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The Goldbugg Report – February 23, 2010
February 23, 2010
February 19, 2010
The Week in Review
The Federal Reserve unexpectedly announced that they raised the Fed Discount rate from 0.50 percent up to 0.75 percent on Thursday. The interest rate in question is the one the Fed charges banks for rarely used emergency loans and they went to great lengths to try to reassure companies and consumers that the move would not raise borrowing costs for them, saying “The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy.” Despite the reassurances from the Fed, there is a growing fear that a hike in the federal-funds rate may be coming when the Fed meets next in March which will lead to higher interest rates for an already strapped consumer.
Initial claims for unemployment jumped far more than expected last week. Producer prices also had a larger than expected increase in January. The increase is being blamed largely on higher gasoline prices and greater energy costs due to unusually cold temperatures. Interesting that they should be blaming the PPI increase on these when Oil, Gas and energy as a whole are far from their highs at the start of the financial crisis. Even when they stripped out food and energy costs, the core producer prices still rose faster than expected. It will be amusing to watch the spin-doctors work on this one. Stripping out mandatory costs such as food and energy on claims that their volatility is skewing the numbers has never made sense. Now even that old smokescreen can’t hide the fact that prices are going up and inflation is beginning to loom ever closer.
Core consumer prices (prices after they stripped out energy and food costs, of course) fell for the first time in 28 years. The media immediately jumped on the data as a sign that inflation worries are overblown. Consumer prices, when you include food and energy, actually rose, but it was less than expected. In our view, the drastic measures that the retail sector took in the months of December and January, cutting prices just to try to move inventory, are the factors that moved the prices down. Retailers can’t keep that up and report a profit, especially since the cost to produce the goods they are selling has gone up according to the PPI numbers. Carrefour, the world’s second largest retailer next to Wal-Mart, reported their profit fell 74% and Wal-Mart’s own numbers were less than spectacular.
Foreign demand for US Treasury securities plummeted by the largest amount on record in December. China alone reduced its holdings by $34.2 billion, potentially moving it into second place behind Japan in ownership of US Treasuries. If the reduction in demand continues, the US government may be forced to make higher interest payments. This news comes right on the heels of president Obama creating a new commission, through an executive order, to come up with a plan to reduce the deficit.
The International Monetary Fund announced Wednesday that it will begin selling 191.3 metric tons of gold in the open market. The sales are to “be conducted in a phased manner over time.” The IMF said that they will still continue to sell gold to central banks, which could reduce some of what they have available to sell in the open market. Even though news of the upcoming sale was already widely known, there was an apparent knee-jerk dip in prices upon the announcement.
Crude oil prices came up this week, approaching $80 a barrel, boosted by the PPI numbers, despite an increase in inventory numbers that would normally have driven prices down.
The Fed’s Discount Rate announcement after markets closed on Thursday helped push the dollar to new highs against the euro, reaching levels not seen since May of 2009.
A South Carolina representative has introduced legislation banning “the unconstitutional substitution of Federal Reserve Notes for silver and gold coin.” The move would essentially mandate gold and silver coins as currency for the state. Representative Pitts said in an interview that “if the federal government continues to spend money at the rate it’s spending money, and if it continues to print money at the rate it’s printing money, our economic system is going to collapse.” Have you started to acquire your gold and silver coins yet? Have you started your precious metals portfolio to help protect against a collapsing dollar? No one expects the legislation to go anywhere, but it does bring to light an interesting point: at the state government level of at least one state, confidence in the US Dollar is collapsing.
Friday to Friday Close
Volatility should be expected to continue, especially in the wake of the Fed decision on Thursday. In an SEC filing made on Tuesday, George Soros showed that he doubled his bet on gold at the end of 2009. US Bank lending is falling at the fastest rate in history. Tim Congdon, from International Monetary Research said “It is absurdly premature to think of withdrawing stimulus while bank credit is still sliding. To have allowed this monetary collapse to occur a full 18 months after the financial cataclysm is extreme incompetence. They seem to have forgotten that the lesson of the 1930s was the falling quantity of money.” Commercial shorts (as in JP Morgan) have been rapidly reducing their short positions in precious metals as we get closer to the month of March, when the CFTC will be looking at setting position limits for precious metals. If the commercial bullion banks are forced to cover their short positions, which exceed the available supply (and have for years!), by the actions of the CFTC then the price of precious metals may literally explode. Now, more than ever, may be the time to add to or start your precious metals portfolio. Dave Paxton, CEO of Vatukoula Gold Mines said on Friday that the world’s supply of new gold is shrinking, saying that “The big open-pit mines, which were these massive units that produced lots of gold, are coming to the end of their lives.” World currencies are all losing their inherent value, even as debt around the globe is skyrocketing. Remember, the key to profitability through the ownership of physical precious metals is to own them and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.
Trading Department – Precious Metals International, Ltd.
This is not a solicitation to purchase or sell.
© 2010, Precious Metals International, Ltd.
GOLD
-Soros More Than Doubled Gold ETF Stake in 4th Quarter. Billionaire George Soros’s Soros Fund Management LLC more than doubled its holding in the biggest gold exchange-traded fund in the fourth quarter after bullion advanced 8.9 percent to a record.
The $25 billion New York-based firm became the fourth- largest holder in the SPDR Gold Trust, adding 3.728 million shares valued at $421 million, according to a filing with the U.S. Securities and Exchange Commission yesterday. Its investment was worth about $663 million, the fund’s largest single investment, as of Dec. 31.
Soros joined China Investment Corp. and central banks including those in China and India in acquiring gold. China Investment, the $300 billion sovereign wealth fund based in Beijing, took a 1.45 million-share stake in the SPDR Gold Trust worth $155.6 million, according to a SEC 13F filing posted on Feb. 5.
“The dollar is weak and people are just shifting their money into a safer haven,” Tetsuya Yoshii, vice president for derivative products at Mizuho Corporate Bank Ltd., said from Tokyo today. “Central banks are adding gold to their reserves and we’re going to see more people adding gold to their investment portfolio as they shift into safer stuff.”
India bought 200 metric tons from the International Monetary Fund in October, while China’s holdings have expanded 76 percent to 1,054 tons since 2003, it said in April. Read more here-
http://www.bloomberg.com/apps/news?pid=20601087&sid;=aKs0jaibTSmY&pos;=7 or http://www.reuters.com/article/idAFN1624135220100217?rpc=44
-George Soros buys gold despite dubbing it ‘ultimate bubble’. George Soros doubled his investment in the world’s largest gold fund just weeks before claiming investing in the precious metal is now the “ultimate bubble”. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7259161/George-Soros-buys-gold-despite-dubbing-it-ultimate-bubble.html
-The ‘ultimate bubble’ meets the ultimate speculator. Read more here-http://www.gata.org/node/8339
-Gold May Advance to $1,400 in 12 Months: Technical Analysis. Gold may climb to about $1,400 an ounce in the next 12 months, according to technical analysis by Chartered Market Technician Daniel Bruno, who advises banks and hedge funds.
The attached chart shows gold is trading above a trend line that starts from the metal’s low in January last year. A climb to $1,419 an ounce would equate to a 150 percent projection of bullion’s rally from January 2009 to its record in December, according to a series of numbers known as the Fibonacci sequence.
Gold “remains robust above its rising trend line,” and the recent rebound from a three-month low on Feb. 5 is a “bullish” signal, Bruno said in an interview. “We project about $1,400 within 12 months as long as the $1,000 level holds,” he said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=auBQnoSvlsEk
-Gold price will surge to $5,000 in two years. Gold Prices will climb to $5,000 within two years due to US dollar weakness and significant buying by players in the hedge fund industry looking to preserve the value of their funds.
That is the opinion of New Zealand market trading expert Welles Wilder, who has previously been highlighted by publications such as Forbes and Barron’s for his skill in the markets, stuff.co.nz reports. Read more here-http://www.commodityonline.com/futures-trading/technical/Gold-price-will-surge-to-$5000-in-two-years-14431.html
-The International Monetary Fund, which set out in September to sell about 13 percent of its gold reserves, said it will “shortly” expand sales to the open market after central banks bought 212 metric tons in private deals.
“In accordance with the priority of avoiding disruption of the gold market, the on-market sales will be conducted in a phased manner over time,” the Washington-based IMF said in an e-mailed statement today.
The institution has 191.3 tons left to sell after purchases by the central banks of India, Mauritius and Sri Lanka. Central banks still have the option to buy more of the metal, which would reduce the amount available on the market, the IMF said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=alOoEXinykfo
-Gold market analyst Peter Grandich could not be more enthusiastic about tonight’s announcement by the International Monetary Fund that it will sell another 191 tonnes of gold. In commentary headlined “Even When Opportunity Knocks a Man Still Has to Get Up Off His Seat and Open the Door,” Grandich writes that the IMF announcement could actually hasten gold’s rise. Read more here-http://www.gata.org/node/8343
But then Grandich puts his money where his mouth is. In commentary headlined “An Open Challenge,” he offers gold bears a $50,000 bet that gold will see $1,200 per ounce before $1,000 per ounce. Read more here-http://www.gata.org/node/8343
-Why the IMF’s supposed gold sales don’t mean much. Read more here-http://www.gata.org/node/8340
-Asian central banks tagged as potential buyers for 191.3 tonnes of IMF gold. The International Monetary Fund says it will soon begin a planned sale of a remaining 191.3 tonnes of gold to raise funds for lending operations. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page34?oid=98842&sn;=Detail&pid;=1
-James Turk-No Surprise in Gold’s Big ‘Bounce.’ Read more here- http://www.fgmr.com/no-surprise-in-golds-big-bounce.html
-James Turk: Gold at new euro record. Read more here-http://www.gata.org/node/8342
-Gene Arensberg: Gold, silver COT action best since 2009. Read more here-http://www.gata.org/node/8341
-1001 Reasons to own gold. The reason there are so many “reasons” is because gold is unlike any other asset. It responds to its own supply and demand, protects against short-sighted government actions and interventions, is a bellwether of market sentiment and economic outlook, protects against currency devaluation and inflation, is global, is one of the most beautiful metals ever found in the earth’s crust, is a store of value, is timeless, is money, How many assets can you say have all those characteristics?
In spite of gold’s recent correction, the reasons haven’t decreased. In fact, the case for holding gold is stronger than ever. And over the past two weeks, a few “reasons” have surfaced that have fallen mostly under the radar. These, I believe, portend of a higher gold price to come. In fact, it is catalysts like these that could end up in our children’s history books that, in retrospect, were obvious to see.
1. For the first time ever, China has invested in GLD, the gold exchange-traded fund. Their sovereign wealth fund, China Investment Corporation, recently invested $155 million in the ETF. The amount represents only .05% of the sovereign funds’ $300 billion, meaning there’s a lot more where that came from.
Those mainstream lemmings who predicted China was done buying gold now have to deal with the reality that this move more likely signals they are closer to the beginning – and not the end – of a long-term strategy to diversify into gold.
2. The Prime Minister’s Office in India is creating a stream-lined process so that the country’s state-owned corporations can “aggressively pursue the acquisition of strategic mineral resources.” The Indian government, normally known for thick-layered bureaucracy, has created a centralized body that will have “rapid strategic and decision making powers.” This is telling, both from the perspective that they see some urgency to the matter, and that the acquisition targets are minerals.
Given the country’s historic propensity to own gold, it’s not a stretch to think the yellow metal will be high on the list of “strategic investments.” Recall their government purchased almost half the IMF gold for sale last year in one fell swoop. The upshot? Don’t be surprised to soon hear of India following China’s lead to begin buying precious metal companies and resources.
3. “Iran is now a nuclear state,” declared President Ahmadinejad last week. The Islamic republic has produced its first batch of high-level enriched uranium, which they claim is solely for electricity purposes but can also be used to create material for atomic weapons if enriched to 90%. In response, the U.S. imposed new sanctions, and the U.N. is considering adding more of its own sanctions, too.
The West recently proposed that Iran export its uranium for enrichment and then have it returned as fuel rods for a reactor. Iran demanded changes to that plan, which were rejected, so claimed they had “no choice” but to start enriching to higher levels on their own. “God willing,” declared Ahmadinejad, “daily production will be tripled.” I’m sure this will all just blow over, right?
4. The U.S. government must inflate. Here’s another reason we think that sooner or later inflation trumps deflation by 2020, government economists project that entitlement benefits (Social Security, Medicare, etc.), along with interest payments on the national debt, will devour 80% of all federal revenues.
This assumes entitlement benefits don’t grow, which, of course, they are. The overall national debt, meanwhile, will rise to 100% of GDP within a few years, an alarming level by any measure. Even Moody’s warned that our credit status could lose its triple A rating if the nation’s finances don’t improve, an unheard-of prospect just a few years ago.
So, we’re abruptly fleeing our debt-adding habits, right? As you probably heard last month, Obama signed legislation that raised the cap on government debt from $12.4 trillion already close to being breached to $14.3 trillion to permit more borrowing. As Doug Casey has pointed out numerous times, this is the exact opposite of what the government should be doing, and will have serious inflationary ramifications.
There’s only one way out: devalue the dollar to reduce the debt burden. And the direct result of that is a rising gold price. We may very well see another round of deflation, but the end game is inflation.
What I would point out is that any one of these reasons would be sufficient for wanting to put some gold in your portfolio. It’s the cumulative effect that’s potentially scary, one that argues we should be overweight precious metals at this point in history. The reasons are numerous and, in my opinion, overwhelming. Jeff Clark, Senior Editor, Casey’s Gold & Resource Report-Read more here-http://www.caseyresearch.com/displayCdd.php?id=347 or http://news.goldseek.com/GoldSeek/1266521422.php
-Aden Sisters-Gold’s Bull Market Turns 9 Years Old. Read more here-http://www.321gold.com/editorials/aden/aden021710.html
-Brace Yourself For A Big Gold Shortage. Read more here-http://www.businessinsider.com/brace-yourself-for-a-big-gold-shortage-2010-2
-China and India the Asian gold-buying phenomenon. The ever growing purchasing power of the Chinese and Indian general populations throws bearish fundamental analyses of the gold market into disarray. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=98598&sn;=Detail&pid;=33
-Financial houses are now bigger than governments, Sinclair tells King World News. In a fascinating 50-minute interview with Eric King of King World News, JSMineSet.com’s Jim Sinclair remarks that the biggest financial houses of the world are now bigger than governments. He also tells some great market anecdotes and explains why real gold is going to defeat the tricks of the paper gold market. Listen here-http://www.gata.org/node/8331
-Gold is money again and has a long way to go, Lassonde tells King World News. Read more here-http://www.gata.org/node/8325
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
-You’ve Just Been Gifted A Huge Second Chance To Get Into Silver. Read more here-http://www.businessinsider.com/youve-just-been-gifted-a-huge-second-chance-to-get-into-silver-2010-2
-Why Silver Prices Are Safe from China’s Monetary Policy. Read more here-http://news.silverseek.com/SilverSeek/1266386640.php
-Big shorts covering, metals likely to rise, Ted Butler tells King World News. Listen here-http://www.gata.org/node/8324
-Cambridge House Phoenix Silver Summit 2010: Silver Review and Outlook from Ted Butler. Read more here-http://news.silverseek.com/SilverSeek/1266344983.php
-Will Silver Outperform Gold In 2010? Read more here-http://news.silverseek.com/SilverSeek/1265996412.php
CHART OF THE WEEK-QUOTES-QUICK HITS
-Today’s chart provides some long-term perspective in regards to the gold market. As today’s chart illustrates, gold has been in a strong bull market since 2001. The pace of that upward trend increased beginning in mid-2005. Following the financial crisis of late 2008, gold surged once again.
Recently, however, gold has pulled back from resistance (red line) of its upward sloping trend channel. In the end, with gold currently trading at just shy of $1,100 per ounce, gold has more than quadrupled in price during its nine-year bull market. Read more here-http://www.chartoftheday.com/20100212.htm?T
-”Sometimes your greatest asset is simply your ability to stay with it longer than anyone else.” Brian Tracy
-”We will receive not what we idly wish for but what we justly earn. Our rewards will always be in exact proportion to our service.” Earl Nightingale
-”The biggest mistake that you can make is to believe that you are working for somebody else. Job security is gone. The driving force of a career must come from the individual. Remember: Jobs are owned by the company; you own your career!” Earl Nightingale
-I place the economy among the first and most important virtues and public debt as the great danger to be feared. To preserve your independence, we must not let our leaders load us with perpetual debt. We must make our choice between economy and liberty or profusion and servitude. Thomas Jefferson
-Russian PM Putin plays down Greece’s economic woes, telling his visiting Greek counterpart the U.S. is no better than Greece in handling its debt and fiscal deficit. Read more here-
-China is a long-term growth story, and how well it manages that growth will have an impact on all of us. A little caution now should be seen as preventative maintenance, and we all know that when we’re talking about cars or economies, that’s a good thing. Frank Holmes-Read more here-http://news.goldseek.com/GoldSeek/1266163200.php
-“One would have to say that the relation of house prices to Canadians’ income is right at the high end of what one would think would likely be sustainable over time.” David Dodge-Former Bank of Canada Governor
-Fed Raises Discount Rate by Quarter-Point to 0.75%. The Federal Reserve Board raised the discount rate charged to banks for direct loans by a quarter point to 0.75 percent and said the move will encourage financial institutions to rely more on money markets rather than the central bank for short-term liquidity needs.
“These changes are intended as a further normalization of the Federal Reserve’s lending facilities,” the central bank said today in a statement. “The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=an77uUMXQUJU&pos;=1
-Bank lending in the US has contracted so far this year at the fastest rate in history, raising concerns that the Federal Reserve may have jumped the gun by withdrawing emergency stimulus.
David Rosenberg from Gluskin Sheff said lending has fallen by over $100 billion (L63.8 billion) since January, plummeting at an annual rate of 16 percent.
“Since the credit crisis began, $740 billion of bank credit has evaporated. This is a record 10 percent decline,” he said. Mr Rosenberg said it is tempting fate for the Fed to turn off the monetary spigot in such circumstances. “The shrinking in banking sector balance sheets renders any talk of an exit strategy premature,” he said. Read more here-http://www.gata.org/node/8344
-US bank lending falls at fastest rate in history. Bank lending in the US has contracted so far this year at the fastest rate in recorded history, raising concerns that the Federal Reserve may have jumped the gun by withdrawing emergency stimulus. Read more here-http://www.telegraph.co.uk/finance/economics/7259323/US-bank-lending-falls-at-fastest-rate-in-history.html
-James Turk-Higher Yields on US Government Debt Are Overdue. Read more here-http://www.fgmr.com/higher-yields-on-us-government-debt-are-overdue.html
-James Turk-US Government Debt is Not a Safe Haven. Read more here-http://www.fgmr.com/us-government-debt-is-not-a-safe-haven.html
-The final Pillar in the gold bull market is a bear market in US Treasuries. The increase in the discount rate to 0.75% is driven by market realities and a desire to be able to sell US Treasuries as foreign demand falls off.
The bull market in gold moved from $400 to $887.50 in the 1970s as interest rates rose from 3% to 14 7.8% on Ten Year money. Once again the knee jerk reaction is to sell gold and buy the dollar. Be assured this must happen.
Because the final Pillar is falling while Gold is over $1000, you can look at Armstrong’s $5000 prediction as a realistic possibility. Stay the course. Jim Sinclair
-It’s true stocks have fallen off somewhat recently. The S&P; 500 is down about 6% from where it was a month ago. But stocks are still quite expensive in historical terms. Birinyi Associates reports the current S&P; 500 P/E ratio (based on trailing twelve month as-reported earnings) to be 25.96, more than 60% above the long-term 15.98 average P/E ratio I calculated using Standard & Poor’s quarterly data.
-Government debt situation worse than it appears. As the WSJ noted, the focus now is not just on published fiscal statistics (as if that worked in Greece’s case) but the debt that includes all the bad stuff that resides off the balance sheet (all the contingent unfunded liabilities). If all the unfunded liabilities were consolidated onto one statement, the debt-to-GDP ratio would be 9x in Greece; 5x in Portugal; 4.5x in the U.K. and 3.5x in the U.S.A. (see page A16 of the WSJ). David Rosenberg-Gluskin/Sheff
-The big lie? Everywhere you look these days you can’t help but find a reference as to how nearly 80% of S&P; 500 companies have managed to surpass their earnings estimates and the current edition of Barron’s added that they “have beaten estimates by a staggering 11%, near the highest on record.” This, of course, is a reason to be bullish on the equity market.
But page B1 of the weekend WSJ exposes these earnings “beats” for what they are fraudulent, for lack of a more appropriate term see For Some Firms, a Case of ‘Quadrophobia’. A just-published study covering nearly 500,000 corporate results over 27 years found how companies “round up” their numbers to beat their estimates fractionally knowing that the fast-money momentum players will trade the stock price higher.
On average, it only takes $31,000 in quarterly net income to beat estimates by a penny, which can be handled easily by a tweak to inventory valuation. The report also showed that companies that find ways to “round up” are also the ones with the highest propensity for re-statements in the future. Well worth a read and hopefully ends the nonsense that we see in the media and Wall Street reports over the extent to which financial results are meeting or beating pre-conceived EPS projections. David Rosenberg-Gluskin/Sheff
-Commercial real estate still in trouble. According to the Congressional Oversight Panel, there is a high chance that we will see as much as $300 billion of losses in the commercial real estate mortgage market in the coming year. From 2010 to 2014, there is an estimated $1.4 trillion (!) of commercial real estate loans that come due for refinancing and yet property values in this space have collapsed 40% in the past two years.
According to the New York Times, almost half of these mortgages are “upside down” or in a negative net equity position. Vacancy rates are at 18% in the U.S. office real estate sector and rents have also plunged 40%. The era of bank failures is hardly behind us. David Rosenberg-Gluskin/Sheff
-It pays to note that usually at this stage of the cycle (we are talking here about life 2½ years after the Fed first started to ease policy and all the policy lags are allowed to percolate through) what is normal is that jobless claims are by now at or below 400k.
Payroll growth is unmistakably positive and averaging 150k per month. And at this stage, employment has typically risen to a new peak, not still over 8 million below the old one. David Rosenberg-Gluskin/Sheff
-Martin Armstrong financial commentary-the clash between two worlds. Read more here-http://www.martinarmstrong.org/files/The-Clash-of-Two-Worlds-2-7-10.pdf
-Canada looks to China to exploit oil sands rejected by US. Canada courts Chinese investment in Alberta oil projects as US firms boycott tar sands fuel. Read more here-http://www.guardian.co.uk/business/2010/feb/14/canada-china-investment-oil-sands
-U.K. Posts First January Deficit Since at Least 1993. Britain posted its first budget deficit for January since monthly data began in 1993 as the longest recession on record shriveled the nation’s tax take.
Government spending exceeded revenue by 4.3 billion pounds ($6.7 billion) last month, the Office for National Statistics said today in London. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aIoUcW9b8bS8&pos;=6
-U.K. Unemployment Claims Jump to Highest Since 1997. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aBnXUou9D74c
-Cameron Should Mull U.K. Plea to IMF, Stelzer Says. Conservative leader David Cameron should consider a “profoundly unpopular” move such as calling for aid from the International Monetary Fund if his party wins this year’s U.K. election, economist Irwin Stelzer said.
“What would I do if I were David Cameron? I would look at the books” and “I would say: ‘Shock, horror, I’ve found it’s much worse than I thought and so Gordon Brown has forced me to call in the IMF,’” Stelzer said, speaking at an event in London late yesterday.
Such a move would be reminiscent of 1976 when then- Chancellor of the Exchequer Denis Healey sought an emergency loan from the IMF. Under Prime Minister Gordon Brown, the U.K. is now running the largest budget deficit since at least World War II, prompting Standard & Poor’s to lower its outlook on Britain’s AAA rating to negative from stable in May. Read more here-
http://www.bloomberg.com/apps/news?pid=20601068&sid;=acM.3r2xK6z8
-Buffett’s New CEO Shows Analysts, Hedge Funds to Door. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aH8_T4Lv2KVM
-Buffett Covers Dinner Tab for Fund Manager Who Shared Research. Read more here-http://www.bloomberg.com/apps/news?pid=20601108&sid;=aYWu1wIwp2vQ
-Top Earners Averaged $345 Million in 2007, IRS Says. The 400 highest-earning U.S. households reported an average of $345 million in income in 2007, up 31 percent from a year earlier, IRS statistics show. The average tax rate for the households fell to the lowest in almost 20 years. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=aqZ8baxbxqrA
-Beatles’ Abbey Road Studios for Sale to Cut EMI Debt. Read more here-http://www.bloomberg.com/apps/news?pid=20601088&sid;=atE1DoPOl6HA
-At $3,250, Olympic hockey tix trump the Super Bowl. Read more here-http://money.cnn.com/2010/02/12/news/economy/olympics_tickets/index.htm
-We all wish we’d bought Microsoft Corp. stock in the 1980s. But what if you’d tucked away a 1965 Shelby roadster like the one that just sold at auction in Scottsdale, Arizona for more than $1 million? Or garaged a pristine 1971 Dodge Challenger, which went for $187,000, or that rare 1970 Ford Mustang for $275,000?
More to the point, what should you buy now that will turn out to be the collectible car of tomorrow? Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aEeyGqvtlMl0
-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’s Argyle mine supplies 90 percent of the world’s pink diamonds, used exclusively for jewelry. Those gems account for just 1 percent of total production at the mine. Much of the remainder is sold as rough, or uncut, diamonds.
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. Bloomberg-
http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a4xAPW0NHhxo
-Pink Diamond Nets Record $10.8 Million in Hong Kong December 2 2009. A ring with a pink diamond the size of a chickpea sold last night for a record HK$83.5 million ($10.8 million) at a Hong Kong auction of art, gems and antiques that was fuelled by Chinese buying.
The 5-carat gem was set by London-based jeweler Graff Diamonds and given the second-highest rating of potentially flawless. The so-called fancy-vivid stone broke the per-carat record for a diamond established in May with Hong Kong property tycoon Joseph Lau’s purchase of a 7.03-carat blue diamond in Geneva for 10.5 million Swiss francs ($10.5 million). A carat is a fifth of a gram. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aC57am6edtD0
-Sotheby’s Sets Record For Green Diamond Nov 17 2009. Buyers set two world records for price per carat of green diamonds and intense blue diamonds, Sotheby’s said. A 2.52-carat vivid green diamond ring sold for 3.1 million francs and a 3.17 carat intense blue diamond ring sold for 2.5 million francs. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a5S9.x.HjoTE
-Blue Diamond Fetches Asian Record of $5.7 Million at Sotheby’s Oct 8 2009. An 8.74-carat blue diamond, the size of a hazelnut, fetched HK$43.8 million ($5.7 million) in Hong Kong, the most expensive of its type sold at auction in Asia.
The emerald-cut, so-called fancy intense blue gem, went to an anonymous phone buyer after a two-minute tug-of-war with at least four rivals that escalated at a rate of HK$1 million a bid. The diamond has the third-highest grade of VVS1, which means it is very slightly flawed, according to host Sotheby’s.
A carat is one-fifth of a gram. New York-based Sotheby’s says it holds the per-carat world auction record for any gemstone with its May sale of a 7.03-carat cushion-shaped fancy vivid-blue diamond in Geneva for 10.5 million Swiss francs ($9.5 million); it was sold to Hong Kong property tycoon Joseph Lau.
“Only about a handful of such diamonds exist in the world,” said Fyzee Thambi, a Hong Kong-based gem dealer, in an interview at the venue yesterday. “That price is a bargain. In better economic times, people would have paid much more for it.” Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aRQFbHxkoXpc
-”After the crisis from last year onwards, I found that more collectors are looking for top quality jewelry and diamonds for the investment to keep the value and also for sale. So for rare stones like this, even for pink, yellow, blue red, green these rare stones are very popular in this market.” Vicky Shek-Christie’s Hong Kong Jewelry Division
-“When times are tough, hard assets like diamonds are in greater demand because they will hold their value when inflation hits and it will hit.” “My clients have told me so. They are plugged into the international markets.
They feel it coming. They are buying up diamonds now to shore up for the future.” Myles Mindham-Marilyn was right: Diamonds are a girl’s best friend. Read more here-http://www.theglobeandmail.com/life/style/marilyn-was-right-diamonds-are-a-girls-best-friend/article1389569/
This 1.61-carat, radiant-cut, fancy purplish-red stone has an estimated worth of $2 million and has been dubbed the “Kimberley Red.”
-Diamond from ‘08 tender reborn as ‘Kimberley Red’. A 1.77-carat, radiant-cut, fancy deep purplish-pink diamond that didn’t attract a buyer at Rio Tinto’s 2008 Argyle Pink Diamond tender has been recut into a stone that has everybody seeing red, literally.
Joshua Sheby, a gemologist with New York-based Scarselli Diamonds who specializes in natural-color diamonds, said Scarselli purchased the diamond in partnership with a few other companies in the first half of 2009 after it went unsold in 2008.
Though Argyle pink diamonds are difficult to cut because they are heavily included, Sheby said they saw potential in this stone and took a chance. The result: a 1.61-carat, radiant-cut, fancy purplish-red stone worth an estimated $2 million. “It was a just a matter of readjusting some of the angles and bringing out that red component,” Sheby said.
The Gemological Institute of America (GIA) graded the stone, and Argyle Pink Diamonds, the marketing arm of mining company Rio Tinto, issued a letter of rarity signed by its business manager Josephine Archer stating that they’ve dubbed the diamond “the Kimberley Red.”
The letter notes that in the past 10 years, only one other diamond larger than 1.5 carats and graded by the GIA as “fancy purplish red” has been featured in the Argyle tender. “This is an important stone from Australia’s Argyle mine. Given the approaching end of mine life, this gem is a significant legacy of the rare and unique fancy colored diamonds produced in this remote part of the world,” the letter states.
As for what the future holds for this rare, red diamond, Sheby said that remains to be seen. The diamond could be sold through an auction house, retail outlet or to a collector and/or investor.
A museum also could decide to buy the stone or rent it for a specified amount of time, he said. “We haven’t ruled out anything,” Sheby said. Read more here-http://www.nationaljewelernetwork.com/njn/content_display/diamonds/supply/e3i55cc6046dcbcc6454a2b63789b1aa034
CHINA SELLS U.S. TREASURIES
-China Sells Treasuries as Obama Increases U.S. Debt. China sold a record amount of U.S. debt, raising speculation it is turning bearish as President Barack Obama increases borrowing to unprecedented levels to sustain economic growth.
The Asian nation’s investment in U.S. government securities dropped by $34.2 billion in December to $755.4 billion, the Treasury Department reported yesterday. The decline is the most since Treasury data start in 2000. Japan’s holdings rose 1.5 percent to $768.8 billion, making it America’s largest creditor.
China is reducing the amount of Treasuries in its record currency reserves after expressing concern about the amount the U.S. is borrowing to fund growing budget deficits. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said last month that investors should seek opportunities in “less levered” countries.
“If this scale of selling is sustained, then it would suggest that China is taking larger steps to diversify than it has in the past,” said Win Thin, a senior currency strategist in New York at Brown Brothers Harriman & Co., which manages about $40 billion.
China’s Treasury holdings peaked at $801.5 billion in May. Reserve assets climbed to a record $2.4 trillion in December. Read more here-http://www.bloomberg.com/apps/news?pid=20601080&sid;=aFJ57ZEjS0uM
-Japan May Not Be Biggest U.S. Creditor, Stone & McCarthy Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aZc3c9jdoW0s&pos;=5
-International Demand for U.S. Financial Assets Slowed. International demand for long-term U.S. financial assets grew in December at a slower pace than a month earlier, as China sold U.S. government securities, a U.S. Treasury Department report showed. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a1mKfP3W.Ang or http://finance.yahoo.com/news/Foreigners-cut-Treasury-apf-1402391707.html?x=0
GREECE-SOVEREIGN DEBT CRISIS
-Credit-default swaps on sovereign debt rose on investor concern that Greece may be unable to borrow unless it gets a pledge of financial support from the European Union. Greece needs to raise 53 billion euros ($72 billion) this year and faces about 16 billion euros of bond redemptions by May as it struggles to narrow a budget deficit that’s more than four times the EU limit.
A political ally of German Chancellor Angela Merkel said yesterday that “not a single euro” should go to help Greece. “It feels a bit like we are in the Twilight Zone,” Jim Reid, head of fundamental strategy at Deutsche Bank AG in London, wrote in a note to investors.
“We are left with a stand-off that probably has to be resolved before Greece next comes to the market.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ao16IwhJcfMc&pos;=6
-Europe may need to stump up as much as 320 billion euros ($441 billion) if it decides to bail out Greece because it would open the door to rescuing other countries in financial distress, according to BNP Paribas.
“To come up with a bailout plan that would be reasonably certain of success, it would have to cover all the most likely candidates, and it would have to be big,” said Paul Mortimer- Lee, global head of market economics at BNP in London. “Size matters when you are trying to scare off speculators and to comfort nervy bondholders.” Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a.yAFN.xKOIg
-German and French banks’ “enormous” exposure to Portugal, Ireland, Greece and Spain explains why Europe’s biggest economies are moving to rescue their southern neighbors, Societe General SA said today in a report titled “Shotgun Greek Wedding.”
The chart of the day shows how much money German, French, Swiss and U.K. banks have at stake in the so-called PIGS countries. Banks in Germany and France alone have a combined exposure of $119 billion to Greece and $909 billion to the four countries, according to data from the Bank for International Settlements. Overall, European banks have $253 billion in Greece and $2.1 trillion in the so-called PIGS.
“The exposure is enormous,” said Klaus Baader, co-chief European economist at Societe Generale in London. “The crisis in Greece isn’t Greece’s problem alone but a concrete problem for Europe’s whole banking sector. That explains the interest of finance ministers in stabilizing the situation.” Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=aCrRNlbKtrss
-Collapse of the euro is ‘inevitable’: Bailing out the Greek economy futile, says French banking chief. Read more here-http://www.dailymail.co.uk/news/worldnews/article-1250433/Greece-debt-bailout-EU-leaders-split-euro-crisis.html
-Credit Suisse: This Is the Real List Of Countries Verging On A Sovereign Crisis (And, Yes, The US Is On It). Read more here-http://www.businessinsider.com/top-20-soverign-default-risks-2010-2
-Time running out for Dubai to pull itself out of danger, says Lord Mandelson. Time is running out for Dubai to restructure its debt and pull itself out of economic danger, Lord Mandelson has warned. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7238174/Time-running-out-for-Dubai-to-pull-itself-out-of-danger-says-Lord-Mandelson.html
-Italy Is Top Threat to Euro, Columbia’s Mundell Says. Italy, saddled with the euro region’s second-largest debt, is the “biggest threat” to the economy of the 16-member bloc, according to Nobel Prize-winning economist Robert Mundell.
“Italy has got to be worried,” Mundell, a professor at Columbia University, said today in a television interview in New York. “If Italy became a target then this would create a big problem for the euro. Whatever is being done to Greece, possibly to Portugal and maybe Ireland, has to also save Italy from that problem.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a_iQsQLYuvSA
-Spanish intelligence probing debt “attacks” report. Citing unnamed sources, El Pais said the National Intelligence Centre (CNI) was looking into “speculative attacks” on Spain following the Greek debt crisis. Read more here-http://www.reuters.com/article/idUSLDE61D04V20100214?type=usDollarRpt
U.S. DEBT CRISIS-DOLLAR
-U.S. Federal Deficit at $430.69 Billion Through January. Federal deficit through 4 months is on track to break last year’s $1.42 trillion record. Read more here- http://abcnews.go.com/Politics/national-debt-budget-deficit-scary-forecast-taxpayers/story?id=9854459
-Drowning in Debt: What the Nation’s Budget Woes Mean for Americans. Economists Predict Cutbacks, Tax Increases That ‘Aren’t Even Imaginable.’ American political and economic leaders have sounded the alarm for years about the red ink rising in reports on the federal government’s fiscal health.
But now the problem of mounting national debt is worse than it ever has been before with potentially dire consequences for taxpayers, according to a report by the nonpartisan Peterson-Pew Commission on Budget Reform. Read more here-http://abcnews.go.com/Politics/national-debt-budget-deficit-scary-forecast-taxpayers/story?id=9854459
-U.S. debt will keep growing even with recovery. Read more here-http://www.gata.org/node/8328
-Hoenig Says Fed’s Objectives Threatened by U.S. Debt. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aKphOytGoQG4
-Obama Creates Bipartisan Fiscal Panel to Tackle Debt. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=a5ffEFiy0bUQ
-Pension Gap of $1 Trillion Is ‘Daunting’ Bill to U.S. States. U.S. states must contend with a more than $1 trillion gap between what they have saved and what they have promised to retired workers for pension and health-care benefits, the Pew Center on the States said in a report today.
States have saved $2.35 trillion of the $3.35 trillion owed to workers as of mid-2008, the center said. The Washington-based group expects the deficit to grow because of investment losses states sustained in the second half of 2008, the report said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=a5N852fTN2SE
-The bottom line is despite all the dollar enthusiasm and bullishness these days, so far all we’ve seen is a typical garden-variety bear-market rally. Throughout the dollar’s long secular bear, similar rallies have periodically erupted to erase oversold conditions and rebalance away excessively pessimistic sentiment.
These are merely technical events, they don’t herald new bulls. Until global dollar demand growth starts to exceed supply growth, the US dollar’s strong secular bear will continue grinding lower on balance. Adam Hamilton-http://www.321gold.com/editorials/hamilton/hamilton021210.html
REAL ESTATE
-Canada Housing Prices May Fall, David Dodge Tells Globe & Mail. House prices in Canada are more likely to fall than climb in the next few years, former Bank of Canada Governor David Dodge told the Globe & Mail newspaper in an interview.
Real estate prices “look pretty high by any conventional measure,” the Globe cited Dodge as saying in the interview. “So, the likelihood of house prices falling a bit over the next few years is probably somewhat greater than that they would rise over the next few years.”
Canada has probably entered “a fairly long period of relatively slow income growth,” which will hurt the housing market, Dodge told the Globe. He also expects mortgage rates to rise, the newspaper reported.
Dodge told the Globe it’s only possible to identify housing bubbles after the fact. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=alDXiVyBSgrY
-Jarislowsky ‘Convinced’ Canada Has Housing Bubble. Stephen Jarislowsky, chairman of Montreal-based investment adviser Jarislowsky Fraser Ltd., said he is “convinced” there’s a bubble in Canada’s housing market, fueled by government measures that encouraged consumers to take on debt.
“They have basically encouraged people to buy houses based on cheap mortgages,” Jarislowsky, 84, said in a telephone interview from Montreal. “That has created the opposite effect of what was desirable.” Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=az32TIe7q_NM
-Flaherty Tightens Mortgage Rules Amid Bubble Talk. Canada’s Finance Minister Jim Flaherty tightened rules in the country’s mortgage industry to ensure buyers can afford their homes when interest rates rise.
Under the changes for government-backed mortgages, which take effect April 19, buyers will have to meet standards for five-year, fixed-rate mortgages even if they opt for variable rates. Limits on refinancing will be stricter and people buying a home that they don’t occupy must make a down payment of 20 percent.
Flaherty, who reiterated he doesn’t see a housing bubble in Canada, today said the three measures will “moderate” the housing market. Flaherty said the changes will prevent borrowers from building up “unsustainable debt levels” and “help Canadians prepare for higher interest rates in the future.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a6vG5Eex7ezY&pos;=5
-Foreclosure ‘Overhang’ Will Cause Home-Price Decline, S&P; Says. Foreclosures will cause U.S. home prices to fall this year as lenders buck federal pressure to modify loans, according to a report from Standard & Poor’s Financial Services.
“The mortgage crisis may be far from over,” Diane Westerback, a managing director at the New York-based firm, wrote in today’s report. “The overhang of homes heading toward liquidation suggests more delinquencies and lower home prices are to come.”
Loan servicers that collect mortgage payments and oversee foreclosures will ramp up attempts to repossess properties after seeing about 70 percent of modifications fail in the last six months, according to Westerback’s study. It will take almost three years to sell all the properties that will be seized by lenders, even if no other mortgages become delinquent, S&P; said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ar_XUFkYnCAE
-New wave of foreclosures by end of 2010 is feared. About 4 million U.S. homeowners are 90 days or more delinquent on their loans or in foreclosure proceedings, Moody’s Economy.com says. A federal loan modification program is helping a relative few. Read more here-http://www.latimes.com/business/la-fi-mortgage-mods17-2010feb17,0,7373629,print.story
-Nearly 75% of all U.S. homes are affordable. Read more here-http://money.cnn.com/2010/02/17/real_estate/most_affordable_cities/index.htm
-Beijing Seen Vacant for 50% as Chanos Predicts Crash. Jack Rodman, who has made a career of selling soured property loans from Los Angeles to Tokyo, sees a crash looming in China. He keeps a slide show on his computer of empty office buildings in Beijing, his home since 2002. The tally: 55, with another dozen candidates.
“I took these pictures to try to impress upon these people the massive amount of oversupply,” said Rodman, 63, president of Global Distressed Solutions LLC, which advises private equity and hedge funds on Chinese property and banking. Rodman figures about half of the city’s commercial space is vacant, more than was leased in Germany’s five biggest office markets in 2009.
Beijing’s office vacancy rate of 22.4 percent in the third quarter of last year was the ninth-highest of 103 markets tracked by CB Richard Ellis Group Inc., a real estate broker. Those figures don’t include many buildings about to open, such as the city’s tallest, the 6.6-billion yuan ($966 million) 74- story China World Tower 3.
Empty buildings are sprouting across China as companies with access to some of the $1.4 trillion in new loans last year build skyscrapers. Former Morgan Stanley chief Asia economist Andy Xie and hedge fund manager James Chanos say the country’s property market is in a bubble.
“There’s a monumental property bubble and fixed-asset investment bubble that China has underway right now,” Chanos said in a Jan. 25 Bloomberg Television interview. “And deflating that gently will be difficult at best.” Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a6i2PSZD.Jr4
GEOPOLITICAL NEWS
-Israel mulling a spring or summer war: Ahmadinejad. Read more here-http://uk.news.yahoo.com/18/20100216/twl-israel-mulling-a-spring-or-summer-wa-3cd7efd.html
-Netanyahu: Israel not planning war with Iran. Read more here-http://www.breitbart.com/article.php?id=D9DTF31O0&show;_article=1
-UN Says Iran Boosts Uranium Enrichment, Stockpile. Iran boosted its uranium stockpile and enriched the heavy metal used for nuclear power and atomic bombs to levels needed to fuel a Tehran research reactor, United Nations inspectors said today in a restricted report.
Iran’s stockpile of low-enriched uranium grew to 2,065 kilograms (4,553 pounds) from 1,700 kilograms in November, the International Atomic Energy Agency said today in a report obtained by Bloomberg News. Iran produced uranium enriched to 19.8 percent, said the report. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aPxTKdHk.hFU
-Clinton Says Iran Is Moving Toward a ‘Military Dictatorship’. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a6h5RiKi85UE&pos;=8
-Clinton Says Iran Army Warning Was Message to Nation’s Leaders. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aGbLKeR93STg&pos;=8
-Afghan Offensive May Take a Month, U.K. General Says. A joint Afghan-NATO offensive against Taliban insurgents in southern Afghanistan will take “another 25 to 30 days,” the top coalition commander for the area said today.
British Major General Nick Carter said his forces are “very happy” with the pace of operations in northern Helmand Province and are making “slow but steady progress” in the area of the main target, the town of Marjah.
The operation by 15,000 U.S. Marines and Afghan and British troops aims to wipe out a Taliban stronghold whose opium crop has helped fund the guerrilla movement. It is the biggest operation against the Taliban since the 2001 U.S.-led invasion of Afghanistan.
“It will take us another 25 to 30 days to be entirely sure that we have secured” the Taliban haven, Carter told reporters at the Pentagon via satellite from Afghanistan. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aP9PlZjNrXXo
-Afghan Taliban’s Top Military Commander Is Captured. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aGnELw4GSqew
-Saudis Arrest Al-Qaeda Militant on Most-Wanted Terrorist List. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aMVkr_9jVB4Y
-Obama-Dalai Lama Talks Show U.S., China Stay Rivals. President Barack Obama greeted the Dalai Lama in a private White House meeting today on notice that the talks will anger China’s leadership and add tension to an already strained relationship.
That isn’t likely to fray economic ties secured by $366 billion of mutual trade and $755 billion in Chinese-held U.S. Treasury bills, according to analysts. And the path to a more constructive overall relationship may lie in both sides dropping any pretence at friendship and acknowledging they are competitors as much as partners, said Yan Xuetong, director of the Institute of International Studies at Tsinghua University in Beijing.
“If China and the U.S. identified each other as rivals I don’t think they would be disappointed with each other,” Yan said. “Both sides pretend to be friends. Actually, they are not.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ab.PsGBVnpT0
-Cyber Warriors. When will China emerge as a military threat to the U.S.? In most respects the answer is: not anytime soon China doesn’t even contemplate a time it might challenge America directly. But one significant threat already exists: cyberwar.
Attacks not just from China but from Russia and elsewhere on America’s electronic networks cost millions of dollars and could in the extreme cause the collapse of financial life, the halt of most manufacturing systems, and the evaporation of all the data and knowledge stored on the Internet. Read more here-http://www.theatlantic.com/doc/201003/china-cyber-war
-U.S. Isn’t Prepared for Massive Cyber Attack, Ex-Officials Say. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aLM4UjMmmEFU
© 2009, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – February 23, 2010
Posted by Worldwide Precious Metals on Tuesday, February 23, 2010
The Goldbugg Report – February 16, 2010
February 16, 2010
We are proud to welcome the World as Vancouver hosts the 2010 Winter Olympics. We wish all our Canadian athletes the best of luck.
February 12, 2010
The Week in Review
Rumors abound that a bailout of Greece from its sovereign debt troubles was in the works by other European Union countries. Such rumors were enough to allay fears and bring risk appetite back, helping to boost the markets. China, however, bucked the trend. A leaked Communist Party directive stated that dollar reserves should be limited to US Treasuries or agency mortgage debt like Freddie Mac that is implicitly backed by Washington. The directive was aimed at the State Administration of Foreign Exchange as well as state controlled commercial banks and could be a sign that the Chinese expect new trouble in battered global markets.
Yet another precious metals ETF was announced this week. This one, if the SEC allows it to launch, is supposed to be backed by a basket of physical gold, silver, platinum and palladium. If the SEC allows the ETF to begin trading, it could help push prices higher across all the metals included in the fund.
Initial claims for unemployment dropped more than expected last week perhaps justifying previous claims that a backlog brought on by the holidays was responsible for the previously larger than expected numbers. Continuing claims for unemployment also fell, but those particular numbers are no longer a reliable gauge since many people have exhausted their benefits and thus are no longer counted in the figure. The US Senate released the bipartisan jobs bill that Obama asked for in his State of the Union, to the tune of $87 billion but the massive snowstorms crippling the northeastern US have delayed any action on it as yet.
China announced last week that it intended to impose sanctions against US companies that are selling arms to Taiwan. Adding fuel to the fire, tensions over the upcoming meeting between US leaders and the Dalai Lama continue to escalate with Zhu Weiqun, the vice minister of the United Front Work Department in China saying that the meeting “would damage trust and cooperation between our two countries, and how would that help the United States surmount the current economic crisis?”
Wednesday Ben Bernanke outlined what the Fed’s exit strategy would be for the economic stimulus measures they put in place during the crisis. An interest rate hike may be in the near future, especially since China, Brazil and Australia have already started raising their rates.
Crude oil continues to be locked into the mid $70 range. Massive snowfalls in the northeastern US and renewed political tensions in Iran and Nigeria may keep prices on the rise.
The US Dollar stalled in its recent rally against the euro on the news that a bailout was being planned for Greece.
In real estate news, the Congressional Oversight Panel for the TARP stated in its February report that about $1.4 trillion in commercial real estate loans will reach the end of their terms. Almost 50 percent of those loans are “underwater” since commercial property prices have plummeted in lockstep with the housing industry. Elizabeth Warren said, in an interview with CNBC Thursday morning: “We’re looking at a situation where about half of all commercial real estate loans are going to be underwater by the end of this year, and that is going to have a direct impact on about 3,000 community banks, or about 40 percent of our entire banking system.”
Friday to Friday Close
Volatility should be expected to continue. US Consumer sentiment slipped backwards this month due to continued high unemployment and a housing industry that just can’t seem to get legs under it and spooked consumers are holding on to their cash, due to fears that their own jobs may be next on the “hit list”. China raised the bank Reserve Requirement ratio for the second time in as many months, sending waves of fear into markets that China would be much more aggressive in pulling back stimulus than previously thought and quite possibly damaging fragile global growth. The sovereign debt situation in the European Union continues unabated, with the situation in Greece even beginning to draw comparisons to the collapse of Lehman Brothers. Governments around the world are in danger of defaulting on their debt. Marc Faber, editor of the Gloom, Boom & Doom report, went so far to say that “In the developed world we have huge debt to GDP, in terms of government debt to GDP and unfunded liabilities that will come due. These unfunded liabilities are so huge that eventually these governments will all have to print money before they default.” Greece alone will need to borrow $73 billion to cover its deficit and refinance debt, with other countries in the EU in similar, or even worse, situations. When the printing presses fire up again and money starts flying out the other end, precious metals prices may skyrocket as investors seek safety. The sheer number of precious metals backed ETFs launching recently shows that interest in owning precious metals as an investment is on the rise and the wise investor, when price dips have presented an opportunity, has been adding physical precious metals to his portfolio. Remember, the key to profitability through the ownership of physical precious metals is to own them and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.
Trading Department – Precious Metals International, Ltd.
This is not a solicitation to purchase or sell.
© 2010, Precious Metals International, Ltd.
GOLD
-10 reasons why gold price will boom. Gold price has been in a volatile condition in the last two months. While some analysts have predicted that gold price is doomed and would plunge to a low of $800 per ounce, others hold faith saying that the yellow metal price will only continue to rise and rise. Following are 10 reasons why gold price will continue to boom.
1) The Stimulus Effect: Including $1 trillion in cash infusions, the stimulus plan will pump $9.7 trillion into the economy, according to Bloomberg. As the Globe & Mail reports flatly, “Many believe that the monetary stimulus efforts will cause a spike in inflation,” driving gold higher.
2) COMEX Traders Predict $1,600 Gold by December: If gold trades at or above $1,600 by December, some 100,000 call option contracts will be “in the money.” Big-money players Goldman Sachs and JPMorgan are reportedly helping to drive the action, ahead of a huge purchase of gold futures contracts.
3) “Big Money” Inflows: In 2008, NYC-based hedge fund Paulson & Co’s flagship fund returned 37%, as the world markets burned. Paulson’s bullish on gold, big time, including the Mar. 17 purchase of 39.9 million shares of AngloGold, worth $1.28 billion. Other major hedge funds are piling into gold, too, including Eton Park Capital, Greenlight Capital and Hayman Advisors.
4) China’s Doubling Down: China just revealed that it has doubled its gold holdings to 1,054 tons. Yet that still only equals 1.6% of its overall reserves. As China moves out of U.S. Treasuries and into gold, this will help fuel the next leg of the run-up.
5) Demand Building across the Board: Worldwide demand for gold jumped by $29.7 billion in the first quarter, a 36% bolt, according to the World Gold Council. Demand for gold ETFs (Exchange Traded Funds) rocketed 540% another trigger for the coming gold boom.
6) The Paper Dollar’s 30% Drop: Since 2001, the U.S. Dollar Index has tanked 30% while gold has risen 300%. With all the downward pressure on the dollar, and inflation on the way, this trend is about to pick up steam.
7) Gold/Dow Ratio Signals $8,000 Gold: During major gold bull markets (and corresponding equity bears), gold and the Dow converge at a 1-to-1 ratio. During the last gold bull, the Dow sank to 850 and gold rose to $850. The Dow is now over 10,000 But even if it fell to 4,000, we could see $4,000 gold before this bull run is over!
U.S. Treasury Dept. Signals $5,468 Gold: Currently, the U.S. government holds about 286.9 million ounces of gold. It has printed about $1.569 trillion worth of paper dollars. If each dollar were backed by gold, that would put the price at $5,468.80 an ounce.
9) Riding the “Commodity Super Cycle”: Jim Rogers expects the Commodity Super Cycle to drive commodity prices higher for another eight years including gold. And he’s stockpiling the yellow metal by the day. Every pullback, says Rogers, is another buying opportunity. Considering he’s been dead right on every major trend of the past 40 years, we wouldn’t bet against him.
10) Historic Model Predicts $6,214 Gold: During the last gold bull, the yellow metal ran from $35 an ounce to $850, a 24-fold increase. This bull started with gold at $255.95, meaning that if historic trends hold, the price target would be $6,214 an ounce. Read more here-http://www.commodityonline.com/futures-trading/technical/10-reasons-why-gold-price-will-boom-14406.html
-14.3 trillion reasons and counting to own gold. Read more here-http://www.gold-eagle.com/editorials_08/souleles020610.html
-Gold prices may cross $1,500 mark by end-2011. Gold, which has a strong correlation with the greenback and crude, will need the support of oil prices at $ 100 a barrel to attain and cross the $ 1500 an ounce level, Francisco Blanch, Head of Global Commodity Research with Bank of America Merrill Lynch told Emirates Business. Read more here-http://www.business24-7.ae/Articles/2010/2/Pages/08022010/02082010_421672853f7a42309c285a57b69d9cf7.aspx
-Despite recent setback gold fundamentals suggests $1,500 price this year. Specialist precious metals analyst, Jeff Nichols, reckons that gold’s fundamentals remain very strong and although there may be further short term falls in price, we can expect $1,500 gold or more before the end of the current year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=97794&sn;=Detail&pid;=1
-Hedge Fund Manager Sprott Sees Gold at $1,500 in 2010. Eric Sprott, whose Sprott Hedge Fund increased more than fivefold in nine years, said gold may rise to $1,500 an ounce this year and $2,000 within two years as the U.S. government takes measures to counter the credit crunch.
“With quantitative easing and the financial problems we have, I suspect that the gold price goes up from here,” Sprott said today in an interview in Toronto, where he announced financial support for Canadian athletes.
“If you tell me how much quantitative easing there is, I’ll tell you where the gold price will go, but I have no trouble imagining we get to $1,500 this year and to $2,000 in two years.” Read more here-http://www.businessweek.com/news/2010-02-04/sprott-sees-gold-at-1-500-an-ounce-this-yr-2-000-within-2-yrs.html
-John Embry is interviewed by King World News. Listen here-http://www.gata.org/node/8304
-Fear, Gold and the Dollar. Our gold-dollar oscillator (below) shows that the dollar is approaching being overbought over the past 60 trading days, while the gold is showing signs of being oversold.
The magnitude of the current spread between gold and the dollar typically means that both could be close to a price reversal dollar heading back and gold back up toward the mean. Frank Holmes-Read more here-http://news.goldseek.com/GoldSeek/1265653700.php
-China and U.S. heading for a cold war? What impact on gold? Some observers feel that China may be looking to retaliate over recent U.S. political statements and moves and a recent Chinese poll suggests it and the U.S. may be moving towards a ‘cold war’. Such political uncertainties could have a positive impact on the gold price. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=97505&sn;=Detail&pid;=1
-China Becomes Oil ETF’s No. 4 Holder, Buys SPDR Gold. CIC’s investments through the SPDR Gold Trust are equivalent to 145,000 ounces of bullion, or about 0.4 percent of the 33.9 million ounces China’s government maintains, based on data from the International Monetary Fund. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZtsKyX2S6Ls or
http://commoditytradealert.com/blog/?p=5289
-Converting paper to gold a change in market perception. Not only does Chris Potter stand by his claim that India’s big gold buy late last year was a game-changer, it’s a 21st century take on the classic alchemist’s quest of old-transforming lead into gold or in this case paper into gold. Interview with The Gold Report. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=97686&sn;=Detail&pid;=1
-Clive Maund gold market update. Read more here-http://www.kitco.com/ind/maund/feb082010.html
-Ned Schmidt’s Gold Thoughts. When the U.S. money supply again begins to grow rapidly, $Gold will advance. In the mean time, when selling pressure on $Gold becomes intense, investors should add to their positions. Investors living in currencies other than U.S. dollars should be adding to Gold positions during this period of currency turmoil.
The EU is not going to dissolve, but using Gold to safeguard wealth from currency turmoil and tax collectors gone berserk seems like a good idea. Read more here-http://www.kitco.com/ind/Schmidt/feb092010.html
-Gold is Testing “Floor” Theory. There is a popular point of view that the Reserve Bank of India put a ‘floor’ under the gold market around $1050, which approximates the price at which it bought 200 tonnes of gold from the IMF.
The thinking is that other central banks, and perhaps the Reserve Bank of India itself, will purchase gold at that price. This theory that $1,050 represents a ‘floor’ is now being put to the test.
Regardless whether this theory proves accurate or not, it is clear from the following chart that gold remains firmly within a major uptrend. Gold also remains above its all-important 200-day moving average. James Turk-Read more here-http://www.fgmr.com/gold-is-testing-floor-theory.html
-Why southern Europe’s debt crisis is a buying opportunity for gold lovers. Read more here-http://blogs.telegraph.co.uk/finance/garrywhite/100003494/why-southern-europes-debt-crisis-is-a-buying-opportunity-for-gold-lovers/
-Midas Fund’s Winmill Turns Gold Rise Into 83% Return on Miners. In January, Winmill predicted gold prices will average $1,200 an ounce (31 grams) during the first quarter and increase to $1,500 by the end of the year. Gold rose 24 percent last year.
Growing U.S. budget deficits will reduce the dollar’s purchasing power, he says. From 2001 through 2009, U.S. money supply almost doubled to $8.5 trillion. During the next decade, U.S. gross domestic product of about $14 trillion is likely to grow an average of only 1 to 2 percent a year, Winmill says.
“We’ll double the supply of dollars and have about the same amount of wealth, so the dollar will have about half the purchasing power that it has today,” he says. Given that assumption, gold will be a way to preserve value, he says.
As the deficit expands, the U.S. Federal Reserve will have less ability to control inflation, Winmill says. He forecasts a 3 percent inflation rate by the end of this year and as much as 5 percent in 2012. The U.S. consumer price index rose 2.7 percent in December from a year earlier.
The Fed is holding its target for the federal funds rate at zero to 0.25 percent to stimulate manufacturing and exports, and that’s driving the dollar down, Winmill says. “It’s great for the price of gold,” he says. “As the dollar goes down, it’s going to take more dollars to buy the same ounce of gold.” Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=abSHodgpVd9I&pos;=10
-John Paulson Gold Fund Said to Tumble 14% in Its First Month. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aPMbZAOfYDcQ&pos;=4 or http://www.gata.org/node/8316
-German Company Will Make Biggest Gold Coin Ever, Weighing 3,333 Ounces. Read more here-http://www.benzinga.com/118117/german-company-will-make-biggest-gold-coin-ever-weighing-3-333-ounces
-GATA Chairman Murphy interviewed on ‘Wall Street Shuffle’. Read more here-http://www.gata.org/node/8321
-GATA Washington conference presentation videos posted. Read more here-http://www.gata.org/node/8309
SILVER
-A Silver Shortage? Money manager Stephen Leeb predicts the price of silver to skyrocket on industrial growth in an interview on the Forbes Video Network. Watch video here-
http://news.silverseek.com/SilverSeek/1265745976.php
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
-Why silver price will boom to $50/oz. Read more here-http://www.commodityonline.com/news/Why-silver-price-will-boom-to-$50oz-25602-3-1.html
-Ted Butler: Last gasp for the big commercial shorts in gold and silver? Read more here-http://www.gata.org/node/8302
-Rob Kirby: A sterling account of silver’s ‘dismal’ performance in January. Read more here-http://www.gata.org/node/8308
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Is Austria The Next Euro Nation To Get Vaporized? Right now everyone is focusing on the PIIGS, with special emphasis on the “G” Greece. If the ECB handles the situation right, then hopefully this goes nowhere. But if it goes bad, then we’re talking about contagion.
So who might fall if periphery Europe goes down? Check out Austria. As you can see, its CDS spread is just starting to turn higher, and it’s well known that the country has major banks with dicey Eastern Europe exposure.
But for now, let’s hope the PIIGS firewall remains in place. Read more here-http://www.businessinsider.com/chart-of-the-day-cds-evolution-for-some-emu-countries-2010-2
-Chart of the week: All It Took Was a Few Bad Trading Days To Get Investors Terrified Of Stocks Again. In January, U.S. stocks began to see their first major mutual fund in-flows since July of last year. It took many months, but after a strong 2009 equity rally, investors began to rediscover faith in U.S. stocks.
Well, there goes that trend. All it took was a few bad trading days for the stock market to crush this tiny bud of renewed investor optimism. Based on fund flow data released today by the Investment Company Institute, over $2.2 billion fled U.S. domestic equity mutual funds during the seven-day period ending February 3rd.
The average investor’s confidence in stock markets remains paper thin. Read more here-http://www.businessinsider.com/chart-of-the-day-us-domestic-equity-long-term-mutual-fund-flows-2010-2
-U.S. unemployment video chart updated to Feb 5 2010. Watch here-http://cohort11.americanobserver.net/latoyaegwuekwe/multimediafinal.html
-Chart of the week: Remember When Men Used To Have Jobs? Men between the ages of 25-54 are frequently described as being “working-age,” because, well, they’re expected to be working.
But as this chart, via Brad Delong, shows, that’s happening less and less. Nearly 20% of men in this age group are out of the workforce, and none of the overall second-derivative labor market improvements seem to be helping much.
How this trend impacts society more broadly should be interesting, to say the least. Read more here-http://www.businessinsider.com/chart-of-the-day-employment-to-population-ratio-male-25-54-years-old-2010-2
-Chart of the week: It’s Official: Obama Is Creaming Bush When It Comes To Jobs. Numbers don’t lie, do they? In the last year of the Bush administration, the monthly job loss numbers built steadily to a peak which then began to reverse itself during Obama’s first year.
It’s a perfect mirror image, as this chart from Nancy Pelosi’s office demonstrates. Now, whether this was the result of Obama’s and Bush’s policies or whether it’s just a matter of timing, is obviously open for debate.
We know what Speaker Pelosi would have you believe. Read more here-http://www.businessinsider.com/chart-of-the-day-jobs-lost-in-the-bush-and-obama-administration-2010-2
-”Formal education will make you a living; self-education will make you a fortune.” Jim Rohn
-”The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.” William Arthur Ward
-US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941. Niall Ferguson
-Starting a journey into the future with dollars is no better than setting off into the desert with a camel that has no hump. Not owning gold or silver in the current environment is like being lost in the desert having neither water nor compass. Peter Souleles
-Technicals run the short term, Fundamentals run the long term, Insurance is not a day to day item. Jim Sinclair
-“You can’t get much lower than zero percent.” “The Fed won’t be able to raise rates, given the employment situation and current fiscal burden. Conditions are in place for higher gold prices.”
Tom Winmill, a New-York based portfolio manager of the Midas Fund. In December, he predicted gold may average $1,500 in the fourth quarter of 2010.
-Reasons to Own Gold Unchanged as Banks Become Buyers. It is gold that dominates our list of “Current Positions.” Despite hitting yet new highs near the end of the year, there is much further to go for gold and gold stocks. Gold itself saw its ninth annual advance, to new highs before a 10% correction at the end of the year.
Gold certainly was helped by the weak dollar and the year-end sell-off was provoked by a dollar recovery but it’s much more than an anti-dollar play. Gold is up in terms of all currencies, boosted by concern about inflation and extraordinarily low interest rates.
Mostly, it’s a vote of no confidence in the world’s paper monies, and scepticism of central bankers’ abilities to effect stable money, and specifically to exit stimulus programs in an orderly manner. Nothing has changed, and gold is becoming a new de-facto alternate currency. There is a lot further to go. Most significant perhaps, central banks have switched from being net sellers to buyers.
As we have discussed before, banks that built up their reserves in the last couple of decades tend to have the highest levels of reserves but the lowest proportion of gold (India, China, Korea etc.). The overall level of gold in central bank reserves has dropped from over 30% a decade ago to just over 10%, the lowest level ever.
The ease with which India (and Mauritius) scooped up half the IMF’s gold for sale shows clearly that demand overhang is not a problem. Central banks are likely to be net buyers for years to come.
Adrian Day, President of Adrian Day Asset Management-Read more here-http://www.kitco.com/ind/GoldReport/feb092010.html
-The inflationary depression still dominates and probably will continue to do so. In time the stimulus will fail to work and the world will slip into total insolvency and deflationary depression. The old M3 is about 3%, but we still have $23.7 trillion floating around. Not only is the US bankrupt, but also so is the rest of the world.
It is now only a question of when the dominos will fall. It looks like the first wave in the collapse of the bear market rally is underway. Bonds will follow with higher interest rates and eventually commodities will be hit. Only gold and silver will survive, as the bankers and Wall Street complete their destruction of the world economy. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1265815105.php
-As we have been forecasting for the last two years, the second wave of mortgage defaults and foreclosures will hit the economy this year. Not only will we have failure in prime loans and option-arm loans, but we are faced with a new crop of subprime and ALT-A loans put into motion by Fannie Mae, Freddie Mac, Ginnie Mae and FHA.
In addition, we find it of great interest that the FHA is changing the rules to purchase homes. That, of course, means less homes will be purchased. Bob Chapman-Read more here-http://news.goldseek.com/InternationalForecaster/1265565600.php
-2010 bank failure tally now 16. Regulators shuttered a Minnesota bank on Friday night, for the 16th failure of 2010. The bank, 1st American State Bank of Minnesota, in Hancock, was closed by the state’s Department of Commerce. The department named the Federal Deposit Insurance Corp. the receiver. Read more here-http://money.cnn.com/2010/02/05/news/economy/bank_failures/index.htm
-Niall Ferguson: A Greek crisis is coming to America. Read more here-http://www.gata.org/node/8317
-7 U.S. States That Are Worse Off Than Greece, Portgal, Ireland, and Spain. The seven states to make my list are California, Florida, Illinois, Ohio, Michigan, North Carolina, and New Jersey. Each has a population above 8 million people. Each has had to borrow more than a billion dollars, so far, to pay claims out of their now bankrupt unemployment insurance fund.
Also, each state currently registers broad, underemployment above 15% as indicated by the U-6 measure for the States. And finally, each state is a large net importer of either oil, natural gas, electricity, or all three of these energy sources. Read more here-http://finance.yahoo.com/tech-ticker/7-u.s.-states-that-are-worse-off-than-greece-portgal-ireland-and-spain-420138.html
-New Jersey Governor Chris Christie on Thursday declared a “fiscal emergency,” allowing him to reserve or freeze state spending as part of his plan to tackle one of the largest 2011 deficits among U.S. states. Read more here-http://www.reuters.com/article/idUSTRE61A49V20100211
-Secret summit of world’s top bankers in Australia. Read more here-http://www.gata.org/node/8305
-G-7 Risks ‘Muddled Middle’ With Plan to Spend Now, Save Later. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=ajXjEgtNTtXc
-How Goldman Sachs Helped Greece to Mask its True Debt. Read more here-http://www.spiegel.de/international/europe/0,1518,druck-676634,00.html
-The Dumping Begins: Chinese Reserve Managers Notified That Any Non-USG Guaranteed Securities Must Be Divested. Read more here-http://www.zerohedge.com/print/72753 or
-TARP Watchdog: Don’t Be Fooled By The Calm, Banks Will Be Rocked By 2011’s $300 Billion Commercial Real Estate Time Bomb. Read more here-http://www.businessinsider.com/tarp-watchdog-the-300-billioin-commercial-real-estate-bomb-hits-in-2011-2010-2
-The stock market will be “flat,” or almost unchanged, through the end of the year, Nouriel Roubini said after the Standard & Poor’s 500 Index posted its biggest losses since March. Read more here- http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aTtM3cfIfsnI
-Roubini Sees Dollar Falling Versus Asian Currencies. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=aDV9aUi1.h0Q
-Peter Warburton: The debasement of world currency: It is inflation, but not as we know it. Read more here-http://www.gata.org/node/8303
-Toyota Recall Cost Will Exceed $2 Billion Estimate, Lawyers Say. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a8IPQpESrNWo
-Swine Acronym Ordered Out of Barclays Capital Reports. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=a.eowWPTrbNI
-Study shows why it is so scary to lose money. Read more here-http://www.reuters.com/article/idUSN0823962020100208?loomia_ow=t0:s0:a49:g43:r1:c0.392924:b30376896:z0
-US food stamps set ever-higher record-32.8 million. Read more here-http://www.guardian.co.uk/business/feedarticle/8933161
-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
-Graff accused of ‘painting over a Rembrandt’ by gemologists. Laurence Graff, the Mayfair jeweller, has been accused of committing a crime akin to “painting over a Rembrandt” after re-cutting an historic diamond, the Wittelsbach Blue. Read more here-http://www.telegraph.co.uk/news/7103328/Graff-accused-of-painting-over-a-Rembrandt-by-gemologists.html or http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100207/FOREIGN/702069935/1002/foreign
-The Argyle Diamond Mine is a diamond mine located in the East Kimberley region in the remote north of Western Australia. Argyle is the largest diamond producer in the world by volume, although due to the low proportion of gem-quality diamonds, is not the leader by value.
It is the only known significant source of pink diamonds, producing over 90% of the world’s supply. It additionally provides a large proportion of other naturally coloured diamonds, including champagne, cognac and rare blue diamonds. Argyle is currently transitioning from an open pit mine to an underground mine. Read more here-http://en.wikipedia.org/wiki/Argyle_diamond_mine
-An Argyle pink diamond is admired as the most concentrated form of wealth in the world. One and a half billion years ago, forces of nature rewarded the land in Western Australia’s vast Kimberley, with pink diamonds. The exact story behind their formation remains largely a mystery, adding to their allure and intrigue.
Diamonds were first discovered in the region in 1979, when a geologist noticed a diamond embedded in an anthill. A Rio Tinto owned mine was built on the site in 1985, and of the 600 million stones it produces each year, just one tenth of one percent is pink. Argylepinkdiamonds.com.au
DAVID ROSENBERG COMMENTARY
-The next shoe to drop could be bullish for oil and gold. While Greece and the other PIGS have been getting all the press, don’t take your eye off the prospect of a strike against Iran, either by Israel or Obama. Netanhyahu sounded very tough in a speech in Europe on Tuesday (relegated to a page 14 news item). What we are talking about here is what the response is going to be to Iran’s intent to move to 20% enrichment of its uranium from the current 3.5%. David Rosenberg-Gluskin/Sheff
-Yes, we are likely on the verge of seeing a trickle of employment growth in the next few months/quarters, but it will take at least eight years before the U.S.A. gets back to full employment. David Rosenberg-Gluskin/Sheff
-With the revisions, we now know that the total job loss in this recession was 8.4 million. It would take eight years of 200k monthly gains just to recoup this decline, adjusting for the growth rate in the workforce. David Rosenberg-Gluskin/Sheff
-The drop in the unemployment rate to 9.7% is very misleading since the number of discouraged workers rose 137k in January, to 1.1 million. What is key is that the economy still shed 20k payrolls and normally at this stage of the cycle, nearly two-and-a-half years after the first Fed rate cut, the economy is already generating at least 150k net new jobs, month-in, month-out.
Hopefully this puts a minus-20k payroll figure into its proper perspective. As an aside, TrimTabs adjusts the jobs data using income tax receipts and its metric shows that employment contracted by 104k in January. Gluskin/Sheff
-While there will be many economists touting today’s U.S. employment report as some inflection point, the reality is that the level of employment today, at 129.5 million, is the exact same level it was in 1999. David Rosenberg-Gluskin/Sheff
-While the focus has been on Greece, and the PIGS in general, let’s not forget that fiscal strains are evident everywhere from the U.K., to Japan, to the U.S.A. David Rosenberg-Gluskin/Sheff
-The sources of buying power that drove the 2009 rally have all but dried up. Who’s left to pick up the baton? The general investing public, but all the ‘dry powder’ there is being put to work towards the fixed-income market, not equities. David Rosenberg-Gluskin/Sheff
-Since this is a technically-driven equity market, we are bound to get a 50% reversal of the bear market rally, which would take the S&P; 500 to 912 so keep your seatbelts on. David Rosenberg-Gluskin/Sheff
-We are currently seeing a countertrend rally in the U.S. dollar all of a sudden, the USD looks like the one-eyed man in the land of the blind. David Rosenberg-Gluskin/Sheff
-When accurately measured, including the shadow inventory from bank foreclosures, there is still nearly two year’s worth of unsold housing inventory in the United States, and commercial vacancy rates are poised to reach unprecedented highs, and this excess supply is bound to unleash another round of price deflation and debt defaults this year. David Rosenberg-Gluskin/Sheff
-First the governments bail out the banks who were (are) basically insolvent. Then these governments, especially in Europe, see their balance sheets explode and face escalating concerns over sovereign default. The IMF now predicts that the government debt-to-GDP ratio in the G20 nations will explode to 118% by 2014 from pre-crisis levels of around 80%.
Now, the ball is put back onto the banks because many have exposure to the areas of Europe that are facing substantial fiscal problems right now. According to the Wall Street Journal, U.K. banks have $193 billion of exposure to Ireland. German banks have the same amount of exposure and an additional $240 billion to Spain.
Many international bond mutual funds also have sizeable exposure to sovereign debt of Portugal, Ireland, Greece and Spain as well. Contagion risks are back. Stay defensive and expect to see heightened volatility. In a nutshell, toxic assets have basically been swept under the rug in the hopes that we will outgrow the problem.
Leverage ratios across every level of society are still reaching unprecedented levels as the public sector sacrifices the sanctity of its balance sheet in its quest to stabilize the dubious financial position of the household and banking sectors in many parts of the world.
Whatever bad assets have been resolved have almost entirely been placed on the books of governments and central banks, which now have their own particular set of risks, as we have witnessed very recently in places like Dubai, Mexico, and Greece, not to mention at the state and local government level in the United States.
We simply have not seen a reduction in the percentage of properties with mortgages that are “under water”, hence the FDIC has identified 7% of banking sector assets ($850 billion) that are in “trouble”, so how can it possibly be that the financial system is anywhere close to some stable equilibrium? David Rosenberg-Gluskin/Sheff
BRITAIN THE NEXT GREECE?
-Greece crisis: There but for the grace of God goes Britain. Should markets pass the same verdict on Britain as on Greece, the results would be almost identical and just as disastrous, says Edmund Conway. Read more here-http://www.telegraph.co.uk/finance/comment/edmundconway/7153169/Greece-crisis-There-but-for-the-grace-of-God-goes-Britain.html
-Could Britain follow Greece into deficit tragedy? Read more here-http://money.uk.msn.com/markets/articles.aspx?cp-documentid=152066756
FABER-I WILL NEVER SELL MY GOLD
-Faber: If We Analyzed The U.S. As A Company, It Would Be A Distressed Piece Of Trash. In an interview with Bloomberg’s Margaret Brennan, Marc Faber hints that markets are improperly giving the U.S. government a free ride.
That’s because if investors were to analyze the U.S. government as a company, they’d soon realize it is completely distressed. You might have suspected it as such, but here’s a gloomy reminder from the man who sells the Gloom, Boom, and Doom report:
“If you add all the unfunded liability’s the US has in terms of future liability’s arriving from medicare, medicaid and social security, then obviously if the US was a corporation it wouldn’t be a triple A, but it would have funds that are junks rated. ” Watch video here-http://www.businessinsider.com/if-the-us-was-a-company-we-would-think-it-was-trash-2010-2
-US, Europe Will All Default On Their Debt: Marc Faber. The governments of every developed economy will eventually default on their sovereign debts, including the US, the UK and Western Europe, Marc Faber, editor of the Gloom, Boom & Doom report, told CNBC.
“In the developed world we have huge debt to GDP, in terms of government debt to GDP and unfunded liabilities that will come due,” Faber said in a live interview via telephone. “These unfunded liabilities are so huge that eventually these governments will all have to print money before they default.” Read more here-http://www.cnbc.com//id/35332965
-Marc Faber sees ‘no huge downside risk for gold,’ more sovereign defaults. Read more here-http://www.bi-me.com/main.php?id=44247&t;=1&c;=35&cg;=4&mset;=1011
-Marc Faber on US Bubble, ‘worthless’ dollar & Gold ‘the Savior’. Watch more here-http://www.youtube.com/watch?v=pAJeZaFdbJA
-Marc Faber: US govt will go bankrupt. Watch more here-http://www.youtube.com/watch?v=2qHD7-XVX4I
-CNBC Anchors Freak Out After Marc Faber Says US Will Default. Watch here-http://www.businessinsider.com/cnbc-anchors-freak-out-after-marc-faber-says-us-will-default-2010-2
NASSIM TALEB-THREE FAVORITE TRADES-BUFFETT LUCKY
-Black Swan Taleb: 3 Favorite Trades Now; “You will be Flying in a Private Jet From Now On.” 1) Short the S&P; vs Long Gold, in a 5 to 1 ratio. By gold Taleb means a basket of precious metals including gold. 2) Hyperinflation bet that could very well not work but if it does “you will never fly in a public jet again” He prefers to play this bet with way out of the money call options on both gold and silver.
3) His “no-brainer” trade is short US treasury bonds , Taleb cites current policy and Larry Summers in Davos. Read more here-http://commoditytradealert.com/blog/?p=5234
-’Black Swan’ Author Nassim Taleb: Warren Buffett May Just Be Lucky. Nassim Taleb says there isn’t enough evidence to show that Warren Buffett’s skill, and not his good luck, is responsible for the billionaire’s enormous investing success over the decades. Read more here-http://www.cnbc.com/id/35300031/
U.S. DEBT CRISIS
-Will Baby Boomers Bankrupt Social Security? Read more here-http://www.cnbc.com/id/34941334
-Rash of retirements pushes Social Security to brink. Read more here-http://www.usatoday.com/news/washington/2010-02-07-social-security-red-retirements_N.htm
-$13.5 Trillion of New Debt: The President’s budget proposes to increase the national debt from today’s level of $12.3 trillion to $25.8 trillion in FY 2020 an increase of $13.5 trillion or 109.8%. The amount of new debt proposed by this budget is larger than the total amount of debt accumulated by the federal government from 1789 to today (even including the $3.6 trillion of new debt over the last three years). Olivier Garret-Republican Study Committee
-Interest Payments on the Debt: Increases from $187 billion in FY 2009 to $840 billion in FY 2020 an increase of $653 billion or 349.2%. Olivier Garret-Republican Study Committee
-$2.8 Trillion Tax Increase:The president’s budget submission increases taxes by $2.8 trillion over ten years. This includes allowing many of the 2001 and 2003 tax cuts to expire at the end of this year, such as allowing the top rate (which is often paid by small businesses) to increase from 35% to 39.6%, and allowing the top capital gains tax rate to return to 20%. These tax increases would take effect in an economy that, according to many economists, will still have an unemployment rate around 10%. Garret-Republican Study Committee
-Mandatory Spending: Increases from last year’s level of $2.1 trillion to $3.4 trillion in 2020, an increase of $1.3 trillion or 59.4%. Within that amount: Medicare spending increases from $425 billion in 2009 to $953 billion in 2020 an increase of $528 billion or 124.2%; Social Security spending increases from $678 billion in 2009 to $1.20 trillion in 2020 an increase of $523 billion or 77.1%; and Medicaid spending increases from $251 billion in 2009 to $487 billion in 2020 an increase of $236 billion or 94.0%. Garret-Republican Study Committee
RICHARD BRANSON-OIL CRUNCH COMING
-Britain faces ‘oil crunch’ within five years, Richard Branson warns. An oil crunch more serious than the financial crisis threatens to strike Britain within five years, Sir Richard Branson and other business leaders have warned. Read more here-http://www.telegraph.co.uk/finance/financetopics/oilprices/7203172/Britain-faces-oil-crunch-within-five-years-Richard-Branson-warns.html
U.S. UNEMPLOYMENT
-Last Friday, the Labor Department reported that nonfarm payrolls (jobs) decreased by 20,000 in January. Today’s chart puts that decline into perspective by comparing job losses following the beginning of the current economic recession (solid red line) to that of the last recession (dashed gold line) and the average recession from 1950-1999 (dashed blue line).
As today’s chart illustrates, the current job market has suffered losses that are more than triple as much as what occurs at the lows of the average recession/job loss cycle.
It is also worth noting that 25 months after an average recession/job loss cycle began during the second half of the 20th century, the job market recouped all losses and was already in process of adding new jobs. At the same 25 month mark during the 21st century, the job market was still suffering losses. Read more here-http://www.chartoftheday.com/20100205.htm?T
-Job openings fell nearly one-quarter last year. In December there were 6.1 workers for every position to be filled. Read more here-http://www.msnbc.msn.com/id/35315598/ns/business-stocks_and_economy/
-A majority of companies in the Standard & Poor’s 500 stock index increased cash to a combined $1.19 trillion while simultaneously reducing spending, keeping a jobs recovery on hold. Caterpillar Inc., Eaton Corp., Walgreen Co. and General Electric Co. are among 260 companies that ended last quarter with $522 billion more than a year earlier after cutting capital spending by 42 percent.
Economists say the dearth of investment is keeping the jobless rate at about 10 percent as the U.S. emerges from its worst recession since the 1930s. “It’s not clear we are going to see the type of growth following this recession that we’ve seen in previous recessions,” Sandy Cutler, Eaton’s chief executive officer, said in an interview yesterday.
That view “is leading people to be cautious as to their rate of reinvestment, and right in parallel with that, in terms of hiring additional employees.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aE6W8c9z9Bms&pos;=6
-Small businesses are becoming the Achilles heel of the U.S. recovery by limiting growth and job creation. Companies with fewer than 500 employees, such as Phoenix Technologies Ltd. and Sonic Corp., helped lead the economy out of the four recessions since 1980.
This time, they continue to cut capital spending and dismiss workers, eliminating 3,000 jobs in January, according to Roseland, New Jersey-based Automatic Data Processing Inc., the world’s largest payroll processor. Read more here-http://www.bloomberg.com/apps/news?pid=20601109&sid;=apZULWyXpqhE&pos;=10
REAL ESTATE-FORECLOSURES-MORTGAGES
-The real estate roller-coaster ride continued last year as the median price of U.S. single-family home plunged 11.9% to $173,200. The housing situation had been looking up earlier in the year, with prices gaining ground in the first nine months. But the increases weren’t enough to push the median home price above 2008’s bar of $196,600, according to the National Association of Realtors. Read more here-http://money.cnn.com/2010/02/11/real_estate/latest_home_prices/index.htm
-The next crisis: Commercial real estate. A congressional watchdog panel warned on Thursday that mounting commercial real estate losses could endanger the banking system and thwart economic recovery.
A total of $1.4 trillion in commercial real estate loans will require refinancing in the next four years, the Congressional Oversight Panel said in a report. More than half of those loans are underwater, written for properties whose value has dropped like a rock.
The expected losses when loans go bad could hit between $200 billion to $300 billion and threaten 3,000 small and mid-size banks with a disproportionate share of commercial real estate assets on their books, according to the panel.
The report is intended to “wave a red flag” to the White House and Congress that the commercial real estate loan market is going to get a lot worse before it gets better. Read more here-
http://money.cnn.com/2010/02/11/news/economy/tarp_commercial_loans/index.htm
-U.S. foreclosure filings rose 15 percent in January from a year earlier and exceeded 300,000 for the 11th consecutive month as modification programs failed to keep delinquent borrowers in their homes, RealtyTrac Inc. said.
A total of 315,716 properties received a notice of default, auction or bank seizure last month, or one in 409 households, the Irvine, California-based seller of default data said today in a statement. Filings fell 10 percent from December.
Bank seizures, also known as real-estate-owned or REOs, may rise to a record 3 million this year, RealtyTrac said last month. About 66,000 delinquent loans out of a targeted 4 million by 2012 were permanently modified as of Dec. 31 under the Obama administration’s Home Affordable Modification Program, according to the Treasury Department.
About 787,000 mortgages are in trial programs that change loan terms, the Treasury said Jan. 19. “It’s almost inevitable that modifications will fail,” Michelle Meyer, New York-based U.S. economist for Barclays Capital Inc., said in an interview. “Over the next several months, we should see REOs increase at an accelerated pace.”
Foreclosure filings also fell in January of last year from December, only to rise in subsequent months, RealtyTrac said. “If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works,” James J. Saccacio, RealtyTrac’s chief executive officer, said in the statement. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aGwcSA_UG5GU&pos;=3
-One-Fifth of U.S. Homeowners Owe More Than Properties Are Worth. More than a fifth of U.S. homeowners owed more than their properties were worth in the fourth quarter as the number of houses and condominiums lost to foreclosure climbed to a record, according to Zillow.com.
In the fourth quarter, 21.4 percent of owners of mortgaged homes were underwater, up from 21 percent in the previous three months and down from 23 percent in the second quarter, the Seattle-based real estate data provider said today in a report. More than one in 1,000 homes were repossessed by lenders in December, the highest rate in Zillow data dating back to 2000.
Underwater homes are more likely lost to foreclosure because their owners have a harder time refinancing or selling when they get behind on loan payments. U.S. home values dropped 5 percent in the fourth quarter from a year earlier, the 12th straight quarter of year-over-year declines, Zillow said. Read more here-http://www.bloomberg.com/apps/news?pid=20603037&sid;=at6VKvccpCzs
or http://www.reuters.com/article/idUSN0914378220100210
-Jumbo Mortgage ‘Serious Delinquencies’ Rise to 9.6%, Fitch Says. U.S. prime jumbo mortgages at least 60 days late backing securities reached 9.6 percent in January from 9.2 percent in December, the 32nd straight increase for “serious delinquencies,” according to Fitch Ratings.
“The trend line for delinquencies indicates the 10 percent level could be reached as early as next month,” Vincent Barberio, a Fitch managing director in New York, said today in a statement. The rate almost tripled in 2009, Fitch said.
Jumbo home loans are larger than government-supported mortgage companies Fannie Mae or Freddie Mac can finance. Their limits now range from $417,000 in most places to as much as $729,750 in high-cost areas. Loans in jumbo securities can be smaller than those amounts if they were issued in earlier years. Non-agency mortgage securities lack guarantees from Fannie Mae, Freddie Mac or federal agency Ginnie Mae. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=at0fpRHaUHhE&pos;=4
-No Exit in Sight for U.S. As Fannie, Freddie Flail. When Charles E. Haldeman Jr. became Freddie Mac’s chief executive officer in August, the ailing housing-finance giant had already consumed $51 billion of government money to stay afloat. It’s likely to need even more.
The Mortgage Bankers Association estimates that mortgage delinquencies won’t peak any sooner than the middle of this year. At the current pace, around 6% of Fannie’s loans and 4.9% of Freddie’s are expected to go into default over the next 18 to 24 months, producing losses that would raise the price tag on Treasury’s bailout to $175 billion, according to October estimates by investment bank Keefe, Bruyette & Woods Inc. The bank has since said that even that dire forecast is too optimistic.
Former FHFA head James Lockhart, the companies’ top regulator until last August, says the U.S. is unlikely to ever fully recoup its investment in the two companies. Read more here-http://online.wsj.com/article/SB20001424052748704362004575001042824028862.html
-Loews CEO Tisch Says U.S. Rang Hotel ‘Death Knell’. Jim Tisch, the leader of Loews Corp., said the U.S. did a “good job of killing” the hotel business by lambasting corporate travel and hurt American International Group Inc.’s ability to return bailout funds by curbing pay.
“The criticism that took place of group travel was really a death knell for the industry,” Tisch said yesterday in an interview at an office of the New York-based holding company, which owns hotels. “It’s easy for the politician to get the sound bite. What they are doing with those sound bites is putting maids and bellmen out of work.”
Loews’s hotel unit posted a $34 million loss in 2009, compared with a $40 million profit in 2008. Tisch, the chairman and chief executive officer of Loews, said group travel comprises about half the firm’s hotel business, and operations suffered as lawmakers disparaged corporate trips amid the $700 billion rescue of financial firms. In 2008, bailed-out AIG canceled about 160 events costing a total of $80 million. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aq4ICuhr5BNY
GEOPOLITICAL NEWS
-Iran is now a ‘nuclear state’ says Ahmadinejad as thousands take to the streets. Read more here-http://www.dailymail.co.uk/news/worldnews/article-1250127/Iran-Revolution-day-protests-Islamic-Republic-nuclear-state.html or http://apnews.myway.com/article/20100211/D9DPTTKO0.html
-Iran atom bomb seen attainable despite snags: study. Read more here-http://www.reuters.com/article/idUSTRE61A42O20100211
-Tens of thousands of Iranians joined a rally in Tehran today to mark the 31st anniversary of the Islamic regime, and security forces clashed with opposition leaders and protesters who used the occasion to defy the government. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aZ9cokR1N9iQ
-Ahmadinejad warns Israel against any military move. Read more here-http://news.yahoo.com/s/nm/20100211/ts_nm/us_iran_israel_ahmadinejad
-Israel urges “crippling” sanctions now against Iran. Read more here-http://www.alertnet.org/thenews/newsdesk/LDE6181A8.htm
-Iran Sanctions Are Only Option, France’s Morin Says With Gates. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aDR4xR89o02k or http://www.reuters.com/article/idUSTRE6172K420100208
-Russia Says Iran’s Nuclear Enrichment Violates UN Resolutions. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aRWRZQiXsmhE&pos;=9
-Iran to make ‘advanced’ attack drones. Iran has begun making ‘advanced’ unmanned drones capable of carrying out ‘assaults with high precision’. Read more here-http://www.telegraph.co.uk/news/worldnews/middleeast/iran/7187418/Iran-to-make-advanced-attack-drones.html
-Iran says to unveil air defence equal to Russia system. Read more here-http://in.reuters.com/article/worldNews/idINIndia-45987720100208
-U.S. Uses Iran to Globalize Its Defenses, Russia Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aRaApwzZO348
-U.S. Targets Iran Guard With Sanctions on Companies. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZuUpNFuZAtc
-Al-Qaeda in the Arabian Peninsula number two Sufyan al-Azdi al-Shahri called for attacks against US interests “everywhere,” in an audio message released Monday. “American and Crusader interests are everywhere and their agents are moving everywhere,” Shahri said. “Attack them and eliminate as many enemies as you can.” AFP
-North Korea’s Kim Reiterates Denuclearization Pledge. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=aAFwTc3K9m6Q
-Washington on Thursday dismissed Iranian claims of a leap forward in uranium enrichment and expressed concern that Iran appeared to have “unplugged” Google and other Internet service providers. Read more here-http://www.reuters.com/article/idUSTRE61A5CJ20100211
-Iran to suspend Google’s Gmail report. The government of Iran announced on Wednesday it would suspend Google’s e-mail service as it prepares to unveil a national e-mail service for Iranians, according to a news report.
The Wall Street Journal reported that the Iranian telecommunications agency will soon debut its new e-mail service, which Iranian officials hope will help develop national technologies and foster a certain level of trust between the government and its citizens. Read more here-http://money.cnn.com/2010/02/10/technology/google_iran_gmail/index.htm
-China PLA officers urge economic punch against U.S. Senior Chinese military officers have proposed that their country boost defense spending, adjust PLA deployments, and possibly sell some U.S. bonds to punish Washington for its latest round of arms sales to Taiwan. Read more here-http://www.reuters.com/article/idUSTRE6183KG20100209 or http://www.timesonline.co.uk/tol/news/world/asia/article7017951.ece
-China could debt bomb the U.S. by dumping or not buying their debt. Read more here-http://www.nypost.com/f/print/news/opinion/opedcolumnists/china_debt_bomb_onc23nzJdiQR7gTLkrwSpL
-President Barack Obama will meet with the Dalai Lama on Feb. 18 in the White House’s Map Room, presidential press secretary Robert Gibbs said. Obama’s plan to meet with the Tibetan spiritual leader has prompted criticism from Chinese government officials at a time when friction between the U.S. and China has been on the rise. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a_PfxJlEHavI&pos;=9
© 2009, Worldwide Precious Metals.
www.wwpmc.com
The Goldbugg Report – February 16, 2010
Posted by Worldwide Precious Metals on Tuesday, February 16, 2010
The Goldbugg Report – February 9, 2010
February 9, 2010
February 5, 2010
The Week in Review
What a week! Sovereign debt in Europe, specifically Greece, Spain and Portugal continued to rear its ugly head, helping fuel a spike in the dollar which helped beat down commodities prices, and sending waves of fear into the equities market, causing both the Dow and the S& P to go tumbling, the Dow even dipping back below 10,000.
On Thursday, the European Central Bank announced it was keeping interest rates at 1 percent. The Bank of England also announced it was keeping rates at 0.5 percent and that it was ending its quantitative easing program for the time being. The BOE left the door open to restart the program if the economy relapses saying that they would “continue to monitor the appropriate scale of the asset purchase programme and further purchases would be made should the outlook warrant them.”
There was conflicting information on the employment front. Both Cisco and Oracle announced intentions to add net jobs this quarter. This news was tempered by an unexpected jump in initial claims for unemployment. Friday’s jobs data, covering January, showed a revision downward for December’s jobs data, but a revision upwards for November by nearly the same amount as December’s revised loss. The official unemployment figure was moved down to 9.7 percent, a 5 month low. The media and the Obama administration are still trying to spin a viable story of how the US lost even more jobs, but was able to lower its unemployment. A total of 8.4 million jobs have been lost since the recession “officially” started in December of 2007. The previously reported number was 7.2 million jobs lost.
President Obama vowed to “get much tougher” with China on trade and currency rules. Treasury Secretary Timothy Geithner said he was optimistic Beijing would begin letting their currency appreciate. Obama and Geithner face a tough road in getting China to change its views. China was not shy about openly stating its displeasure with the Obama administration this week over an upcoming visit with the Dalai Lama and arms shipments to Taiwan saying “We will take corresponding measures to make the relevant countries realize their mistakes.”
On Monday, President Obama submitted his 2011 budget proposal. The total requested spending is $3.83 trillion and the federal deficit is projected to be $1.56 trillion and $1.27 trillion in 2010 and 2011 respectively. The budget, which relies on 6 years of better than expected growth, led Peter Morici, a professor at the University of Maryland’s Smith School of Business to say “Rosie Scenario wrote this budget.” On Thursday, the House voted to allow the government to go $1.9 trillion deeper into
debt. The cost of insuring US government debt over a five-year period then jumped to its highest since April 2009. A Reuter’s article quoted Moody’s Investors Service as saying “If the Obama administration’s budget projections for rising interest payments on government debt are realized, ‘at some point, we don’t know when, there would be downward pressure on the U.S. [credit] rating’”.
Crude oil continued to hover around the mid $70 range. Inventory rose more than expected and weaker demand combined with a stronger dollar, to help keep the price down. A monster of a winter storm blowing through the eastern half of the US may help drive the prices back up again, however.
The US Dollar hit an eight month high against the euro on the news coming out of the eurozone, but fell against the yen.
Volatility should be expected to continue. The sovereign debt issues currently plaguing the eurozone are far from over and most likely the issues are not confined to Europe. James Turk, a consultant to the Gold Anti-Trust Action Committee points out that “ as the sovereign debt crisis spins out of control, it may cause banking crises in Greece and Spain as well as the other weak spots in the eurozone, namely, Portugal, Ireland and Italy.” Turk’s view is brought on by the fact that Euros are moving from banks in troubled eurozone countries for safe haven in Germany or France on fears that, in a worst case scenario, those same troubled countries may have to exit the eurozone, forcing them to re-issue their original currencies. Turk also made in his statement of February 4th, and we quote, “Every once in a great while, the market offers a unique opportunity to buy precious metals “on the cheap”. I believe today is one of those moments.” Speculation is rampant that a large hedge fund imploded and began liquidating assets this week, triggering panic among other investors. The astute investor can take advantage of the opportunity that this week of news and rumor-triggered panic selling has presented to add to, or start, a precious metals portfolio prior to prices moving sharply back to the upside after the “fear factor” subsides. Remember, the key to profitability through the ownership of physical precious metals is to own them and hold them for the long term. Never over-extend your ability to maintain ownership of your product over the long term.
Trading Department – Precious Metals International, Ltd.
This is not a solicitation to purchase or sell.
© 2010, Precious Metals International, Ltd.
GOLD
-Gold should continue to consolidate over the next few weeks but, the next big move is likely to be up. This is the view of Sprott Asset Management’s chief investment strategist John Embry, who says he is looking for the price of the yellow metal to hit around $1,350 to $1,400 by late spring. Speaking on the inaugural Mineweb Gold Weekly Podcast, Embry says the recent downward trend seen in the gold price is nothing more than a healthy correction.
“Gold had a 300 dollar plus run in US dollars from July into the early part of December and it has come under heavy pressure subsequently. It certainly has engendered immense bearishness amongst the commentators which is actually good from my perspective. I think the fundamentals are undisturbed and as a result it is setting up for another strong buy.”
Asked about the link between gold and the US dollar, especially the recent strengthening of the dollar against the euro, Embry, says, while there is often a very clear link, the problems in the US and, by extension, the US dollar, are everywhere especially given the huge budget deficit it is sitting with so “the idea that one should run away from gold and into the US dollar because it is strengthening against the euro and several other currencies to me is actually preposterous.
“The idea that the US dollar is a safe haven today is flat out wrong,” he added, “and that is going to be one of the major factors that are going to change the perceptions in the gold market going forward.” Another reason for Embry’s conviction about bullion’s next move, is the increasing role gold will play as a protection against monetary debasement.
“I think a lot of the world’s wealth is figuring out that we have little choice given the debt problems in the world and the resultant unlimited creation of money and so I think there is a solid investment bid in the market for gold.”
He adds, that concerns that have been raised about the possible impact the jewellery market is likely to have on the long term rise of gold because, he says, “all great bull markets in precious metals come from their reestablishment as money.” Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page33?oid=97226&sn;=Detail&pid;=1
-Remarks by John Embry Chief Investment Strategist Sprott Asset Management, Toronto Vancouver Resource Investment Conference Hyatt Regency Hotel Vancouver, British Columbia, Canada Monday, January 18, 2010. Why gold will keep going up for years.
From a media perspective, if we were approaching the end of a bull market, the newspaper articles and television clips would be universally bullish touting the obvious merits of the yellow metal. There is indeed more coverage recently because of the relentless price rise, but it tends to be skeptical with the bearish commentators continuing to get the most exposure despite having been continuously wrong.
There is no better example of this than an individual who my compliance department would prefer that I not identify. However, I’ll give you a broad hint he writes virtually daily for a noted Canadian gold Internet site. Dubbed the Tokyo Rose of gold commentators, he is always quoted in articles with a negative slant despite having been consistently wrong since the inception of gold’s bull market. In my opinion, as long as he gets any press at all, we are a long way from the end of this bull market in gold.
Finally, it is widely acknowledged that if the peak gold price in the last great bull market ($850 in January 1980) were to be adjusted to reflect the U.S. inflation rate in the intervening period, it would be equivalent to $2,300 today. That the current gold price is approximately half of that should put to rest any suggestion that this is a bubble. Read more here-http://www.gata.org/node/8281
-Kevin Bambrough and David Franklin of Sprott Asset Management in Toronto argue in an essay just published that central banks no longer have any interest in maintaining the value of their currencies and that, as a result, gold is the only currency that can safeguard wealth. Read more here-http://www.gata.org/node/8285
-Gold to Reach $1,500 as Haven Status Restored, Nichols Says. Gold will climb to $1,500 an ounce and silver will top $25 this year as the dollar loses its haven status, according to Jeffrey Nichols, managing director of American Precious Metals Advisors.
“Fear of sovereign debt defaults by one or another European country could benefit the dollar and temporarily hurt gold,” New York-based Nichols said in an e-mail to Bloomberg yesterday. “But gold is the ultimate safe haven and the dollar, without the support of sound monetary and fiscal policies, is a depreciating asset.”
“As in the past year, these occasional reversals will lead some to believe the party is over for precious metals,” said Nichols, a precious metals analyst for more than 25 years. “But I believe periods of weakness will be opportunities for those underweighted in gold and silver to augment their holdings of physical metal.”
Gold advanced 24 percent last year as the Federal Reserve held interest rates near zero to spur growth, pushing the Dollar Index 4.2 percent lower. The U.S. government has boosted spending to combat the global recession, pushing the nation’s marketable debt to an unprecedented $7.27 trillion.
“It baffles me that so many foreign exchange traders and institutional investors around the world think of the dollar as a safe haven at a time of currency market turmoil and continued U.S. economic and financial market crisis,” he said. “It is only a matter of time before the dollar’s safe haven appeal diminishes and gold regains its status as the ultimate safe haven,” Nichols said.
Growing Chinese interest in gold, increased central bank bullion purchases and a worsening outlook for production should all boost the metal, he added. Nichols estimated China’s private-sector investment gold purchases totaled as much as 100 tons, or 3.2 million ounces, last year and said it could rise by more than 50 percent in 2010 as growing incomes and inflationary expectations give “more people both the means and the motivation to invest in the metal.”
Jewelry sales in China, which is bought both for adornment and as a store of wealth, totaled 350 tons last year and could increase by 100 tons or more this year, he said. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=ay7aVAKL6qYw
-Prospects for gold look good over the next 12 to 18 months according to both GFMS CEO Paul Walker and DundeeWealth Economics president Martin Murenbeeld. That’s according to their presentations delivered at the Mining Indaba conference in Cape Town on Monday but the two differ over their longer term prospects for the metal.
Walker’s prediction on where the gold price could go in the next year was more bullish than that made by Murenbeeld but he is extremely concerned about the growing influence of investment demand in the gold market.
He told delegates, “I am bullish on gold for the next 12 to 18 months. A gold price of $1,400/oz would not surprise me. But we are now near a point where I have to question the sustainability of some of the drivers behind gold. Quite where the turning point will come I do not know.”
Murenbeeld’s forecasts were for gold to average $1,172/oz during 2010 and end the year at $1,234/oz while he forecast an average price of $1,280/oz for 2011. Murenbeeld was unable to attend the conference for medical reasons and his presentation was given on his behalf by conference programme director Tim Wood.
Murenbeeld said he had nine bullish arguments in favour of gold and six bearish ones against the metal which were “not as compelling”. He said mine supply of gold was flat with “anaemic ” growth prospects while global foreign exchange reserves held in US dollars were excessive.
This was likely to lead to a diversification out of US dollars and into SDRs (special drawing rights), other currencies and gold. Murenbeeld also believed investment demand for gold was in a long run uptrend because of fears over inflation and the debasement of currencies. Read more here-http://www.miningmx.com/special_reports/conf_cover/2010/mining-indaba-2010/good-prospects-for-gold.htm
-Newmont chief opens Boddington mine, believes gold could hit US$1,350/ounce this year. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page34?oid=97218&sn;=Detail&pid;=1
-Gold: fundamentals remain strong, says World Gold Council. The World Gold Council said that suggestions of a gold price ‘bubble’ do not take account of gold’s market fundamentals, which remain robust. Read more here-http://www.telegraph.co.uk/finance/personalfinance/investing/gold/7136743/Gold-fundamentals-remain-strong-says-World-Gold-Council.html
-U.K.’s Royal Mint Doubles Production of Gold Coins. The U.K.’s Royal Mint, established in the 13th century, more than doubled gold-coin production last year as investors sought to diversify their assets and hedge against a weaker dollar and accelerating inflation.
Output rose to 125,469 ounces from 46,315 ounces a year before, according to data obtained by Bloomberg News under a Freedom of Information Act request. Gold averaged $974 (612 pounds) an ounce last year. Fourth-quarter production rose 54 percent to 25,078 ounces, the data show.
Gold’s nine-year bull market attracted hedge-fund managers including John Paulson and Paul Tudor Jones, while investors in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, amassed more metal than Switzerland’s central bank. The metal reached a record $1,226.56 an ounce on Dec. 3.
“People are obviously looking at physical gold more than paper,” Andy Davidson, an analyst at Numis Securities Ltd. in London, said by phone. “Coinage always seems to accelerate” in such conditions, he said.
Sales of American Eagle gold coins by the U.S. Mint increased 66 percent last year to 1.43 million ounces, its Web site showed. The mint suspended production in November of some coins because of depleted inventories. London-based luxury department store Harrods Ltd. began selling gold bars and coins for the first time in October. Read more here-http://www.bloomberg.com/apps/news?pid=20601102&sid;=abFClrv2Oqq8
-A Breather For Gold. Read more here-http://www.forbes.com/2010/02/01/forbes-india-gold-bubble-burst_print.html
-2010: A gap year for metal prices VM Group. According to the VM Group Metals monthly publication 2010 is likely to be the year metal prices take a breather but, the impact of China cannot be underestimated. Read more here-http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=96881&sn;=Detail&pid;=1
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
-James Turk: Precious Metals at ‘Bargain Basement’ Prices. Every once in a great while, the market offers a unique opportunity to buy precious metals ‘on the cheap’. I believe today is one of those moments.
There is ‘panic in the air’ and ‘blood in the streets’, which are conditions that open up unique opportunities. People who have used leverage to carry trading positions have been forced to sell their precious metals throwing out the ‘baby with the bathwater’ much like the panic that occurred after the Lehman Brothers collapse.
The trigger this time though is not an over-leveraged investment bank, but rather, the sovereign debt of Greece and Spain. Years of profligate spending and weakening economic activity are taking their toll. I highlighted in December that sovereign debt defaults were approaching as “countries around the globe run out of money and confront overwhelming debts that cannot be repaid.”
While Greece and Spain are now the trigger points, they are not alone. Nor is this problem of countries with too much debt unique to Europe. The debt of the biggest debtor of them all the US government is finally being called into question.
Reuters today reported: “If the U.S. economy grows anemically, already stretched government finances will be crimped, potentially putting downward pressure on the top Aaa U.S. rating, said Moody’s Investors Service.” To emphasize and make clear its point, the article went on to say: “If the Obama administration’s budget projections for rising interest payments on government debt are realized, ‘at some point, we don’t know when, there would be downward pressure on the U.S. rating,’ [Moody's] said.”
The likelihood of sovereign defaults is growing. Greece and Spain long ago gave up their domestic currencies to become part of the eurozone. They cannot create euros out of ‘thin air’ to repay their debts with debased currency.
While both countries give lip service to reducing their annual operating deficits but not their debts in the future, neither is prepared to bite the bullet and make tough decisions to bring spending under control. Given the weak economic activity in both countries, raising taxes is unlikely to produce further revenue, making the default all the more likely.
The discussion about default though is hiding a pernicious, developing force that portends a widening crisis. Euros are being pulled out of Greek and Spanish banks and placed in German and French banks. The thinking is that if Greece and/or Spain leave the eurozone to once again issue drachmas and pesetas, their revamped currencies will be trade at a discount to euros.
Therefore, to avoid losing purchasing power from this possibility, euros are moving out of banks from south to north. Thus, as the sovereign debt crisis spins out of control, it may cause banking crises in Greece and Spain as well as the other weak spots in the eurozone, namely, Portugal, Ireland and Italy, which bring me back to gold.
Counterparty risk is growing. As it does, the precious metals become increasingly important to preserve wealth because tangible assets are not dependent upon the promise of any government or bank. Gold and silver are the ultimate safe haven, and right now they are being offered at bargain basement prices. More importantly, it is clear from the Fear Index that gold is good value.
No one can predict the future. Precious metal prices may fall further. Then again, maybe today marks the low. But regardless, the risk of sovereign debt defaults is not going to disappear. Nor is uncertainty about the durability of the euro.
And the dollar continues to be debased by reckless spending that is piling more debt upon the US government’s huge mountain of debt. These risks create an environment in which one seeks safety for their hard-earned assets, which is what the precious metals offer. Read more here-http://www.fgmr.com/precious-metals-at-bargain-basement-prices.html
-Silver: Room for Growth. Mike Maloney says gold prices will hit $15,000 an ounce but silver is the better investment. Maloney, author of Rich Dad’s Guide to Investing in Gold and Silver, says silver prices can hit quadruple digits and will outperform gold over the long term.
During the last decade, gold prices soared to a high of $1,227 an ounce while silver moved from $4.57 to a high of $21, with prices now trading in the $15 range. Silver is a thinner market, and prices are subject to more volatile swings. Silver also has different leverage than gold.
Not only can it trade as a safe haven asset, but it also has exposure to growth and recovery sectors, like industrials. Maloney said that in times of both inflation and deflation, gold prices will skyrocket as the precious metal will have to cover the amount of base currency and outstanding revolving credit. Silver’s story is a little different but more profitable.
Which metal do you want to own, silver or gold?
Maloney: I think in inflation silver will perform with gold. In deflation you will see silver lag. People are trained to think gold in a currency crisis, gold as a safe haven. But there will come a day where gold will get too expensive for the common man [and] at that point just like in 1979, silver’s price will explode.
I believe in either scenario silver will blow the doors off of gold on a percentage basis. For the first 2,000 years that gold and silver were money, the average exchange rate between the two was that silver’s value was about 1/12th of gold’s value.
According to Maloney’s ratio, at today’s gold price of $1,100 an ounce, silver should be $96. But if gold hits $15,000, silver could rise to $1,250. Mike thinks silver can beat that number.
How should you invest in silver?
Maloney: I like the physical metal first. History shows that the physical metals outperform the stocks on an average. If you take the Barron’s Gold Mining Index and divide it by the price of gold you’ll see from 1970 to today, gold outperformed the index by about 4%. In other words, the mining stocks actually underperform on an average, but if you’re good at picking stocks, of course you could outperform gold significantly.
Maloney: There are these rare moments in history that go by in a blink of an eye, so as far as historic terms go, where the safest asset class is the place where people go to protect their purchasing power.
The safest asset class also simultaneously becomes the asset class that has the single greatest potential gains in absolute purchasing power. And we’re in one of those times right now when gold and silver are being revalued by the public. Just like in 1980 and 1934 all of the circulating medium would be redeemable in gold. Read more here-http://www.thestreet.com/print/story/10671767.html
-Silver Is Poised to Rise in The Long Run, But The Short-term Situation Is Complicated. Read more here-http://news.silverseek.com/SilverSeek/1265140361.php
-Win With Silver. With the Olympics just days away, and with precious metals sitting at very attractive prices (following this utterly absurd move lower), this is the perfect time to point out that when “going for gold” one can often be better off taking home silver.
As with many of the greatest, long-term investment opportunities, the reasons for investing in silver are numerous and obvious and will (like all things) become much more obvious, in hindsight. The simplest place to start is with the patterns in price movement, and the reasons for those patterns. Read more here-http://seekingalpha.com/instablog/407380-jeff-nielson/46854-win-with-silver
-Silver Ratio: The Investing Truth They Reveal. Read more here-http://www.kitco.com/ind/Lewis/feb042010.html
-Silver’s Most Important Price Point. Read more here-http://news.silverseek.com/SilverSeek/1265238514.php
-Ted Butler’s weekly interview with King World News. Listen here-http://www.gata.org/node/8283
-US Mint Gold and Silver Eagle Bullion Demand Hits January Highs. Read more here-http://www.coinnews.net/2010/02/01/us-mint-gold-and-silver-eagle-bullion-demand-hits-january-highs/
-U.S. Mint silver, gold, platinum coin revenue hits $1.7bn record high in FY 2009. Despite the inability of the U.S. Mint to acquire sufficient blanks, both gold and silver bullion coins smashed sales records due to unprecedented investor demand in FY 2009. Read more here-http://www.mineweb.co.za/mineweb/view/mineweb/en/page34?oid=97140&sn;=Detail&pid;=1
CHARTS OF THE WEEK-QUOTES-QUICK HITS
-Chart of the week: Why GDP Is Surging, But You Still Don’t Have A Job. Why is the GDP surging but jobs aren’t coming back? Maybe because the GDP isn’t really surging. Today’s chart, which comes from Goldman’s Jan Hatzius shows Real Final Demand so-called real GDP which basically represents GDP excluding inventory restocking.
As you can see by the dark line, the recovery is flat, and doesn’t live up to past recoveries at all. In the one measure that really counts, demand, there is no v-shaped recovery. And that’s why there are no jobs. Read more here-http://www.businessinsider.com/chart-of-the-day-why-gdp-is-surging-2010-2
-Chart of the week: See The Countries Short-Sellers Are Abusing. Sovereign debt concerns have exploded this year, and the chart below makes this fact very clear. It shows short-selling interest for the sovereign debt of different nations, as calculated by short-interest firm Dataexplorers in a February report.
Dataexplorers presents Short interest as an alternative to using credit default swap data alone: “CDS data on these markets is well publicized, but what does short selling data tell us about the current market attitude to developing country government bonds?”
The degree of recent short selling is indicated by the blue bars, while that of one year ago is in red. Longer bars implies far more traders betting against a nation’s debt. What is particularly striking about the data is that while some of the infamous European sovereign-default-risk PIIGS (Portugal, Italy, Ireland, Greece, and Spain) rank highly on this list of troubled nations, many Eastern European nations look far worse in terms of short interest.
Note some PIIGS aren’t in the table, they might not have been included in Dataexplorer’s screen. If the shorts are right, Eastern Europe may actually be the spark that sets off the rest of Europe’s financial crisis. Note Abu Dhabi shot up this year as well, no doubt due to Dubai’s crisis. Read more here-http://www.businessinsider.com/chart-of-the-day-simple-average-utilization–selected-sovereign-bonds-2010-2
-Chart of the week: Ohio’s Unemployed Masses Are Getting Hammered Like Never Before. You can never be sure of a job, a marriage, or even efficient markets theory these days, but through thick and thin it appears there’s at least one constant left in this world liquor sales will keep rising, at least in Ohio.
In 2009, Ohio’s liquor sales volume hit a record high, for the seventh year in a row. As shown below, even when recession and mass unemployment hits, the people of Ohio don’t give up when it comes to booze.
In fact, by the look of 2009 data, it appears mass unemployment may have helped boost spirits sales. That’s quite a jump from 2008 to 2009. Then again, liquor is probably one of the cheapest forms of entertainment around, thus tight times might lead some people to buy even more of it. Read more here-http://www.businessinsider.com/chart-of-the-day-ohio-unemployment-vs-liquor-sales-2010-1
-”Bernanke will continue to print money until there are no trees left in America.” Jim Rogers
-“No nation in history has ever printed its way to prosperity, borrowed its way to prosperity or spent its way to prosperity. The US will not be exempt from this truth.” Dan Norcini
-The past decade the Standard & Poor’s 500 Index lost 9 percent including dividends. Read more here-http://www.bloomberg.com/apps/news?pid=20601082&sid;=akU.T5b3edZg
-The era of the great policy reflation is over China and India are tightening credit policies; much of Europe is tightening fiscal policies; Canada looks set to unveil a fiscal plan that will aim to reduce the deficit. David Rosenberg-Gluskin/Sheff
-Stocks plunged around the world Thursday, with the MSCI World Index dropping the most in four months, and metals tumbled on concern an unexpected increase in U.S. jobless claims and growing sovereign debt will derail the economic recovery. The euro slid to the lowest since June. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aOR8UFEmYXJE&pos;=2
-Commodity prices tumbled the most since August, led by metals and energy, on concern that rising job losses in the U.S. and mounting debt in Europe will slow economic growth and curb demand for raw materials. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aQGUJa3398V4&pos;=2
-Gold is down today because stops got run on the paper gold exchange. That came on the back of a strengthening dollar due to a weaker euro as a mirror effect. Please return to December of 2009 when the impending dollar rally was sold based on a sustainable US economic recovery. That was enough to convince money managers.
That demand then triggers the algorithms which fires off huge fund buying for what today is no reason at all. Our friends at the COMEX use this phenomena to bomb gold and so many of you have a heart attack selling your insurance in both shares and metals. It is like living in a mental hospital where emotions drive all decisions and most of those are total madness.
Technicals run the short term, Fundamentals run the long term, Insurance is not a day to day item. Despite these facts, most of the public gets pick pocketed in the paper gold market as a ritual played out every 28 days. You are not better than Trader Dan therefore stop speculating before you have no money left to protect.
Jobless claims were anticipated lower to confirm December’s US economic recovery enthusiasm, but went the other direction today. This is another wound in the assumption that started your dollar rally in December. Other reasons given for the general decline in commodities was fear that world demand for raw material will subside. As usual the West assumes it is the engine of world demand for everything. Jim Sinclair-Read more here-http://jsmineset.com/2010/02/04/golds-pick-pockets-continue-to-prosper-2/
-The California State Teachers’ Retirement System, the second-biggest U.S. public pension, is considering investments in commodities to boost returns and provide a hedge against inflation and slumping equities. The governing board of the fund, with $134 billion under management, is scheduled to hear today a staff report in Sacramento that recommends its first-ever commodity investment.
The board will decide whether to seek additional research on strategies and portfolio weightings. “Commodities historically exhibited low correlation to equities and bonds and produced double-digit returns when equities fell,” Innovation and Risk Director Steven Tong and Investment Officer Carrie Lo said in a report to the board.
“In effect, commodities may act as an insurance policy, realizing low single-digit returns over the long run but generating large double-digit payoffs in the event of a negative shock.” Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=adUC4S1obfh4&pos;=7
-More Americans unexpectedly filed first-time claims for unemployment insurance last week, indicating companies lack confidence the economic recovery will be sustained. Initial jobless applications increased to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, Labor Department figures showed today in Washington.
The number of people receiving unemployment insurance was little changed and those receiving extended benefits increased. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aKxCzuYaGS.c
-White House Sees U.S. Unemployment Rate Averaging 10% This Year. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=a9MIx5UDiDFM
-Self Employment in U.S. Climbs, Reflecting Lack of Other Jobs. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a1MCHbwdlS_4
-Poof: Another 800,000 jobs disappear. Job losses during the recession may have been underestimated by close to a million jobs. So instead of employers cutting just over 7 million jobs from their payrolls since the economic downturn began in December 2007, it’s expected that the Labor Department’s new estimate will be a loss of 8 million jobs. Read more here-http://money.cnn.com/2010/02/04/news/economy/jobs_outlook/index.htm
-Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to ensure enactment of his plan to cut the European Union’s largest deficit.
GSEE, which represents about 2 million workers in the private sector, voted at a meeting in Athens today to walk out Feb. 24. The main public-employee union plans a Feb. 10 strike to protest spending cuts as Papandreou steps up budget cuts to persuade investors Greece won’t need a bailout. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aN2G_2S_aP2M
-Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.
It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”
Taleb said investors should bet on a rise in long-term U.S. Treasury yields, which move inversely to prices, as long as Bernanke and White House economic adviser Lawrence Summers are in office, without being more specific. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a3E4uC5VIFeo&pos;=5
-Italy’s financial police are seizing 73.3 million euros ($102 million) of assets from Bank of America Corp. and a unit of Dexia SA as part of a probe into an alleged derivatives fraud in the region of Apulia. Police are investigating losses on derivatives linked to the sale of 870 million euros of bonds sold by the regional government in 2003 and 2004, according to an e-mail from the prosecutor’s office in Bari today.
The banks misled the municipality, located in the heel of Italy, on the economic advantages of the transaction and concealed their fees, the prosecutor said. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aMRv05Cm8PTg&pos;=5
-Meet the market’s biggest losers. Fortunes have been made and lost since AOL was last a standalone company. Here are the 10 companies that have lost the most in market value over the past decade. Read more here-http://money.cnn.com/galleries/2010/fortune/1002/gallery.biggest_losers.fortune/index.html
-El Nino, a warming in the Pacific Ocean that can influence the severity of the Atlantic hurricane season and weather patterns around the world, will likely fade sometime in the next six months, the U.S. Climate Prediction Center said today. Models indicate the Pacific may return to normal temperatures between April and June, although forecasters are uncertain exactly when, according to a CPC statement.
If El Nino fades in June, it is one factor that may mean more Atlantic storms this year, said David Streit, a senior meteorologist for Commodity Weather Group Llc in Bethesda, Maryland. The Atlantic hurricane season runs from June 1 through Nov. 30.
“With the loss of El Nino altogether, that will definitely help to give greater numbers than you would see in normal seasons,” Streit said. Read more here-http://www.bloomberg.com/apps/news?pid=20601124&sid;=alld1U0Kx2K8
-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
-World’s most famous ‘unseen’ diamond. The room was dimly lit. Armed guards stood at both entrances and enormous ironclad doors were slid shut to seal the gallery. Nobody spoke above a whisper as we waited for the first glimpse in half a century of one of the world’s most extraordinary gems.
The Wittelsbach-Graff Diamond was last seen in public at the 1958 World Exhibition in Brussels. After that, it disappeared and its whereabouts remained a mystery until Laurence Graff, a billionaire diamond dealer, bought it at auction in 2008, appending his surname.
He and his son Francois were in the gallery of the Smithsonian’s National Museum of Natural History in Washington DC as the blue stone, was brought up from a secret vault and finally revealed. Read more here-http://news.bbc.co.uk/2/hi/americas/8488183.stm
-Smithsonian finds Hope and Wittelsbach-Graff diamonds are not from same stone. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2010/01/28/AR2010012801658_pf.html
-Historic 507-Carat Diamond Named ‘The Cullinan Heritage’. Petra Diamonds has announced that the 507-carat white diamond recovered at its Cullinan mine in South Africa will be named “The Cullinan Heritage.” The diamond is reportedly of “exceptional” color and clarity and one of the 20 largest high-quality rough diamonds ever discovered. Read more here-
http://www.idexonline.com/portal_FullNews.asp?id=33571
-Rio Tinto close to decision on restarting Argyle diamond mine. RIO Tinto is nearing a decision to restart work developing its underground Argyle diamond mine in Australia, the Anglo-Australian miner’s chief executive for diamonds and minerals said.
“We are hopeful of being able to start it but that depends on the approval of our investment committee. We are continuing to work on how and when the restart might take place,” Harry Kenyon-Slaney told Dow Jones Newswires.
Rio Tinto started building an underground mine at Argyle in 2006 as open pit operations dwindled. But the miner all but halted development last year as it faced heavy debt and crashing commodity prices. Markets have since bounced back. Read more here-http://www.theaustralian.com.au/business/mining-energy/rio-tinto-close-to-decision-on-restarting-argyle-diamond-mine/story-e6frg9df-1225826170445
-A powerful wing of South Africa’s ruling party is pushing for the nationalization of at least 60 per cent of the country’s mining sector, sending jitters through Canadian investors in Africa’s richest economy.
Analysts say the proposal is unlikely to become government policy, but the persistence of the nationalization idea among factions of South Africa’s ruling party is causing nervousness among Canadian and other foreign miners here. Read more here-http://www.theglobeandmail.com/report-on-business/nationalization-talk-puts-miners-on-edge/article1452803/
-U of A loans out rough diamond collection to Royal Alberta Museum. A new exhibit at the Royal Alberta Museum has a unique connection to Edmonton, as the University of Alberta has contributed diamonds from its own Mineralogy and Petrology Museum to enhance the show while on display in the city.
“Diamonds” will run at the Royal Alberta Museum until March 21. The Museum of Mineralogy and Petrology is located in the basement of the Earth Sciences Building, and is open Monday through Friday to the public. Read more here-http://thegatewayonline.ca/articles/news/2010/02/02/u-loans-out-rough-diamond-collection-royal-alberta-museum
PAULSON: U.S. WAS CLOSE TO COLLAPSE-RUSSIA WANTED FINANCIAL WAR
-The U.S. economy came “very close” to collapsing into a second Great Depression and the government had no alternative to bailing out financial firms, former Treasury Secretary Henry Paulson said.
“There was a time when the credit markets had essentially frozen and when blue chip industrial companies were having trouble raising money,” Paulson said in an interview today on Bloomberg Television. “I knew then we were on the brink.”
“We easily could have had unemployment of 25 percent,” he said. “That would have meant millions of additional jobs lost, millions of additional homes lost, trillions more lost in savings. It would have been terrible.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=axCgjHqNkaw0
-Paulson Says Russia Urged China to Dump Fannie, Freddie Bonds. Russia urged China to dump its Fannie Mae and Freddie Mac bonds in 2008 in a bid to force a bailout of the largest U.S. mortgage-finance companies, former Treasury Secretary Henry Paulson said. Paulson learned of the “disruptive scheme” while attending the Beijing Summer Olympics, according to his memoir, “On The Brink.”
The Russians made a “top-level approach” to the Chinese “that together they might sell big chunks of their GSE holdings to force the U.S. to use its emergency authorities to prop up these companies,” Paulson said, referring to the acronym for government sponsored entities. The Chinese declined, he said.
Russia’s five-day war with U.S. ally Georgia started on Aug. 8, the same day as the opening ceremonies of the Beijing Games. Prime Minister Vladimir Putin told U.S. President George W. Bush during those ceremonies that “war has started,” according to Dmitry Peskov, Putin’s spokesman.
“The report was deeply troubling heavy selling could create a sudden loss of confidence in the GSEs and shake the capital markets,” Paulson wrote. “I waited till I was back home and in a secure environment to inform the president.” Russia never approached China about dumping U.S. bonds, Peskov said today. “This is not the case,” he said by phone.
Russia sold all of its Fannie and Freddie debt in 2008, after holding $65.6 billion of the notes at the start of that year, according to central bank data. Fannie and Freddie were seized by regulators on Sept. 6, 2008, amid the worst U.S. housing slump since the Great Depression. Read more here-http://www.bloomberg.com/apps/news?pid=newsarchive&sid;=afbSjYv3v814
U.S. DEBT CRISIS-TAXES GOING UP
-Obama Budget Said to Forecast $1.6 Trillion Deficit for 2010. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=ackCreHkor18&pos;=8
-The era of big government has returned with a vengeance, in the form of the largest federal work force in modern history. The Obama administration says the government will grow to 2.15 million employees this year, topping 2 million for the first time since President Clinton declared that “the era of big government is over” and joined forces with a Republican-led Congress in the 1990s to pare back the federal work force.
Most of the increases are on the civilian side, which will grow by 153,000 workers, to 1.43 million people, in fiscal 2010. The expansion could provide more ammunition to those arguing that the government is trying to do too much under President Obama. Read more here-http://washingtontimes.com/news/2010/feb/02/burgeoning-federal-payroll-signals-return-of-big-g//print/
-Obama’s Budget Has One Small Missing Piece For $6.3 Trillion Dollars. What is not included, namely $2.8 Trillion and $1.9 Trillion of MBS guaranteed portfolios at Fannie and Freddie, and an additional $782 billion and $809 billion in company debt outstanding for the two GSEs, respectively.
This amounts to a total of $6.3 trillion in liabilities which should be counted toward the budget. Read more here-http://www.zerohedge.com/article/obamas-budget-has-one-small-missing-piece-63-trillion-dollars
-Obama Deficit-Reduction Plans Face Difficult Sell. Read more here-http://www.bloomberg.com/apps/news?pid=20601068&sid;=aZnNekhkN0cY
-Obama Budget Has $1.9 Trillion Tax Rise for Richest, Businesses. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aL975wIYeQjs
-Congress Approves $1.9 Trillion Increase in U.S. Debt Limit. The U.S. Congress voted to increase the federal debt limit by $1.9 trillion, to $14.3 trillion, enough to prevent lawmakers from having to raise it again before this year’s midterm elections. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aZtM1bES_T1c
-Geithner Says Long-Term U.S. Deficits Pose ‘Corrosive Threat’. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aIMXrX2K9KPg&pos;=4
-Deficits May Alter U.S. Politics and Global Power. Read more here-http://www.nytimes.com/2010/02/02/us/politics/02deficit.html
-U.S. Rating Under Pressure Unless Deficits Cut, Moody’s Says. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=am_JfQwiS4po
-Next in line for a bailout: Social Security. Read more here-http://money.cnn.com/2010/02/02/news/economy/social_security_bailout.fortune/?section=magazines_fortune
-A Majority Of States Are Now Insolvent: Quantifying The Disastrous Unemployment Situation. Read more here-http://www.zerohedge.com/article/majority-states-are-now-insolvent-quantifying-disastrous-unemployment-situation
-Harrisburg, the capital of Pennsylvania, will consider Chapter 9 bankruptcy protection along with tax increases and asset sales as options to address $68 million in debt service payments due this year, the chairwoman of a City Council committee said last night. Read more here-http://www.bloomberg.com/apps/news?pid=20601103&sid;=aRLYN3..REz4
-Budget-strapped states avoid the word ‘taxes’. Read more here-http://www.washingtontimes.com/news/2010/feb/03/budget-strapped-states-avoid-t-word//print/
-Desperate to save police, fire and other city jobs, a divided Phoenix City Council on Tuesday approved a sales tax on grocery items that will generate tens of millions of dollars a year. The 2 percent food tax will take effect April 1 and expire after five years, though Mayor Phil Gordon said the council has the option of reversing its decision after it hears from the public during 15 budget hearings planned for this month.
The tax on milk, meat, vegetables and other food purchased by shoppers will generate an estimated $12.5 million for the fiscal year that ends June 30. It will raise another $50 million for fiscal 2011. Read more here-http://www.azcentral.com/news/articles/2010/02/03/20100203foodtax0203.html
-Gravel roads, once a symbol of quaint times, are emerging as a sign of financial struggle in a growing number of rural towns. High costs and tight budgets have prompted communities in Maine, Michigan, Indiana, Pennsylvania and Vermont to convert or consider converting their cracked asphalt roads back to gravel to cut maintenance costs, officials in those states say. Read more here-
http://www.usatoday.com/news/nation/2010-02-03-gravel-roads_N.htm
-Colorado Springs cuts into services considered basic by many. More than a third of the streetlights in Colorado Springs will go dark Monday. The police helicopters are for sale on the Internet. The city is dumping firefighting jobs, a vice team, burglary investigators, beat cops dozens of police and fire positions will go unfilled.
The parks department removed trash cans last week, replacing them with signs urging users to pack out their own litter. Neighbors are encouraged to bring their own lawn mowers to local green spaces, because parks workers will mow them only once every two weeks. If that.
Water cutbacks mean most parks will be dead, brown turf by July; the flower and fertilizer budget is zero. City recreation centers, indoor and outdoor pools, and a handful of museums will close for good March 31 unless they find private funding to stay open.
Buses no longer run on evenings and weekends. The city won’t pay for any street paving, relying instead on a regional authority that can meet only about 10 percent of the need. “I guess we’re going to find out what the tolerance level is for people,” said businessman Chuck Fowler, who is helping lead a private task force brainstorming for city budget fixes. “It’s a new day.” Read more here-http://www.denverpost.com/news/ci_14303473
GLOBAL DEBT CRISIS
-Pimco’s El-Erian Says 2010 Will Be Year of Sovereign Risk. Mohamed El-Erian, chief executive and co-chief investment officer of Pacific Investment Management Co., said 2010 will be the year of sovereign risk as the “ballooning of public balance sheets” continues.
Greece is “Europe’s big game of chicken,” El-Erian, 51, said in a Bloomberg Radio interview today. Europe needs to provide “significant aid” to the country, while the Greek government works to adjust its fiscal deficit, he said. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aJeGbT7CCWTY
-20 reasons Global Debt Time Bomb explodes soon. Commentary: Which trigger will ignite the Great Depression II? Read more here-http://www.marketwatch.com/story/story/print?guid=98105012-8C05-444F-99C1-CB1F8D95870A
-Warning: Capt Bernanke’s sinking U.S.S. Titanic. Commentary: Cheap money’s again blowing new ‘icebergs’. Read more here-http://www.marketwatch.com/story/story/print?guid=55EC892F-94D3-4198-8ACA-47E553838BD6
-Greece rattled by ‘hidden debt’ controversy. Greek debt markets have come under fresh assault from hot money funds after a commission of experts in Athens told the country’s parliament that it had uncovered €40bn (£35bn) of “hidden debts” during an investigation into past manipulation by the financial authorities. Read more here-http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7140233/Greece-rattled-by-hidden-debt-controversy.html
SIX MORE U.S. BANKS FAIL
-Six banks fail, in Florida, Georgia and California. Regulators shuttered six banks on Friday, notching up 15 failed banks in the first month of in 2010. The biggest to fall was First Regional Bank in Los Angeles, which had deposits of $1.87 billion.
The others were Community Bank and Trust in Cornelia, Ga.; Florida Community Bank in Immokalee, Fla.; First National Bank of Georgia in Carrollton, Ga.; Marshall Bank in Hallock, Minn.; and American Marine Bank in Bainbridge Island, Wash. Read more here-http://money.cnn.com/2010/01/29/news/economy/bank_failures/index.htm
SWISS WARN OF UBS BANK FAILURE
-Swiss warn UBS bank could collapse. Switzerland’s justice minister warned in an interview on Sunday that top bank UBS could collapse if sensitive talks with the United States over a high-profile tax fraud investigation fall through.
“The actions of UBS in the United States are very problematic. Not just because they are punishable but also because they threaten all of the bank’s activities,” Eveline Widmer-Schlumpf told Le Matin Dimanche newspaper.
“The Swiss economy and the job market would suffer on a major scale if UBS fails as a result of its licence being revoked in the United States,” she said. Read more here-
http://news.yahoo.com/s/afp/20100131/bs_afp/switzerlandusbankingtaxregulatejusticecompanyubs
MORE BAD BANKING DEBT COMING
-S&P; raises estimates for US banks’ loan loss rates. Loss rates for U.S. banks’ mortgage and consumer loans could rise beyond previous estimates, especially in a prolonged economic downturn, credit rating agency Standard & Poor’s said on Monday.
The new forecasts could trigger downgrades of some financial institutions’ ratings, S&P; added. “We foresee loss rates exceeding our previous expectations under both a base case and a more severe stress test for residential mortgages, home equity loans, and consumer loans, including credit cards,” the agency said in a research report. Read more here-
http://www.reuters.com/article/idUSN019918320100201?type=marketsNews
-Banks’ bad debts to rise for another year, says Moody’s. Bad debts at Britain’s banks will not peak for another 12 months, according to credit-rating agency Moody’s, in a warning that the UK’s emergence from recession is a “false dawn for credit”. Read more here-http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7129844/Banks-bad-debts-to-rise-for-another-year–says-Moodys.html
STOCK MARKET
-El-Erian Says Retreat in Stocks Will Worsen as Economy Slumps. Mohamed A. El-Erian, whose firm runs the world’s biggest mutual fund, said the largest stock market decline in 11 months may worsen amid persistent U.S. joblessness and economic growth that trails analysts’ forecasts.
Investors have wrongly priced in an “orderly” withdrawal of stimulus measures, a rebound in bank lending and coordinated government policy to restore growth, the chief executive officer of Pacific Investment Management Co. wrote in a Bloomberg News column. That means Wall Street projections for gains in 2010 may prove incorrect and prices will slump, he said.
“Investors may well find that January’s global equity sell-off was just a precursor to a disappointing year for several asset classes,” El-Erian, 51, wrote. “The global financial crisis has undermined growth and job creation; it has clogged many of the pipes that allocate funds to productive uses; and it has rapidly taken public debt and the budget deficit to worrisome levels.” Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid;=aKp04HpeyeLU
-Stocks Plunge Risk at Highest Since April 1984, Survey Finds. Expectations that U.S. stocks will tumble 10 percent or more rose to highest level since April 1984 this week, according to Investors Intelligence’s weekly survey of newsletter writers.
The proportion of investment writers who anticipate a so called correction climbed to 38.9 percent in the week ended yesterday, an increase from 36.7 percent in the period ended Jan. 27. The New Rochelle, New York-based company has tracked the projections of newsletters since 1963. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=a7MG6IzewL1E&pos;=4
-As for the equity market, if there is a possible bright light it is that sentiment has swung massively to the bearish side. The American Association of Individual Investors survey shows that as of February 4th, there were 29.2% in the bull camp and 43.1% in the bear camp.
Just a week ago these shares were at 35.0% and 36.7% respectively; and 41% and 26% at the turn of the year. Quite the swing. That said, the bear market rally off the March 2009 low was a rally more rooted in technical’s than in fundamentals a view validated by the fact that this rally stalled out after a classic 50% retracement from the bottom.
Now, what if we see a 50% reversal off the up-move? Well, that would mean a retest of 915 on the S&P; 500 to the downside. Don’t think it can’t happen this market, on a Shiller normalized P/E basis, is still 25% overvalued as it is. You do not want to pay a Cadillac price for a Ford focus that much we do know.
Meanwhile, the S&P; 500 closed yesterday’s session at 1097.28; back on October 15, it was sitting at 1095.56. The S&P;/TSX index is now at 11,390.46; back on September 15, it was sitting at 11,495.83. So here we have the U.S. market doing diddly-squat now for nearly four months just moving sideways and the Canadian market is actually lower now than it was five months ago.
It is surprising that the majority of pundits still believe that we are in a bull market. David Rosenberg-Gluskin/Sheff
REAL ESTATE-FORECLOSURES-MORTGAGES
-CIBC warns of double-dip in U.S. house prices. CIBC World Markets warned today of a double-dip in U.S. house prices, where the troubles all began. The U.S. economy is healing but a full recovery in the battered real estate market is years away, economists Benjamin Tal and Meny Grauman said in a report that projects American home prices could see prices drop again by 5 per cent to 10 per cent.
While most indicators have stabilized, they wrote, that is a sign of a “badly damaged” market and the distortions of temporary tax measures, and they forecast further weakness as supply outstrips demand, mortgage rates rise and the government’s tax credit expires. This, they added, has “significant implications” for related stocks that have priced in a steady recovery in the market.
“The risk of a double-dip in U.S. home prices is not simply the result of properties being sold at ‘fire-sale’ valuations, but also due to a deluge of shadow inventory coming onto the market. Although conventional inventories are trending lower, shadow inventories, capturing seriously delinquent and bank-owned properties, are just as large.”
Mr. Tal and Mr. Grauman noted that almost 2 million U.S. mortgages are more than 90 days delinquent, and most will end in a foreclosure. Some 2.3 million properties are already in foreclosure or seized by banks, they said, also warning of a record number of unemployed and the fact that some 10 million households are in a negative home equity position of more than 20 per cent. Read more here-http://www.ctv.ca/generic/generated/static/business/article1453635.html
-The Next Leg Of The Housing Crisis In Five Simple Charts. Read more here-http://www.zerohedge.com/article/next-leg-housing-crisis-five-simple-charts
-Obama Housing Rescue Threatened by Foreclosures, Unemployment. President Barack Obama’s efforts to bolster the U.S. housing market, the trigger of the worst recession since the 1930s, may be undone by record unemployment and repossessions by lenders.
Foreclosures probably will reach 3 million this year, surpassing the record of 2.82 million in 2009, according to Irvine, California-based RealtyTrac Inc. That would more than offset an estimated 448,000-unit rise in home sales, based on the average forecast of the National Association of Realtors, the Mortgage Bankers Association and Fannie Mae. Read more here-
http://www.bloomberg.com/apps/news?pid=20603037&sid;=a6RsJycboEUE
-Pending Sales of Existing Homes in U.S. Increased 1%. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=azeSgbfoQo7o&pos;=3
-U.S. Vacancy Rate Increases as Banks Seize More Homes. The share of homes vacant and for sale rose in the fourth quarter after banks seized property from borrowers who defaulted on mortgages.
The homeowner vacancy rate increased to 2.7 percent from 2.6 percent in the third quarter, the U.S. Census Bureau said in a report today. There were 2.09 million empty properties on the market, up from 1.99 million, according to the report. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=aegjwGzWkAqY
-No Help in Sight, More Homeowners Walk Away. In 2006, Benjamin Koellmann bought a condominium in Miami Beach. By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040.
“People like me are beginning to feel like suckers,” Mr. Koellmann said. “Why not let it go in default and rent a better place for less?” Read more here-http://www.nytimes.com/2010/02/03/business/03walk.html
-Consumers paying credit card over mortgage. Read more here-http://money.cnn.com/2010/02/03/news/economy/credit_vs_mortgage/index.htm
-Option ARMs Surpass Subprime Mortgages in Loss Severity. Read more here-http://www.housingwire.com/2010/01/29/option-arms-surpass-subprime-mortgages-in-loss-severity/?source=patrick.net
-Foreclosures new hot spots. The new foreclosure plague is tied more to the economy than bad mortgages. Here are 10 cities where defaults grew the fastest in 2009. Read more here-http://money.cnn.com/galleries/2010/real_estate/1001/gallery.New_foreclosure_hot_spots/index.html?hpt=Sbin&source;=patrick.net
-Rising FHA default rate foreshadows a crush of foreclosures. The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market’s recovery.
About 9.1 percent of FHA borrowers had missed at least three payments as of December, up from 6.5 percent a year ago, the agency’s figures show. Although the FHA’s default rate has been climbing for months and eating into the agency’s cash, the latest figures show that the FHA’s woes are getting worse even as the housing market shows signs of improvement.
The problems are rooted in FHA mortgages made in 2007 and 2008. Those loans are now maturing into their worst years because failures most often occur two to three years after a mortgage is made.
If the trend continues and the FHA’s cash reserves are exhausted, the federal government would automatically use taxpayer money to cover the losses a first for the agency, which has always used the fees it charges borrowers to pay for its losses. Read more here-http://www.washingtonpost.com/wp-dyn/content/article/2010/02/01/AR2010020103527_pf.html
-Fear and foreclosure in Las Vegas. Nowhere has America’s housing crisis taken a heavier toll than in Nevada, where a glut of new homes lie empty. Read more here-http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/7079868/Fear-and-foreclosure-in-Las-Vegas.html?source=patrick.net or http://money.cnn.com/2010/01/28/real_estate/foreclosure_cities_growth/index.htm
-GMAC Inc., the auto and home lender controlled by the U.S. government, posted a record quarterly net loss, driven by the declining value of mortgage assets. The fourth-quarter loss from continuing operations was $3.9 billion, compared with profit of $7.7 billion a year earlier, Detroit-based GMAC said in a statement.
GMAC’s net loss was $4.95 billion after writing down mortgage holdings. For the year, GMAC swung to a net loss of $10.3 billion from a $1.87 billion profit. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=afofZb7mCyOE
-You lost your house but you still have to pay. Read more here-http://money.cnn.com/2010/02/03/real_estate/foreclosure_deficiency_judgement/index.htm
-The commercial real estate dilemma. Read more here-http://money.cnn.com/2010/02/04/news/companies/banks_commercial_real_estate/index.htm
-China Property Market ‘Bubble’ Set to Burst, Xie Says. China’s property market “bubble” is set to burst as the government curbs credit growth and clamps down on speculation, according to independent economist Andy Xie.
As bank lending slows, “it’s very difficult to see this demand continuing,” Xie, formerly Morgan Stanley’s chief Asian economist, told Bloomberg Television in Hong Kong today. Read more here-
http://www.bloomberg.com/apps/news?pid=20601068&sid;=aDZjmVQaQ.Ms
GEOPOLITICAL NEWS
-Al-Qaeda Likely to Try U.S. Attack In Six Months, Panel Told. Al-Qaeda is likely to attempt a terrorist attack in the U.S. within the next three to six months, U.S. intelligence officials told a Senate panel in Washington. National Intelligence Director Dennis Blair told the Senate Intelligence Committee today that an attempted attack is “certain” within that time frame.
Blair was responding to a question from the panel’s chairwoman, California Democratic Senator Dianne Feinstein, during an annual assessment of threats to the U.S. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a5y7H_F_uMLk
-China, Iran Prompt U.S. Air-Sea Battle Plan in Strategy Review. The U.S. military is drawing up a new air-sea battle plan in response to threats such as China’s persistent military buildup and Iran’s possession of advanced weapons, according to the Pentagon’s latest strategy review. Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=ajDFeH4dy2qo
-Iran Threatens World, Not Just Israel, Peres Says. Israeli President Shimon Peres called for establishing the “widest possible” international coalition to prevent Iran from developing nuclear weapons. “Iran is a source of evil,” Peres said today at a conference in Herzliya, Israel.
It threatens “not just the security of Israel, but the security of the Arabs, too, and all nations that want peace and freedom.” Read more here-http://www.bloomberg.com/apps/news?pid=20601110&sid;=a3DoWzm6bGBk
-’Iran will deliver telling blow to global powers on Feb. 11.’ Iranian President Mahmoud Ahmadinejad says the nation will deliver a harsh blow to the “global arrogance” on this year’s anniversary of the Islamic Revolution. Read more here-http://www.presstv.ir/detail.aspx?id=117545§ionid;=351020101
-U.S. expanding missile defenses in Gulf. he United States has expanded land and sea-based missile defense systems in and around the Gulf to counter what it sees as Iran’s growing missile threat, U.S. officials said. Read more here-http://www.reuters.com/article/idUSTRE60U18R20100131?type=politicsNews or http://www.nytimes.com/2010/01/31/world/middleeast/31missile.html?th&emc;=th or http://www.guardian.co.uk/world/2010/jan/31/iran-nuclear-us-missiles-gulf
-US missile test mimicking Iran strike fails. A U.S. attempt to shoot down a ballistic missile mimicking an attack from Iran failed after a malfunction in a radar built by Raytheon Co, the Defense Department said.
The abortive test over the Pacific Ocean coincided with a Pentagon report that Iran had expanded its ballistic missile capabilities and posed a “significant” threat to U.S. and allied forces in the Middle East region. Read more here-http://www.reuters.com/article/idUSN0120076120100201
-Russia is moving closer to the West on how to deal with Iran’s nuclear program following a rocket launch by the Islamic republic, said Konstantin Kosachyov, the head of the foreign relations committee of Russia’s lower house of parliament. Read more here-http://www.bloomberg.com/apps/news?pid=20601087&sid;=aAZv_K2i48Vg&pos;=9
-Australia blocks Iran shipments over weapons fears. Australia said it used an anti-weapons of mass destruction law to block three shipments to Iran but calls for new sanctions against the Islamic state opened up a new international divide Thursday. Read more here-http://www.breitbart.com/article.php?id=CNG.aa47ff8e5ba4bc86073248d6f79e96e3.681&show;_article=1
-China suspends military ties with US. China suspends military exchanges with the US and threatens to impose sanctions on US arms companies over a Washington decision to sell weapons to Taiwan. Read more here-http://www.presstv.ir/detail.aspx?id=117442§ionid;=351020404
-North Korea is expected to deploy a nuclear-tipped missile capable of reaching parts of the United States in the next decade, despite two long-range missile flight-test failures, according to the Pentagon’s ballistic-missile defense review. Read more here-http://www.washingtontimes.com/news/2010/feb/04/nuclear-missile-threats-to-us-mount//print/
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The Goldbugg Report – February 9, 2010
Posted by Worldwide Precious Metals on Tuesday, February 9, 2010
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February 2, 2010
© 2009, Worldwide Precious Metals.
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The Goldbugg Report – February 2, 2010
Posted by Worldwide Precious Metals on Tuesday, February 2, 2010
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