aVKHuJf1e_Nc
-As Budget Deficit Grows, So Do Doubts on Dollar. The U.S. economy may be showing signs of recovering from the financial crisis, but the jury is still out on the future of the U.S. dollar.
While many analysts expect the dollar to strengthen in coming months as the crisis fades and the U.S. economy turns toward growth, a growing chorus of investors is expressing concern about the longer-term outlook for the greenback.
In a new twist to an old refrain among economists, who have long worried about the effects of growing U.S. debt, they say that the huge liabilities the U.S. is taking on to dig its way out of crisis could ultimately undermine faith in the dollar.
“There has been a lot of disappointment with the way the U.S. credit crisis was handled,” says Claire Dissaux, managing director of global economics and strategy for Millennium Global Investments Ltd., a London investment firm specializing in currencies. “The dollar’s loss of influence is a steady and long-term trend.”
On Tuesday, the Obama administration added fuel to concerns about the dollar, saying the U.S. will run a cumulative budget deficit of $9 trillion over the next 10 years, $2 trillion more than it had previously projected. Read more here-http://online.wsj.com/article/SB125122938682957967.html
-Stiglitz Sees Risk to Dollar, Need for Reserve System. The dollar’s role as a good store of value is “questionable” and the currency has a high degree of risk, said Nobel Prize-winning economist Joseph Stiglitz.
“There is a need for a global reserve system,” Stiglitz, a Columbia University economics professor, said at a conference in Bangkok today. Support from countries like China should ensure orderly discussions on a new reserve system, he added.
The dollar has lost 12 percent since March 5 against an index comprising the euro, yen and four other major currencies. 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.
“The current reserve system is in the process of fraying,” Stiglitz said. “The dollar is not a good store of value. Right now, the dollar is yielding almost no return and yet anybody looking at the dollar has to say there’s a high degree of risk.”
The dollar will weaken as the U.S. pumps “massive” amounts of money into the economy, according to Curtis A. Mewbourne, a portfolio manager at Pacific Investment Management Co., the world’s biggest manager of bond funds. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=a4QMMa4gnquY
-”Our Country Would Be Healthier” With a Weaker Dollar, O’Rourke Says. “I don’t expect the Federal Reserve to pull back that aid or that liquidity too quickly,” Michael O’Rourke, chief market strategist with BTIG tells Tech Ticker. As he puts it, policy makers are “trying to trade the 1930s for the 1970s.” In other words, do anything to avoid deflation, even if that means eventually dealing with runaway inflation.
But doesn’t that mean further devaluing the dollar? Yes and O’Rourke believes that’s actually a good thing. “This reserve currency status is what has allowed us to be fiscally irresponsible run these deficits all the irresponsible behaviour in the credit markets and housing market over the last five years,” he states. “If people weren’t willing to finance that it wouldn’t have happened.
Most of that financing was a result of the dollar as a reserve status.” A weak dollar would also help invigorate the ailing manufacturing sector “because it would be cheaper than importing,” he says. “Our country will be healthier for it.” Read more here-http://finance.yahoo.com/tech-ticker/article/310070/%22Our-Country-Would-Be-Healthier%22-With-a-Weaker-Dollar-O%27Rourke-Says?tickers=^dji,^gspc,spy,dia,udn,uup&sec;=topStories&pos;=9&asset;=&ccode;
STOCK MARKET
-Stock rally is “dash for trash”: hedge manager Bullman. Speculation rather than economic fundamentals has driven this year’s sharp rally in stocks, and equities may now be 20 percent overpriced, said the managing partner at hedge fund firm Bullman Investment Management.
Nick Bullman, who told Reuters he has this week placed bets on falling share prices, is concerned that government stimulus packages have not revived bank lending as much as hoped and that conditions remain as tough for companies as they did last year.
“The rally has been a ‘dash for trash’ based on speculation. On Wednesday (I) went short on the S&P; (500) and financials via ETFs (exchange-traded funds),” he said in an interview on Friday.
“Stocks that were on their knees have risen to pre-Lehman levels, but the fundamentals haven’t changed at all. Credit card debt in the U.S. is getting worse. I think the U.S. equity market is potentially up to 20 percent overvalued over the short term.”
The S&P; 500 .SPX index has risen more than 50 percent from a March low on hopes the recession will not be as severe as some had originally feared and that government action will help stimulate an upturn.
However, Bullman said he is concerned that quantitative easing whereby central banks flood the banking system with new money by buying up assets from banks will eventually push up inflation in some assets. This has led him to buy into gold, often viewed as a hedge against inflation.
-Chart of the day: The Trashiest Stocks Are On Fire (FNM, FRE, AIG). Since the market hit its lows in early March, the trashiest, most beaten-down stocks have been the big winners. Some are arguing that the trash stocks have to slow down soon. But in the meantime, it looks like investors are reaching for the trashiest of the trash. Check out the crazy runs in Fannie Mae (FNM), Freddie Mac (FRE), AIG (AIG) and even the soon-to-be-liquidated GM over the last few weeks. This is the kind of behaviour that might foretell the end of the junk rally. Read more here-http://www.businessinsider.com/chart-of-the-day-xxx-2009-8
S&P; 500 PE RATIO AT RECORD LEVELS
-Today’s chart illustrates how the recent plunge in earnings has impacted the current valuation of the stock market as measured by the price to earnings ratio (PE ratio). Generally speaking, when the PE ratio is high, stocks are considered to be expensive. When the PE ratio is low, stocks are considered to be inexpensive.
From 1936 into the late 1980s, the PE ratio tended to peak in the low 20s (red line) and trough somewhere around seven (green line). The price investors were willing to pay for a dollar of earnings increased during the dot-com boom (late 1990s) and the dot-com bust (early 2000s).
As a result of the recent plunge in earnings and recent stock market rally, the PE ratio spiked and just peaked at 144 a record high. Currently, with 97% of US corporations having reported for Q2 2009, the PE ratio now stands at a lofty 129. Read more here-http://www.chartoftheday.com/20090821.htm?T
-Chart: Earnings Distortion over Time. Sweeping losses under the rug is nothing new on Wall St, but it’s getting worse. S&P; 500 P/Es range from 16-134, depending on which earnings methodology you use. The first number is based on “operating earnings”, and the second is based on the real bottom line.
If you need background on the difference between operating and non-GAAP, go here or here. This graph shows the difference between S&P; 500’s GAAP and operating earnings, in billions of dollars. The trend line is telling. Read more here-http://news.goldseek.com/GoldSeek/1250697600.php
REAL U.S. UNEMPLOYMENT RATE AT 16 PERCENT
-Real US unemployment rate at 16 pct: Fed official. The real US unemployment rate is 16 percent if persons who have dropped out of the labour pool and those working less than they would like are counted, a Federal Reserve official said Wednesday.
“If one considers the people who would like a job but have stopped looking so-called discouraged workers and those who are working fewer hours than they want, the unemployment rate would move from the official 9.4 percent to 16 percent, said Atlanta Fed chief Dennis Lockhart. Read more here-http://www.breitbart.com/article.php?id=CNG.4452bed82adf3124e5884678e236d7fb.361&show;_article=1
-Unemployment Rates Rose in 26 U.S. States in July. Unemployment rates rose in 26 U.S. states in July, a sign the labour market will take time to improve and budget crises in capitals across the nation may deepen.
California, Nevada, Rhode Island and Georgia all reached their highest level of joblessness since records began in 1976, with California’s rising to 11.9 percent from 11.6 percent the previous month, the Labour Department reported today in Washington. The number of states with at least 10 percent unemployment held at 16.
The figures are a blow to states already hammered by falling income and sales-tax receipts and underscore economists’ projections that the national unemployment rate will reach 10 percent by early next year. Companies will probably trim payrolls at a slower pace in coming months as factories and the housing market show signs of stabilization.
“State revenues could fall short of expectations if consumer spending doesn’t pick up and if the labour market fails to improve,” said Alex Miron, an economic analyst at Moody’s Economy.com in West Chester, Pennsylvania. “We’re going to see higher unemployment over the month ahead.” Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aUjHZ_FeLe64
-Fewer Americans filed claims for jobless benefits last week, another sign the economy is pulling out of the worst recession since the 1930s. Applications fell by 10,000 to 570,000, a higher level than forecast, in the week ended Aug. 22 from a revised 580,000 the week before, Labour Department data showed today in Washington. The total number of people collecting unemployment insurance fell to the lowest level since April.
Companies’ staff cuts are easing as government stimulus measures help stabilize the housing and manufacturing industries. At the same time, a rebound in hiring will take longer to occur, restraining the consumer spending that accounts for about 70 percent of the economy.
“We’re definitely seeing firings slowing as firms are much leaner than they were earlier,” said David Semmens, an economist at Standard Chartered Bank in New York. “Any good news in the labour market provides a floor for consumer sentiment.” Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aO6T81ycefaQ
ROBERT KIYOSAKI-PREPARING FOR THE WORST
-”Is the crisis over?” is a question I am often asked. “Is the economy coming back?” My reply is, “I don’t think so. I would prepare for the worst.” Like most people, I wish for a better future for all of us. Life is better when people are working, happy, and spending money.
The stock market has been going up since March 9, 2009. Talk of “green shoots” fill the air. Yet, in spite of the more positive news, I continue to recommend that people prepare for the worst. The following are some of my reasons:
1. I believe the stock market is being manipulated. I suspect the government, banks, and Wall Street are doing everything they can to keep the market from crashing. Our leaders know that nothing makes the world feel better than a raging bull market.
Do I have any proof that the market is being manipulated? No. I just smell a rat, or a pack of rats. I believe greed, self-interest, arrogance, and fear control the financial markets. I suspect those in charge will do anything to keep us all from panicking… and I don’t blame them. A global panic would be ugly and dangerous.
2. In my view, this global crisis has been caused by the Federal Reserve Bank, the U.S. Treasury, Wall Street, and the central banks of the world. They caused the problem, profited excessively in doing so, and now profit by being asked to fix the problem.
Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog.
In the 1980s, our government’s hot money stimulus was measured only in the millions of dollars. By the 1990s, the government had to ramp the stimulus voltage into the billions in order to get the frog to twitch. Today the frog has jumper cables with trillions in high-voltage hot money pouring through the lines.
While most us feel better when we have more high-voltage money in our hands, none of us feel good about higher taxes, increasing national debt, and rising inflation for the long term. Another old saying goes, “Sometimes the cure is worse than the disease.” I say the government stimulus cure is killing us frogs.
3. Old frogs don’t hop. Another reason I am cautious about the future is that the Western world has a growing number of old frogs. Between 1970 and 2000, the economy responded to bailouts and stimulus packages because the baby boomers of the world were entering their greatest earning years their purchasing power increased, and demand for homes, cars, refrigerators, computers, and TVs boosted the economy.
The stimulus plans seemed to work. But when a person turns 60, their spending habits change dramatically. They stop consuming and start conserving like a bear preparing for winter. The economy of the Western world is heading into winter. Hot wires and hot money will not get old frogs to hop. Old frogs will simply join the bears and stick that money in the bank as they prepare for the long, hard winter known as old age. The businesses that will do well in a winter economy are drug companies, hospitals, wheelchair manufacturers, and mortuaries.
4. The dying frog economy will lead us to the biggest Ponzi schemes of all: Social Security and Medicare. If we think this subprime financial crisis is big, it’s my opinion that this crisis will be dwarfed by the crisis brewing in Social Security and Medicare. Medicare being the biggest crisis of all. As old frogs head for the big lily pad in the sky, they will demand young frogs spend even more in tax dollars just to keep old frogs from croaking.
5. The 401(k)Ponzi scheme. A Ponzi scheme, like the scheme Madoff ran, depends upon young money to pay off old money. In other words, a Ponzi scheme needs tadpoles to finance old frogs. The same is true for the 401(k) and other retirement plans to work. If young money does not come into the stock market, the old money cannot retire. One reason so many people my age are worried, not only about Social Security and Medicare, is because they’re concerned about getting their money out of the stock market before the other old frogs decide to drain the swamp.
The facts are that the 401(k) plan has a trigger that requires old frogs to begin withdrawing their money at a certain age. In other words, as baby boomers grow older, more and more will be required, by law, to begin withdrawing their money from the market. You do not have to be a rocket scientist to know that it is hard for a market to keep going up when more and more people are getting out.
The reason the 401(k) has this law related to mandatory withdrawals is because the Federal government wants to collect the taxes that they deferred when the worker’s money went into the plan. In other words, the taxman wants their pound of flesh. Since they allowed the worker to invest without paying taxes, the government wants their tax dollars when the employee retires. That is why the laws require older workers to sell their shares and pay their pound of flesh.
Demographics show that we are entering a battle between young and old. I call it the “Age War.” The young want to hang onto their money to grow their families, businesses, and wealth. The old want the tax and investment dollars of the young to sustain their old age. This war is not coming it is upon us now. This is one of many reasons why I remain cautious and say, “The worst is yet to come.” Read more here-http://finance.yahoo.com/expert/article/richricher/184720
REAL ESTATE-MORTGAGES-FORECLOSURES
-U.S. Home Prices Tumble 6.1% on Surging Foreclosures. U.S. home prices fell 6.1 percent in the second quarter from a year earlier as a record number of foreclosures eroded the value of real estate.
The rate of decline slowed from the first quarter’s 7.1 percent drop, according to a report today from the Federal Housing Finance Agency. Measured monthly, prices rose 0.5 percent in June after a 0.6 percent monthly gain in May, the Washington-based agency said.
Prices fell in June in four of nine U.S. regions covered by the report as banks seized real estate from delinquent borrowers. About 4.3 percent of U.S. homes, or one in 25 properties, were in foreclosure in the second quarter, according to an Aug. 20 report from the Mortgage Bankers Association in Washington. That’s the most in three decades of data. Read more here-
http://www.bloomberg.com/apps/news?pid=20601110&sid;=aNnP_i73Xc.4
“Foreclosures have a tangible negative impact on prices,” Gleb Nechayev, a senior economist at CBRE/Torto Wheaton Research in Boston, said in an interview before the price index was released. “It’s very stressful not just for individual households, but for whole neighbourhoods.”
-Home Prices in 20 U.S. Cities Fall Less Than Forecast. Home prices in 20 U.S. cities fell in June at a slower pace than forecast, signalling the real- estate crisis that triggered the worst recession since the 1930s is dissipating.
The S&P;/Case-Shiller home-price index declined 15.4 percent from a year earlier, the smallest drop since April 2008, the group said today in New York. The gauge rose from the prior month by the most in four years. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aXpJdIqUXDQ8
-Case-Shiller Flashing The “Ultimate False Bottom” In Housing. Following the news that the Case-Shiller Index showed the second-straight month of home price gains in June, analyst Mark Hanson, of Mark Hanson Mortgage Advisors is out calling the numbers the “ultimate false bottom.”
The argument that the current bump-up in housing prices is meaningless is one that’s been going around for awhile and that we’ve addressed before. The idea is that foreclosures sales are home-price killers when they occur. But they are non-seasonal and have basically held steady.
All that the home price increase reflects, then, is the expected seasonal increase in higher-end, non-foreclosure sales. This chart from Hanson explains. Read more here-http://www.businessinsider.com/case-shiller-flashing-the-ultimate-false-bottom-in-housing-2009-8
-John Burns of John Burns Real Estate Consulting suggests we may be seeing a false bottom in housing. What we are seeing is the result of a government program that offers first-time home buyers $8,000 if they buy a home by November 30; and that program is working, especially at the lower end of home prices. 31% of home sales in July were involved with this program.
But like Cash for Clunkers in automobiles, this is pushing demand for homes from next year into this year. John offers us the following chart that gives us what he thinks is happening in the markets, from his surveys. He thinks that we saw a “false bottom” in April of this year and that activity will peak in November, before going on to the actual bottom, from which there will be a long, slow recovery. Read more here-http://news.goldseek.com/MillenniumWaveAdvisors/1251064800.php
-Existing Home Sales in U.S. Jump to Two-Year High. Sales of existing U.S. homes jumped more than forecast in July to the highest level in almost two years, signalling the housing crisis that crippled the world’s largest economy is easing.
Purchases climbed 7.2 percent to a 5.24 million annual rate, the most since August 2007, the National Association of Realtors said today in Washington. The gain was the biggest since records began in 1999. The median price fell 15 percent.
Foreclosure-driven declines in prices, government credits for first-time buyers and near-record-low borrowing costs may keep stoking demand, helping the economy recover from the worst recession since the 1930s. At the same time, more Americans will probably lose their homes as companies cut payrolls, indicating a rebound will be slow to take hold. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aaCRVTkj_Idk
-U.S. New Home Sales Jump 9.6%, Most in Four Years. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aqnFJ5TBePL8
-U.S. Housing May Be Turning Around, Shiller Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a5tOdeaxYuvI
-Taylor, Bean & Whitaker Mortgage Corp., the 12th largest U.S. mortgage lender, filed for bankruptcy protection from creditors as regulators question its involvement with Colonial BancGroup Inc.
“The filing follows a series of events in recent weeks that have crippled the company’s business operation,” Taylor Bean said in a statement. The company today listed both assets and debt of more than $1 billion in Chapter 11 documents in U.S. Bankruptcy Court in Jacksonville, Florida. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a9kb5v7bThoU
HOW MANY MINUTES TO EARN A BIG MAC?
-The size of your pay packet may be important, but so is its purchasing power. Helpfully, a UBS report published this week offers a handy guide to how long it takes a worker on the average net wage to earn the price of a Big Mac in 73 cities. Fast-food junkies are best off in Chicago, Toronto and Tokyo, where it takes a mere 12 minutes at work to afford a Big Mac. By contrast, employees must toil for over two hours to earn enough for a burger fix in Mexico City, Jakarta and Nairobi. Read more here-
http://www.economist.com/daily/news/displaystory.cfm?story_id=14288808&fsrc;=nwl
© 2011, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – September 01, 2009
Posted by Worldwide Precious Metals on Tuesday, September 1, 2009
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